The Jones Insurance Insider #5: Additional Insured Verbiage Leaves Property Management Company Excluded from Coverage in Three-Way Suit

Generally, contracts with third parties provide commercial building owners with ironclad insurance risk protection—even when something goes wrong with a COI. As property managers, you don’t receive the same protections (unless you are a signatory to the contract). So, if a third party neglects to add you as an Additional Insured, even if you think the contract doesn’t require it, you have NO COVERAGE and are exposed. 

One property management company learned that lesson the hard way when a contractor fell while working on the roof of property they managed. The contractor sued both the owner and property manager for negligence. In court, everything came down to the Additional Insured Status. 

The contract between the property owner and the injured worker’s employer required that the contractor list “the Owner, the Architect and the Architect’s Consultants as additional insureds for claims.” However, it made no mention of adding the property management company as an Additional Insured —and so they didn’t.

The property management company attempted to claim Additional Insured status as the contract was signed by an employee of the management company and was “care of” the property management company but the court quickly shot down this argument finding that the language of the contract was “clear and unambiguous” in only providing coverage for the owner. Moral of the story? You need to ensure any third party adds your organization specifically as an Additional Insured on their policies, because unlike property owners, property management companies can’t rely on contractual privity or “owner” verbiage.

Takeaways from Alex Kario, Senior Director of Operations at Jones

• If your property management company is named as “care of” on a contract it only signals that you are authorized to administer the contract, not that you receive the protections that a signatory receives. 
• If the property management company overseeing the mall had done a diligent review of the contractor’s COI or Additional Insured endorsements, it should have noticed that crucial Additional Insured protections were not evidenced in its favor. 
• It is crucial to then review the contract itself to ensure adequate protections are required within the contract for all interested parties. In this case, the contract contained no obligation to insure the property management company. 

SHAMELESS PLUG: HOW JONES CAN MAKE SURE THIS DOESN’T HAPPEN TO YOU 

At Jones, we establish baseline insurance requirements with our customers that we check all vendor and tenant COIs against. In a situation like this it’s clear the intention of the property management company was to have Additional Insured status conferred, so that would have been included in the requirements Jones checks COIs against. In this case, Jones would have flagged the contractor’s COI as not containing either Additional Insured verbiage or an Additional Insured endorsement that conferred coverage to the property management company. 

🤕 Personal Injury Versus Personal Advertising Injury: What’s the Difference? 

Our experience working with property managers from companies across the US has shown us that comparing insurance requirements from lease documents to the coverage evidenced on a COI is one of the trickiest parts of the job. Today we’re working to bridge that gap with a deep dive into the difference between personal injury and personal advertising injury. Here’s a quick takeaway:

Personal advertising injury:

• Covers intangible damages like violation of privacy, libel, or copyright infringement 
• Has its own row on a COI

Personal Injury

• How legal professionals refer to a broad class of claims that encompasses injury and death
• No direct correlation to COI

Want to know more about reviewing leases for insurance requirements? Check out our blog here for a full write up, or watch the video below.

That’s it for this month, see you in December! 👋