Posted on May 17, 2014
When companies work with other businesses, there are times when they need added protection from the risk associated with using that other company or vendor. If a subcontractor or vendor causes damage or injury to others while working on a project with another company, both companies are subject to risk of financial loss.
Additional insured coverage is insurance protection added to commercial general liability policies to provide added protection to companies that work with others in completing a job. Each state has specific rules with how additional insured coverage operates for indemnifying companies, but there are common elements across the nation with regard to how these endorsements are used.
Additional insured endorsements are often found within the construction industry. General contractors will require that subcontractors add them to their general liability policies as additional insureds to protect from liability for damages or injuries on a construction site. Some commercial landlords will also require their business tenants to add them as additional insureds as part of the rental lease agreement.
When additional insureds are added to a policy, the company is protecting those additional insureds for negligence on their part. So for instance, if you hire a cement contractor to lay sidewalks on your building project, and they request to be added as additional insureds. If someone slips on the walk, injures himself and then sues, your insurance company would provide coverage to you and the cement contractor, your additional insured.
This coverage is added using endorsements and certificates. Most companies requesting to be added as additional insured to your policy will specifically request that you supply them with a certificate showing the status. Often, companies will request mutual coverage for additional insureds.
Your broker can review your general liability policy with you and then help determine what additional insured coverage is supplied by your existing policy. If there are any gaps, additional policy amounts can be added. Also, always read your contract to make sure what your policy will provide to additional insured parties so that you are not jeopardizing or putting your company at significant risk.