What Is An Additional Insured Endorsement?
What Is An Additional Insured Endorsement? An additional insured endorsement is a type of insurance coverage that extends the coverage of an existing insurance policy to another party, typically someone who is not named in the original policy. This additional coverage is often requested by businesses or individuals who want to protect themselves from potential liability claims that may arise from their work with the policyholder.
When you purchase an insurance policy, you may need to add an additional insured endorsement to ensure that a third party is covered under your policy. An additional insured endorsement is an amendment to your policy that extends coverage to a person or entity other than the policyholder. This endorsement can provide protection for other parties who may have a financial interest in the policy, such as landlords, contractors, or clients.
What is an additional insured endorsement? This means a policy must pay before other policies and without seeking contribution from other policies that also claim to be primary.
Below are some answers to commonly asked additional insured endorsement questions:
- What Is An Additional Insured Endorsement?
- Why Are Additional Insured Endorsements Requested?
- How Do I Add An Additional Insured Endorsement To My Policy?
What Is An Additional Insured Endorsement?
In the world of insurance, it's important to understand the various types of endorsements that are available for policyholders. One of the most common endorsements is the Additional Insured Endorsement (AIE). This endorsement is used to extend coverage to parties other than the named insured under an insurance policy.
An Additional Insured Endorsement is an endorsement that modifies the terms of an insurance policy to include another party as an additional insured. This endorsement can be added to a liability insurance policy or any other type of insurance policy that has a liability component, such as property insurance or workers' compensation insurance.
The purpose of an AIE is to protect a third party from liability arising from the actions of the named insured. This is particularly important in situations where the named insured is performing work for a client, such as a contractor or subcontractor. By adding the client as an additional insured, the policy extends coverage to the client in the event of a liability claim arising from the work performed by the named insured.
For example, let's say a contractor is hired to perform renovations on a homeowner's property. If the contractor accidentally damages the property during the course of the work, the homeowner may file a liability claim against the contractor. However, if the homeowner is added as an additional insured to the contractor's liability insurance policy, the homeowner will be protected from liability arising from the contractor's work.
It's important to note that an AIE does not provide coverage for the additional insured's own negligence. Rather, it provides coverage for liability arising from the named insured's actions. Therefore, it's important for the additional insured to have their own liability insurance policy to protect against their own negligence.
There are several types of Additional Insured Endorsements, including:
- Automatic Additional Insured Endorsement: This endorsement automatically extends coverage to any party that is required to be added as an additional insured under a contract or agreement.
- Scheduled Additional Insured Endorsement: This endorsement specifically lists the parties that are added as additional insureds to the policy.
- Completed Operations Additional Insured Endorsement: This endorsement extends coverage to parties that may be held liable for work that has already been completed by the named insured.
In conclusion, an Additional Insured Endorsement is an important tool for extending coverage to third parties under an insurance policy. By adding an additional insured, the policyholder can provide protection to clients, vendors, and other parties that may be exposed to liability arising from the policyholder's actions. If you are considering an AIE, it's important to speak with your insurance agent or broker to determine the appropriate type of endorsement for your specific needs.
Why Are Additional Insured Endorsements Requested?
There are many reasons why additional insured endorsements may be requested. One common reason is when a contractor is hired to perform work on behalf of a property owner. In this situation, the property owner may require the contractor to add them as an additional insured on their liability insurance policy. This ensures that if there is any damage or injury caused by the contractor’s work, the property owner is protected from potential liability claims.
Another reason why additional insured endorsements may be requested is when a business is leasing a property. The property owner may require the business to add them as an additional insured on their liability insurance policy, in case any claims arise from the business’s use of the property.
In some cases, additional insured endorsements may be required by law or contract. For example, in the construction industry, many contracts require all parties involved in a construction project to add each other as additional insureds on their liability insurance policies.
Overall, additional insured endorsements are an important part of liability insurance coverage, as they help to protect businesses and individuals from potential liability claims that may arise from their work with others. While they may add an additional cost to an insurance policy, the peace of mind that comes with knowing that all parties involved in a project are protected can be invaluable. It is always important to carefully review insurance policies and contracts to ensure that all necessary additional insured endorsements are included.
How Do I Add An Additional Insured Endorsement To My Policy?
Adding an additional insured endorsement to your policy can be a straightforward process, but it's important to understand the steps involved and the potential implications of doing so. Here's what you need to know.
Determine whether you need an additional insured endorsement: Before you can add an additional insured endorsement to your policy, you need to determine whether it's necessary. This will depend on the specific circumstances of your situation. For example, if you're a contractor working on a client's property, your client may require you to name them as an additional insured on your policy. Similarly, if you're renting a property, your landlord may request to be added as an additional insured.
Contact your insurance company or agent: Once you've determined that you need an additional insured endorsement, you should contact your insurance company or agent. They will be able to provide you with the necessary forms and information to add the endorsement to your policy. You may need to provide some additional information about the third party you're adding as an additional insured, such as their name, address, and relationship to you.
Fill out the necessary forms: Your insurance company or agent will provide you with the necessary forms to add the additional insured endorsement to your policy. You will need to fill out these forms accurately and completely, providing all the necessary information about the third party you're adding as an additional insured.
Pay any additional premiums:Adding an additional insured endorsement to your policy may result in additional premiums. You will need to pay any additional premiums required by your insurance company to extend coverage to the third party.
Review and sign the endorsement: Once you've completed the necessary forms and paid any additional premiums, your insurance company will provide you with the additional insured endorsement. Review the endorsement carefully to ensure that all the information is correct and that the coverage meets your needs. Sign the endorsement and return it to your insurance company.
It's important to note that adding an additional insured endorsement to your policy can have implications for your coverage. In some cases, it may limit your coverage or increase your premiums. Be sure to discuss any potential impacts with your insurance company or agent before adding the endorsement to your policy.
In conclusion, adding an additional insured endorsement to your policy can provide valuable protection for third parties who have a financial interest in your policy. By following the steps outlined above and working with your insurance company or agent, you can ensure that the endorsement is added to your policy correctly and that you have the coverage you need.
Court Cases On Additional Insured Issues
McIntosh et al., Plaintiffs, Appellants v. Scottsdale Insurance Co., Defendant, Appellee.
A man was injured when he fell twenty feet over a low retaining wall in a municipal convention center during an annual festival, which was conducted by a nonprofit corporation (hereinafter "the festival") pursuant to a city ordinance. He sued the city, alleging that his injuries were caused by "the city's failure to warn of a dangerous condition."
The city's general liability insurer provided defense when the festival's insurer denied liability. Before trial, the city admitted fault and, in return, the injured man agreed "not to execute against (the city's) assets and to release (its insurer) from any claims growing out of the accident." After trial on damages only, judgment was entered against the city.
The plaintiff then brought an action against the festival's insurer, alleging that it owed coverage to the city for the tort judgment. A federal district court concluded that an additional insured endorsement in the subject policy did not cover the city for its own negligence and that the governing ordinance did not require the festival to obtain coverage for the city's own negligence. Appeal followed granting of the festival insurer's motion for summary judgment and denial of the plaintiff's cross motion, including request for attorneys' fees.
The appeal court noted that an additional insured endorsement in the subject policy provided that: "The persons insured provision is amended to include as an insured the person or organization named below but only with respect to liability arising out of operations performed for such insured by or on behalf of the named insured."
The festival (the nonprofit corporation) was the named insured; the city was identified as an additional insured. The district court concluded that the endorsement extended coverage to the city only to the extent that it would be held vicariously liable for negligence on the part of the festival. As a corollary, the subject coverage would not cover negligence on the part of the city.
The appeal court disagreed. It concluded that the endorsement covered the city for the tort judgment. It found that the phrase "but only with respect to liability arising out of (the named insured's) operations" could be read to provide coverage for the additional insured in the circumstances. It said that a reasonable person would believe that the plaintiff's injuries and the city's liability stemmed from the festival's operations.
The judgment of the district court was reversed and remanded with an order to enter summary judgment for payment of the damage award to the plaintiff and to conduct a hearing on the request for attorneys' fees.
(McINTOSH ET AL., Plaintiffs, Appellants v. SCOTTSDALE INS. CO., Defendant, Appellee. United States Court of Appeals, Tenth Circuit. No. 92-3164. April 22, 1993. CCH 1993-94 Fire and Casualty Cases, Paragraph 4293.)
The Burlington Insurance Company, Appellant v. NYC Transit Authority, et al.
Thomas P. Kenny, an employee of the New York City Transit Authority (NYCTA) was seriously injured when he fell off an elevated platform in his attempt to avoid an explosion. The explosion was caused by a Breaking Solutions, Inc. (BSI) machine touching a live electrical cable that was buried at the site.
NYCTA, MTA and the City of New York (City) were additional insureds under BSI CGL policy issued by Burlington Insurance Company (Burlington) so when Kenny and his wife sued BSI, MTA, NYCTA, and City for the injuries, defense and indemnity was requested from Burlington from all parties.
Burlington took on the case subject to a reservation of rights. When it was revealed that the BSI was not and could not have been aware of the buried electrically energized cables BSI was found not negligent by the courts. Burlington then withdrew its coverage for MTA and NYCTA because BSI had not been negligent. Burlington did settle on behalf of the City for $950,000.
Burlington commenced an action with the courts for a summary judgment that it does not provide any coverage for NYCTA and MTA. Burlington then added to that action its right to subrogate against the City so as collect the $950,000 from the City because it was also not covered under the BSI policy. The Supreme Court awarded summary judgment to Burlington and NYCTA, MTA and City appealed.
The Appellate Division reversed the decision. Burlington appealed The New York Court of Appeals agreed to hear the appeal.
The wording of the additional insured endorsement stated that an entity is "an additional insured only with respect to liability bodily injury caused, in whole or in part, by [BSI's] action."
Burlington argued that because BSI did not cause the injury, coverage did not extend to the additional insureds. The defendants argued that because BSI a part of the loss and that if not for BSI actions, the accident would not have occurred there as a "but for" causation so that coverage would then extend to the additional insured.
The New York Court of Appeals rejected the "but for" argument and agreed with Burlington that because BSI was not negligent there was no coverage available for any of the additional insureds.
The Burlington Insurance Company, Appellant v. NYC Transit Authority, et al., Respondents, New York Supreme Court, Appellate Division. 2017 NY Slip Op 04384
Brian Fay Construction, Inc., vs. Morstan General Agency, Inc.
Brian Fay Construction, Inc. (BFC) subcontracted with J.P. Spano and Company (Spano) to perform some work on BFC's construction site. The parties agreed that BFC would defend, indemnify, and hold Spano harmless from all claims that arose from BFC's performing certain subcontract work.
BFC asserted that it contacted its insurance agency, DFW Associates, Inc. (DFW) after it entered into its agreement with Spano to have it add Spano to BFC's general liability policy as an additional insured. DFW issued an "ACORD Certificate of Liability Insurance" naming BFC as the insured and Spano as an additional insured under Fay's general liability policy with Burlington Insurance Company (Burlington). The certificate also named Spano as an additional insured under BFC's workers compensation policy with Realm Insurance Company (Realm).
A BFC employee was injured on the job and sued Spano for damages. Spano brought a third-party action against BFC and BFC filed a claim with Burlington. Burlington denied coverage. It asserted that BFC's policy excluded coverage for losses that arose out of bodily injury to the insured's employees, that an endorsement to the policy provided that there was no liability coverage for losses that involved the insured's employees, and that "there was no evidence (that) Spano was an additional insured."
After Burlington stated its reasons to deny coverage, BFC filed an action against DFW and Morstan General Agency, Inc. (Morstan), another insurance broker. The action claimed that they "failed to properly name" Spano as an additional insured on the Burlington policy. The lower court found that DFW was obligated to defend and indemnify BFC in the underlying personal injury action that BFC's employee filed. DFW appealed.
On appeal, the Supreme Court, Appellate Division, Second Department, New York, noted that insurance agents generally have a "duty to obtain requested coverage for their clients within a reasonable time or to inform the client of the inability to do so." The court noted, however: "While Burlington's letter indicated that 'there was no evidence Spano is an additional insured,' the letter, by itself, did not establish that Spano was in fact not an additional insured under the liability policy, or that the claim was rejected on that basis, or that the claim would have been rejected, based on the employee liability exclusion, regardless of whether Spano had been named as an additional insured.
Indeed, the letter may be interpreted as merely seeking additional information from the plaintiff." The court concluded that BFC had not met its initial burden of producing enough facts to entitle it to a decision in its favor as a matter of law with respect to DFW. The lower court's judgment was reversed.
Brian Fay Construction, Inc., vs. Morstan General Agency, Inc. Supreme Court, Appellate Division, Second Department, New York. December 20, 2011. 90 Atlantic Decisions 3rd 796
The Bottom Line On Additional Insureds
An Additional Insured Endorsement can be an excellent way to establish a healthy relationship with either a business partner or a client. Ensuring that everybody is well covered will leave you to concentrate on the projects at hand rather than the impending risks which accompany the project.
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