General contractors (when you’re working as a subcontractor), property managers and homeowners who are clients often request to be added as the additional insured under your liability policy. Additional insured status is given by adding an endorsement to the policy.
Additional insured means that your insurance policy covers another person or business. As the additional insured, your client doesn’t need to pay premiums on your policy, but they still have coverage.
How does it work?
Often, the additional insured will be the the general contractor on a project where you’ve been hired as a subcontractor. If the GC is sued because of something that is a result of your work, your insurance will protect the general contractor.
Let’s look at an example. You’re hired as a drywall installation subcontractor and the general contractor asks that you add him as the additional insured. You finish your work and leave the site to start another job. After the project is completed, the client contacts the GC to tell him that a sheet of drywall is buckling and the screws are popping out.
Basically, if the GC can’t prove you were responsible, he still won’t have to handle the claim on his insurance. The GC can have the claim filed under your insurance, instead of his own.
The additional insured, however, does not receive any notifications if the policy has been changed or it ended. For your client to be notified of any changes in policy, he would need to be added as the certificate holder on your ACORD certificate of liability insurance.
Types of Additional Insured
With traditional policies and additional insured, you will typically be charged a fee for each additional insured that you want or need to add to your policy.
A newer concept is the blanket additional insured endorsement. This automatically grants insured status to a person or organization that the named insured is required by contract to add as an insured or wishes to add. This means that you can add any number of additional insured persons without paying anything extra.
Additional insured status is commonly used in conjunction with an indemnity agreement (“hold harmless” clause, contractual liability) between the named insured (the indemnitor) and the party requesting additional insured status (the indemnitee). Having the rights of an insured under its indemnitor’s general liability policy is viewed as back up for the indemnification.
If the indemnity agreement proves unenforceable for some reason or the claim is limited by a limitation of liability clause, the indemnitee may still be able to obtain coverage for its liability by making a claim directly as an additional insured under the indemnitor’s policy.
How do I add clients to my insurance policy?
It’s pretty simple to add an additional insured. All you need to do is to speak to your insurance agency. They will be able to tell you if the terms of your insurance policy will allow you to add an additional insured. Once your client has been added as the additional insured, his name will appear on your certificate of liability insurance.
For more information and clarification, you may want to read about certificate holders and the difference between these two endorsements.
Some Quick Tips
- Ensure that all names are spelled correctly. Misspelled names can void the coverage.
- GC’s and PM’s require not just their name, but also the owner or leaser. The cost can add up if you don’t have a blanket endorsement.
- Clients typically require the additional insured names to be included in the Description of Operations section of the COI. Often, they also require the Additional Insured endorsements to be attached to the COI.
- Understand the difference between Ongoing and Completed Operations (risks, damage that happens after you step away). Additional insured endorsements sometimes exclude completed operations. Make sure yours covers both.