NEWS
Independent Insurance Agents of Virginia
Incorporated
8600 Mayland Drive, Richmond, VA 23294
For Further Information Contact:
May 2003
Diane Mattis, CPCU – Education Director
Toll Free # 1-800-288-4428
E-Mail: dmattis@iiav.com or visit www.IIAV.com
Additional Insured vs. Named Insured
Overview and Update on Changes in New 2001 CGL Form
by Carlton L. Gill Jr. CPCU, ARM, CLU, W.T. Chapin Insurance Center
Who is insured under a General Liability policy? This seemingly simple question can
become very difficult to answer. We should begin the analysis by looking at the “Who Is
Insured” section (Section II) of the Commercial General Liability Policy. There, we find
the parties listed depending on whether the declarations indicate the insured to be an
individual, partnership (or joint venture), limited liability company, or an organization
other than a partnership, joint venture or limited liability company (such as a corporation,
association, school board, nonprofit foundation, etc.). In addition, employees are
specifically listed (with exceptions) as are newly acquired and/or newly formed
organizations (other than partnerships, joint ventures or limited liability companies).
What is the difference between someone who is insured under the policy and a named
insured? Simply, a named insured is specifically listed in the declarations of the policy
and must have an insurable interest under the policy. It is common for multiple entities
to be named insureds. For example, a real estate developer may form limited liability
companies for each of the subdivision developments. Once the project is completed, the
limited liability company is dissolved. (This may cause Products/Completed Operations
coverage problems!) Both the real estate developer and his limited liability companies
may be named insureds under the policy to protect their respective interests. The policy
(in the Common Policy Conditions) specifically enumerates rights and responsibilities for
the first named insured. No other entity, regardless of whether they are a named insured
or an additional insured has those rights or responsibilities.
An additional insured seeks protection under someone else’s policy where there is no
common ownership, but there still exists an insurable interest. For example, a city may
wish to be added on the real estate developer’s policy in the event the city is brought into
a claim as a result of the real estate developer’s operations. Likewise, the city may wish
to be added as additional insured to a retail store’s policy where the awnings extend over
the city owned sidewalk. Members are frequently additional insureds on their respective
club, church, and homeowners’ association policy. ISO publishes a list of additional
insured endorsements. (I counted 37 commonly used additional insured endorsements
and they change frequently.) IIAV offers a class entitled “Coping with Additional
Insureds”, which I recommend.
New Development:
If Contractual Liability is not provided by the same GL insurer, ISO form CG 2010 or
CG 2033 can be used to provide additional insured status for owners, lessees and/or
contractors. One area of concern with respects to additional insureds is the inclusion or
exclusion of Completed Operations. In 1993 the CG 2010 form was revised with “your
work” being replaced by “your ongoing operations”. This effectively eliminated
Completed Operations coverage. Many construction (and other) contracts require
Completed Operations Coverage. Typically additional insureds would have Completed
Operations under their own policy, but this does not meet their contractual obligations of
the insured. Since Virginia continued using 1985 wording in a Virginia specific form
(CG 0132) we didn’t have any problems. With the 2001 GL form being adopted in
Virginia, agents should start using the CG 2037 form along with the CG 2010 form to
provide owners, lessees and contractors with additional insured status including
Completed Operations coverage.
Defense Costs and Duties of Additional Insured:
In the 1998 ISO Commercial General Liability Policy, additional insureds have greater
protection than in the past. With the 1998 form, additional insureds are entitled to
defense expenses, if a contract requires them. Previously defense costs were not
included. There are several conditions that must be met for defense costs to be included:
 The “insured contract” must specify that defense costs are included.
 The lawsuit must be covered by the policy.
 The additional insured must cooperate with the investigation of the claim.
 The additional insured must also use the defense attorneys provided by the insurer
(to avoid duplicating effort and expense).
 Claims or lawsuits solely against the additional insured will not be covered, nor
will defense costs be provided.
 If a claim is settled on behalf of the named insured but not the additional insured,
the insurer will not have a duty to defend the additional insured.
 The additional insured must provide information about other insurance that may
contribute to the settlement and help coordinate the actual settlement. (This may
be the biggest problem. Since most additional insureds are added to keep their
own insurance from being involved, this condition may defeat their goal. )
Failure to meet these conditions voids the insurer’s responsibility to provide defense
costs, but does not release them from liability for the actual claim. In other words, if
the additional insured does not wish to coordinate coverage, they will still have
coverage under the policy, but not for defense costs.
Cancellation Provisions:
Usually, most entities are satisfied with being added as an additional insured and
receiving a Certificate of Insurance indicating this. Occasionally, you will be requested
to add an entity as an additional named insured. This terminology is outdated, but is
frequently requested by someone believing that, in this capacity, they will be notified in
the event of cancellation or nonrenewal of the policy. Remember that only the first
named insured receives such notification in ISO policies. Keep in mind that insurers who
file their own forms may have the ability, or may even be required, to notify additional
insureds in the event of cancellation or nonrenewal. This is particularly true if a premium
charge is made to add the additional insured. I checked with two “regional insurers” who
both charge for additional insureds (one on a BOP policy and one on a Contractor’s
Package Policy). In both cases, their policy requires notification of additional insureds in
the event of cancellation or nonrenewal. Check with your underwriters for specific
advice about a particular situation. Simply because an insurer charges for an additional
insured does not automatically mean that the additional insured will receive any notice
(e.g. surplus lines policies).
Many additional insureds request a Certificate of Insurance specifying that the words
“will endeavor to” be stricken to guarantee that they will be notified in the event the
policy is cancelled. Courts have thus far not agreed that striking this wording is an
attempt to modify the insurance contract. This can only be done by endorsement. When
an agent alters the ACORD certificate, such as crossing out the “endeavor to” wording,
the agent assumes responsibility for notifying certificate holders of policy cancellation.
This opens up an E&O exposure from the third-party certificate holder.
Best Practices for Certificates of Insurance
One of the most time-consuming and labor intensive functions in any agency
is the handling of certificates of insurance. This is also an area that creates
a number of E&O concerns. Although a certificate confers no rights upon
the certificate holder, agents often alter the certificate at the request of
either the insured or the certificate holder, creating a liability in the
process.
The Best Practices for Avoiding E&O Claims When Handling Certificates
of Insurance

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DON’T alter the wording on the ACORD certificate of insurance
Use the proper ACORD form (proper edition date, Certificate,
Evidence of Property Insurance, etc.)

Don’t issue non-ACORD certificates without approval from the insurer

Stay within the authority granted under your agency agreement


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Document who requested the certificate and what was requested
Comply with the company’s requests for a listing of certificates issued
or additional insureds added when operating under a blanket additional
insured endorsement
Establish a written procedure for handling certificates of insurance
Excerpt taken from Best Practice E&O IIABA/IIAV seminar.
It is the intent of this technical bulletin to be just guidelines and not legal advice.
Each agency should review their own particular clients exposures and applicable
coverage forms. The Independent Insurance Agents of Virginia does not accept any
responsibility for the information provided, but offers such as acceptable guidelines.
This information is not intended as legal advice, but is provided for general agency
information. Facts, circumstances, and the application of particular laws will differ
in individual circumstances.
Founded in 1897, IIAV is a non-profit trade association representing independent
insurance agents throughout the Commonwealth of Virginia. IIAV is part of the
nation’s oldest and largest associations of independent insurance agents,
representing a network of more than 300,000 agents and agency employees
nationwide. Its members are small, medium, and large businesses that offer
customers a choice of policies from a variety of insurance- property, casualty, life
and health. For more information concerning the association contact IIAV, 8600
Mayland Dr. Richmond, Va. 23294. Phone 804-747-9300 Web address:
www.iiav.com and nationally www.independentagent.com