Additional Insured Endorsement - An amendment to a policy that extends coverage to an entity not originally included
An Additional insured endorsement is a useful tool but often misunderstood. It specifies who else should be protected in the event of a claim.
TL;DR
- An additional insured endorsement adds a person or entity to your policy.
- It matters to agencies because miscommunication can lead to unnecessary liability.
- A common pitfall is to mix additional insured endorsement with other insurance terms.
- Agencies can lessen E&O exposure by explaining coverage nuances thoroughly.
What is an Additional Insured Endorsement in Insurance?
To a client, an additional insured endorsement is an amendment given to someone camouflaged under their policy umbrella. Technically, it’s a directive common in commercial liability policies, often part of certificates of insurance or lease agreements. It affords coverage for an additional insured other than the one named in the policy declarations.
Key Related Terms to Know
- Additional Insured – A person/group not initially afforded protection but later included via an endorsement.
- Named Insured – This is the entity primarily covered by the insurance policy.
- CG 20 10 – An ISO form providing additional insured status for ongoing operations.
- CG 20 26 – An ISO form providing additional insured status for ongoing and completed operations.
- CG 20 37 – An ISO form providing additional insured coverage when required by a contract or agreement.
- Blanket Additional Insured – Covers several parties as additional insureds without naming them individually.
- Secondary Named Insured – Person/group having the same rights as the named insured but doesn’t initiate the policy.
Common Questions About Additional Insured Endorsement
How Do Additional Insured Endorsements Work?
Additional insured endorsements extend the named insured’s policy coverage to include another party. Importantly, the additional insured’s coverage applies only as far as the policyholder’s liability extends.
What Is the Difference Between Additional Insured and Named Insured?
While a named insured initiates an insurance policy, an additional insured is an entity later included in the coverage through an endorsement. Both parties share the coverage limit, and the policy terms remain unmodified.
What Rights Does an Additional Insured have?
An additional insured can file a claim directly to the insurer, receive policy notifications, and get defended in a lawsuit under the liability policy.
Additional Insured Endorsement vs. Named Insured
Additional insured endorsement and named insured, although different, are universal in insurance policies. The former is an add-on, while the latter is entrepreneurial, often confused.
| Primary use case | Coverage/Concept Type | Typical Exclusions | Who is Most Affected by Errors | Common Mistakes
|
Additional Insured Endorsement | To extend policy coverage to other parties | Liability coverage | Reimbursements beyond policy limits or not part of the contract | Custom builders and contractors | Misinterpreting the additional insured status |
Named Insured | Core policyholder recognized by the insurer | Liability coverage | Indemnification for risks out of the policy scope | Small businesses and contractors | Assuming erroneous coverage rights |
Real Claim Examples Involving Additional Insured Endorsement
Scenario 1: A construction company causes a mishap at a client’s property, resulting in substantial property damage. The additional insured endorsement helped the client cover the loss as their firm was included in the coverage.
Scenario 2: A negligent salon professional (insured) causes a severe allergic reaction to a customer. The salon owner, as an additional insured, avoided bearing the financial burden since they were included via the endorsement.
Limitations and Common Mistakes
- Misconception that additional insured endorsement expands coverage limits.
- Additional insured endorsements don’t cover professional liability and worker’s compensation claims.
- Poorly drafted endorsement forms leading to E&O exposures.
- Not updating the endorsements after policy renewal.
How to Explain Additional Insured Endorsement to Clients
Personal Lines – An additional insured endorsement allows you to extend your policy’s protection to someone else. Let’s say you’re hiring a contractor for renovations; you can include them in your policy to protect against possible accidents.
Small Business – An additional insured endorsement is crucial, especially when dealing with clients or contractors. It allows you to add other parties to your policy, providing shared protection and keeping your business relationship secure.
CFO/Risk Manager – Securing an additional insured endorsement ensures added protection for our partners. It also hedges against potential disputes or claims, strengthening our enterprise’s risk management plan.