RISK CONTROL BULLETIN
An Introduction to Additional Insured Status
Introduction
Contractors and others are often required to add various parties as additional insureds on their Commercial General
Liability (CGL) policies. Typically these might include the owner and design professionals. At other times, contractors may
require that their subcontractors name them as additional insureds on their CGL policies. This paper is an attempt to
provide you with a brief introduction and overview of the subject, to enable you to ask more informed questions about it,
and to give you a better understanding of what you should expect when naming others as additional insureds on your
policy and vice versa.
What does it mean to be an additional insured on an other party's CGL policy?
Use of "additional insured" status is an attempt to obtain insurance protection under someone else's policy instead of
relying on your own. To better understand what insurance protection is afforded by "additional insured" status it might help
to view it relative to the status of the first named insured shown in the policy declarations.
Those who have "insured" status under the CGL coverage form developed by Insurance Services Office Inc. (ISO),
include named insureds, automatic insureds, and additional insureds. Named insureds are those individuals or entities to
whom a policy is issued. They are named in the policy declarations and referred to throughout the policy as "you" or
"your." If a policy is issued to more than one named insured, there may not be adequate space on a standard
Declarations page, to list them all. There is usually a primary named insured, referred to as "first named insured" shown
on the declarations page. The other named insureds may be listed on a blank endorsement page with the words
"Additional Named Insured Endorsement" typed on it.
Automatic insureds are those who enjoy "insured" status under a policy because they have certain close ties to the named
insured. Among others, if the named insured is a partnership, all partners have named insured status. The same holds
true for members of a named insured joint venture; and, in corporations, for executive officers, directors, stockholders
and, with certain exceptions, employees.
The ISO CGL coverage form describes those persons or organizations who automatically qualify as an "insured" under
Section II of the policy, captioned Who Is An Insured.
Additional insureds are individuals or entities who must be specifically added to the policy, usually by endorsement, to
enjoy "insured" status. Under a CGL policy, virtually any person or organization can be added as an additional insured,
subject to the approval of the insurer.
Why would someone want to be added as an additional insured on another's CGL policy?
Additional insured endorsements usually provide the additional insured with coverage for bodily injury or property damage
liability that might arise out of the ongoing operations that the named insured is performing for the additional insured. For
example, if a general contractor (GC) subs out the electrical work and is named as an additional insured on the sub's CGL
policy, that policy would also provide liability coverage for the GC.
Additional insured status is usually used as a supplement to a hold harmless agreement. It gives the party being held
harmless (the indemnitee) greater assurance that the other party (the indemnitor) will have the financial ability to honor
the agreement by backing it with an insurance policy. It also reinforces the intent of a hold harmless provision in a contract
by giving the additional insured direct rights under the named insured's policy.
For example, if a hold harmless provision is unenforceable because of statutory restrictions, or the circumstances of the
loss are outside the scope of the hold harmless agreement, the indemnitee can look for coverage under the indemnitor's
policy, including a direct right to a legal defense.
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Other reasons for requiring additional insured status include:
• avoiding subrogation by the indemnitor's insurer, when a loss is caused by the indemnitee's acts or omissions. A CGL
policy usually does not give an insurer subrogation rights against an insured.
• obtaining personal injury and advertising injury coverage (i.e. libel, slander, wrongful eviction) under the
indemnitor's policy. The CGL policy excludes coverage for these exposures when liability is assumed in a contract or
agreement (i.e. via a hold harmless). However, if the indemnitee is also an additional insured under the indemnitor's
policy, coverage would be available, and the indemnitor would more likely be able to honor the hold harmless.
What does it take to be named as an additional insured on another's CGL policy?
An individual can be added to a policy, as an additional insured, only at the request of the first named insured shown in
the policy Declarations and only with the insurance company's consent. It is accomplished by means of an endorsement
that is issued by the insurance company and made a part of the policy. The endorsement can be a standard form issued
by ISO or it can be a manuscript endorsement that is created and issued by the insurance company.
Manuscript endorsements may be created to address specific needs the named insured or additional insured may have in
terms of expanding or restricting coverage. They might also include insurance company stipulations that restrict coverage.
The point is that whether it's a standard ISO endorsement or a manuscript endorsement, you must know the wording in
order to ensure that the additional insured endorsement accomplishes the desired transfer of risk from the indemnitee to
the indemnitor.
Since manuscript endorsements are, by definition, not standard in form or substance, you may never be sure if they
accomplish what you want them to until a case comes to trial. For this reason it is essential that they be reviewed by
someone with considerable insurance coverage expertise such as a professional agent or broker or perhaps legal
counsel.
Finally, you should understand that there may be a charge for adding an additional insured to a policy. The charge would
be incurred by the policyholder and billed to the first named insured, as are other premium charges.
Are an additional insured's rights under a CGL policy the same as the rights of a named insured and an
automatic insured?
A party added to an ISO CGL policy as an additional insured, is as much "the insured" in the context of the insuring
agreement as the named insured who purchases the policy is. The additional insured has the same coverage, generally
subject to the same exclusions, as the named insured has. As mentioned earlier, an additional insured also has the same
rights to a defense in a suit seeking covered damages as does the named insured.
However, there are some differences with regard to both rights and obligations that are worth noting:
• Only the first named insured may cancel a policy
• Only the first named insured receives notice of cancellation from the insurer
• Only the first named insured receives any premium return
• The first named insured is responsible for payment of premium
• Medical payment coverage applies only for the named insured and not additional insureds
• Only a named insured, but not an additional insured's, employees, executive officers, and directors are insureds under
the policy, to the extent they are acting within the scope of their employment or duties
• Certain exclusions, such as damage to property, apply only to the named insured and not to an additional insured
• More stringent reporting requirements are imposed on the named insured in the event of an occurrence, claim, or suit
Are there any problems associated with providing or having named insured status?
Problems for the named insured who allows another to have additional insured status on the policy include:
• Dilution of limits - both the named insured and the additional insured share the occurrence and aggregate limit (i.e.
when other insureds have access to a named insured's policy) and all must share the limits applicable to any
occurrences that result in claims against one or more of them.
• Defense conflicts - when a suit is brought against both the named insured and an additional insured, it is not unusual
to have each of them making allegations against the other. This presents a conflict of interest for the insurer who must
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defend both. True, this is the insurer's problem, but it is something the named insured should be aware of. In such
situations, it is likely the insurer will retain separate legal counsel at the insurer's expense. While defense costs normally
do not reduce policy limits, they do run up the cost of the claim and worsen the named insured's loss experience.
• Providing unintended coverage - without clearly defined limitations on the coverage provided by an additional insured
endorsement, it is possible that the additional insured could be given general coverage. If the endorsement is not
worded properly, coverage provided under the named insured's policy might extend beyond that arising out of the
specific job or work for which additional insured status was required.
Problems for the party named as an additional insured on another policy include:
• Loss of defense control may be an important consideration for some, particularly larger organizations that are self
insured or are otherwise actively involved in managing litigation when claims are made against them. Insurers have the
exclusive right to manage defense of the claims they cover. In some instances, named insureds are allowed significant
input into the process. Additional insureds will not likely be in a position to have any say.
• Increased likelihood of coverage disputes with the indemnitor's insurer is another possibility you should be aware of.
As explained earlier, additional insured status is often required to supplement a hold harmless agreement, to help
insure that the indemnitor ( the party who holds another harmless ) has the financial ability to honor the agreement.
Often hold harmless agreements include provisions for holding an indemnitee harmless for losses that are excluded or
not otherwise covered in the indemnitor's CGL policy. When such a loss occurs, the party being held harmless may be
looking for coverage under the indemnitor's policy and it may not be available.
For example, the CGL's pollution exclusion excludes coverage for pollution arising from a premises owned by "any
insured." Since an additional insured is "an insured," it would come within the pollution exclusion. However, had they
not been added as an additional insured, but were simply held harmless in the contract, it is possible the named
insured's policy (i.e. the indemnitor's policy) might respond under its contractual liability coverage provisions.
Another source of coverage disputes is the CGL policy's "Separation of Insureds" condition which effectively allows one
insured under a policy to bring suit against another. Such suits are called "cross liability" suits, and the provision in the
policy is referred to as the Severability Of Interests provision. Under this provision, the insurer is obligated to
protect/defend the insured being sued, and possibly pay damages to the plaintiff, also an insured under the policy, if
they are successful in their suit. This can cause problems with defense and coverage issues when the named insured
does not believe there should be coverage but the additional insured does.
• Other insurance conflicts can arise out of the wording of the "other insurance" conditions included in ISO CGL policies
using 1996 or earlier forms. To achieve the risk transfer benefit that the indemnitee wishes to gain from having
additional insured status, he will want his insurance to be excess over the coverage available to him under the
indemnitor's policy. If both the named insured and the additional insured have standard 1996 ISO policies, both will
declare that coverage under their policy is primary. In such instances, any loss covered under both policies will be
apportioned between them. The additional insured's purpose of avoiding involvement by his policy, and transferring all
risk to the indemnitor ( i.e. the named insured ) will be defeated.
In April, 1997, ISO introduced mandatory endorsement "Amendment of Other Insurance Condition", to remedy this
situation. The current 1998 ISO CGL coverage form has incorporated the language of this endorsement. If your CGL
coverage form is other than the 1998 ISO version, you may want to review your situation with your agent to determine if
the "Other Insurance" condition in your policy is such that it would respond as excess insurance over coverage you
have as an additional insured.
There may be no coverage for completed operations. Until ISO revised the general liability program in 1993, additional
insured endorsements provided coverage for losses arising out of the named insured's work (i.e. "your work"). The courts
usually ruled that "your work" included both ongoing operations and completed operations. However, the revised forms
refer to losses arising out of "ongoing operations," which does not include completed operations.
When you are required by contract terms to provide an additional insured with completed operations coverage, you must
be sure the endorsements use the "your work" language. This may require a manuscript modification by your insurer or
use of a manuscript endorsement tailored to meet your needs. Another alternative is to resist the additional insured's
demand for completed operations coverage.
How can I be sure that my insurance program takes into consideration and addresses my needs regarding
additional insured status?
• Read this Risk Control Bulletin as introduction to the subject area if you haven't read it already.
• Consult with your lawyer and insurance agent.
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• Work with them as needed, review your contracts to determine when you are required to provide others with additional
insured status and what the specifics are.
• Determine if you are in compliance with contract provisions. This will likely require actual review of the policy and
endorsements.
• Follow through to have endorsements changed if needed to comply with contract provisions, and no more.
• If possible, change contracts if requirements are unreasonable.
• Work with your agent and legal counsel as needed, to determine when you will want others to include you as additional
insureds under their CGL policies and what your specific requirements are.
• Request or require (depending on your bargaining position) that the other party's CGL be endorsed to meet your needs.
• Obtain a copy of the policy and endorsements if possible and practical.
• If not, at least obtain a Certificate Of Insurance that shows you as an additional insured, with specific reference to the
endorsement being used.
• Implement a program to insure that additional insured status is reviewed whenever contract changes are made.
• If changes in additional insured status are needed, because of contract changes, follow steps above to be sure they are
made correctly.
• Implement a Certificate Of Insurance program to be sure you have current Certificates on file for all subcontractors, that
policy limits and coverages are adequate, and that additional insured requirements are properly indicated.
• Review FCCI's companion Risk Control Bulletins An Introduction to Hold Harmless Agreements and An Introduction to
Certificates of Insurance.
This publication is not part of your policy. This publication is provided for informational purposes only and does not attempt to identify all potential
issues, situations, hazards, or remedial actions. FCCI Insurance Group* and its affiliates and subsidiaries are making no representations and providing
no legal advice and shall not be liable for any loss, injury, death, damage or expense arising out of the use of this information. You are solely
responsible for complying with all relevant laws, including any changes in the law, and for the safety and protection of your operations.
* The FCCI Insurance Group includes the following insurance carriers: FCCI Insurance Company, FCCI Commercial Insurance Company, National
Trust Insurance Company, Monroe Guaranty Insurance Company, and Brierfield Insurance Company.
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