This post is part of a series sponsored by TSIB.
If you are working on a construction project, the company you work for may ask to be an additional named insured or an additional insured. It’s easy to think they’re the same thing, but in reality there are some significant differences between the two.
An additional named insured is a legal entity that is added to a policyholder’s policy. This entitles the additional named insured to many of the benefits and coverages that the policy provides – whereas an additional insured is typically a third party added to the named insured’s policy. This is done in support of an indemnity obligation under a contract between that third party and the named insured. For example, a general contractor (GC) and/or a project owner may be listed on a commercial contractor’s corporate policy as additional insureds for a particular project.
Additional insured person
The insurance coverage provided by the additional endorsement is strictly limited to liability arising from actions taken by or on behalf of the named insured. In other words, if you are an additionally insured general contractor, the insurance coverage only extends to liability caused by the named insured commercial contractor. Typically, the GC requires its commercial contractors to name the GC as an additional insured on the commercial contractor’s corporate policy. In addition, the commercial contractor has typically agreed to release the GC from any liability the commercial contractor incurs under its written contract.
For example, if the commercial contractor or someone carrying out work on their behalf causes harm to the GC or the project owner, the GC would normally be covered. However, if a third party unrelated to the commercial contractor causes damage, the commercial contractor may be covered, but the general contractor or project owner may not. In the event that the GC causes damage that is covered by the Trade Contractors policy, the GC will not be entitled to coverage under the additional insurer.
The insurance cover extended to an additional insured person is limited. Should a situation arise that results in liability for both parties, coverage under the policy will be shared between the named insured and other insureds.
For example,
In the event that a named insured has $50,000 in liability coverage, an additional insured will also have $50,000 in coverage.
Should either the named insured or another insured incur liability, $50,000 will be available to cover that liability.
However, if both parties are found liable, they must share the total coverage of $50,000.
Additional named insured
An “additional” named insured has all the benefits of the actual policyholder. Under the above scenarios, the “additional” named insured would be insured against damage caused by a commercial contractor as well as damage caused by the “additional” named insured. Therefore, in this case, there would be coverage of $50,000 for the policyholder and coverage of $50,000 for the “additional” named insured.
However, the “additionally” named insured does not have all of the rights and/or obligations of the policyholder or the originally named insured. You will not be able to pay premiums, cancel coverage, or receive insurance notifications.
It is important to evaluate the expectations, objectives, benefits and coverage a party wishes to receive under a policy. If limited coverage is sufficient, an additional insured endorsement should be sufficient. However, if full coverage of all potential liabilities is required, an “additional” named insurer should be required.
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2024-04-22 05:38:41
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