Litigation Management

of insurance as sufficient evidence that they are an insured under the policy held by the named insured. However, the certificate holder may in fact not be an additional insured. The insurance agent could fail to submit the request to add an additional insured to the insurer, or the written contract between the parties could be void of language specifying that one party is to be added as an additional insured and the policy only contains a blanket additional insured endorsement.

The certificate holder (and its liability insurer) may not realize there is an issue until a claim arises. Courts have relied on disclaimers set forth in certificates in holding that the policy of insurance itself controls the extent and terms of coverage.

Comparing Policies and Allegations In most states, it is a well-settled rule that an action must be brought against an insured and the complaint allegations must state a claim that could

potentially trigger insurance coverage before the duty to defend arises. Therefore, one of the threshold questions is whether a person or organization qualifies as an insured under a policy of insurance. This inquiry begins by making a comparison of the provisions in the policy of insurance to the allegations made in the complaint and any applicable written contracts.

Additional insured provisions have
been interpreted liberally by the

courts and in favor of coverage. They
are intended to protect a party who
is not a named insured from expo-
sure to vicarious liability for the acts
of the named insured, but policy lan-
guage can be expanded to include
broader protections, including the
additional insured’s own negligence
in certain situations. As a result, addi-
tional insured status may provide the
right of an immediate defense instead
of a subsequent reimbursement of
defense costs incurred in litigation.
Additional insured status does not
necessarily guarantee the same protec-
tions as named insured status due to
policy exclusions and limitations that
might be found in additional insured
endorsements. Those rights are deter-
mined by the terms of the policy and
not the terms of the contract of which
the insurer was not a party.

Just because a policy affords coverage to an additional insured does not mean that it is primary or exclusive. Other policies may exist that apply and the additional insured may have its own policy. The written contract between the parties and the additional insured endorsement may state that the insurance is primary to any other insurance issued to the additional insured and any other insurance is excess. The issue of priority may not be mentioned in the additional insured endorsement, leaving the area of inquiry to rest with an interpretation of the other insurance clauses in the policies. This clause in the additional insured’s own policy often states that it is excess over any applicable policy under which the insured has been added as an additional insured pursuant to a contract or agreement. In such a case, the insurance policy providing coverage to the additional insured may be deemed primary.

Lawyers, risk managers and insurers should obtain a copy of the negotiated contract, certificates of insurance, and the complete insurance policy with any and all endorsements so that a thorough review and analysis can take place. Additional insured status and the additional protection afforded should continue to be reviewed into the future, as contracts can be renegotiated and company acquisitions can occur. These changes can affect additional insured status and the accompanying protection by the time new claims arise.

By Dana L. Bacsi, Esq., CLMP, is a Partner with the law firm Goehring Rutter & Boehm, based in Pittsburgh. Adam E. Jones, JD, is a Senior Claims Analyst with QBE the Americas, in Sun Prairie, Wis.