So They Asked For Additional Insured Status…So What?
A common ask in the business world is for another party to be ‘named’ as an ‘Additional Insured’ or ‘Loss Payee’ on your insurance program. And they will endlessly hound you for a revised Certificate of Insurance (COI) until it says exactly what they want. The ‘name’ wording is what can get you into trouble and should be eliminated. When Named Insured status is requested, deny it!
It is important to understand that both Additional Insureds and Loss Payees can receive benefits under a policy, however they lack the full authority of a Named Insured. The difference is that Additional Insureds receive only liability protection whereas Loss Payees receive only first party physical damage coverage. The First Named Insured is the only party that can request changes to the policy coverage, submit claims or cancel it.
COI requests often come from the job owner, general contractors (GC), suppliers, vendors, etc. and are almost always written into a contract (see the ‘Insurance Requirements’ section). While most just want proof that you have insurance coverage, others will ask for a litany of coverages, various limits and endorsements to be shown on your certificate. One of those endorsements requires you to ‘name’ or include them as an Additional Insured on your liability policy.
It is important to understand, that a COI is not a schedule of insurance nor does anything listed on it amend the actual policy; it does not guarantee that the coverage listed (or any coverage) exists. Rather, it is proof that a policy was, at one point in time, written. Essentially, it isn’t worth the paper it is written on. What truly matters, is what is agreed to in the contract.
It is important to note that Additional Insured status can be given on liability coverages only. For monopolistic states like Ohio, Workers’ Compensation (WC) coverage is either placed through the state fund or you are self-insured. Any work performed outside a monopolistic state is covered through a separate WC program. So, if third-party asks for additional insured status on your WC program, it cannot be done.
A caveat to this is, you as a job owner or CG, are responsible to track and ensure that all of your subs carry their own WC coverage. If not, you could be charged additional premium (determined by payroll) for the coverage they should have carried.
One of the main reasons a party asks for Additional Insured status is so that your insurance policy will defend them against claims for bodily injury or property damage sustained by third parties that arise out of your negligent acts or omissions. Conversely, a Loss Payee is only protected for their interest in real or personal property. Generally, including someone (or entity) as an additional insured or loss payee, does not generate additional premium.
Language found within various contracts and agreements might make sense in the legal world, but you have to also be concerned about the insurance world. There are significant distinctions between ‘Named Insured’, ‘Additional Insured’ and ‘Loss Payee’.