SPECIFICALLY SPEAKING | INSURANCE COVERAGE
What’s the Risk
Seeking Additional insured Status Protection
By Dana L. Bacsi and adam e. Jones
If you could get someone else to assume your risks, you would o it, right? Who wouldn’t? But when someone agrees to assume your risks, does their
insurance coverage apply? Parties can
agree to transfer risk in a contract
by setting forth that one party will
assume the financial consequences of
specific liabilities of the other party in
the event of a particular type of loss.
These types of risk transfer are seen
in situations of then lessor-lessee,
owner-contractor, contractor-sub-contractor, manufacturer-seller and
seller-buyer relationships.
Becoming an Additional Insured
A party may become an additional
insured on a liability policy in two
primary ways. One, when the policy contains a blanket endorsement
that amends the policy definition
of insured to include as an additional insured any party with which
the named insured has agreed in a
contract to provide liability coverage. Two, when the policy contains a
manuscript endorsement that specifically names the party who is entitled
to coverage as an additional insured.
The insurance coverage provided by
a commercial general liability (CGL)
policy, in general, does not apply to
liability assumed under any contract
or agreement and claims for breach of
contract. However, this exclusion does
not apply to liability assumed in a con-
tract or agreement that is an insured
contract. The definitions section of the
CGL policy provides that an insured
contract includes a lease of premises
and other meanings, including the
broad other contract or agreement
pertaining to your business.
Typically, when a named insured
seeks to add an additional insured, the
insurance agent will issue a certificate
of insurance that warns that the certificate is issued for informational purposes only and confers no rights upon
the certificate holder and does not
amend, extend or change the coverage
afforded by the policy. It is important
to note that a certificate of insurance
may not transfer risk. The certificate
provides limited information on the
actual coverage provided. It can be
used as notification that the certificate
holder has been named as an additional
insured pursuant to the requirements
set forth in the written contract.
