Additional Insureds? Here are the Facts

I received a phone call from one of my cross country ski club association clients recently asking advice about one of their members. The member was asking the club to name them as an additional insured on the racing association’s liability insurance as an “Additional Insured,” believing that would protect them should one of the sanctioned events be sullied by an injury and an eventual lawsuit. This prompted a rather protracted discussion about who is protected and who is not by the naming of an Additional Insured under a policyholder’s policy.

If you are the policyholder who currently has a liability policy, YOU are the insured. You are covered against most any allegations of wrong-doing that result in bodily injury and property damage stemming from your premises and/or your actions. Your employees and volunteers are usually covered as well. If you are using someone else’s property and/or equipment, they also will likely enjoy some degree of coverage if you are the cause of the injury or damage.

Where it gets complicated, and often results in a disappointment or outright declination of coverage to another party, is when they ask to be named as an Additional Insured under your policy. Insurance companies will often times agree to this endorsement, but there are strings attached:

  1. The Additional Insured is generally only protected from liability arising from bodily injury and property damage that is caused in whole or in part by your actions or omissions. If the liability arises from the actions or omissions stemming from the Additional Insured there would NOT be coverage for them. Remember, the insured under your policy is you … not the Additional Insured. Their protection provided under your policy is meant first and foremost from your negligence, not theirs, even though they are named on your policy.
  2. The actions or omissions caused by you must stem from the performance of your ongoing operations. Therefore, if the liability was from some other cause, such as the Additional Insured serving food and beverages during the sanctioned race, it could be argued that this does not stem from your ongoing operations, but rather from the Additional Insured’s. Again, you would enjoy coverage, but they would likely not.
  3. Additionally, the actions or omissions that result in an injury or property damage could provide protection to the Additional Insured provided that they arise in connection with your premises (owned by or rented to you). Therefore, for the Additional Insured to enjoy protection they would need to carry their own insurance for their own property and operations, in spite of being named under your policy.
  4. Often times, an insurance company will also require a contract to exist between you and the Additional Insured. Absent this, there is too much room for misunderstanding. A contract will better explain the respective responsibilities between you and the Additional Insured. Don’t overlook this important proviso when planning your next event or when working with some other entity, even if named as Additional Insured on their policy or requesting they be added as an Additional Insured on yours.

The bottom line is this: an Additional Insured is likely to be only an insured under your policy if they are named as a co-defendant stemming from a lawsuit in which you are alleged to have done something wrong. If the alleged wrong stems from their action or omission, and has nothing to do with you, their being named on your policy as an Additional Insured won’t do them any good. Worse, they may be lulled into the false belief that the certificate of insurance that you gave them with their name on it is their “get out of jail free” card. How do they get proper coverage to protect themselves? They should take out their own policy and not expect yours to cover them, with the exception of those rare cases I have referenced above.

Have further questions about liability insurance, as well as property, automobile, directors & officers, workers’ compensation and health? Call us toll-free at (877) MERRIAM (637-7426).

Brian H Merriam, CPCU, ARM, AAI, President

Brian H Merriam, CPCU, ARM, AAI, President

376 Broadway
Schenectady, NY 12301-1038

(877) MERRIAM x 201
(877) 637-7426 x 201