Differences Between Named Insured and Additional Insured: Part 2
This post is part of a series sponsored by TSIB.
When working on a construction project, the company you are working for may ask to be an Additional Named Insured or an Additional Insured. It’s easy to believe that they are the same thing, but in reality, there are some significant differences between the two.
An additional named insured is an entity that is added to a policy owner’s policy. This entitles the additional named insured many benefits and coverages the policy provides—whereas, an additional insured is typically a 3rd party added to the Named Insured’s policy. This is done in support of an indemnity obligation within a contract between that third party and Named Insured For example, a General Contractor (GC) and/or a Project Owner can be listed on a Trade Contractor’s corporate policy as additional insureds for a specific project.
Additional Insured
Coverage provided through the additional insured endorsement is extremely limited on the liability arising out of acts performed by or on behalf of the named insured. In other words, if you are an additional insured GC, coverage will only extend to liability caused by the named insured Trade Contractor. Typically, the GC requires its Trade Contractors to name the GC as an additional insured on the Trade Contractors corporate policy. In addition, the Trade Contractor has typically agreed to indemnify and hold harmless the GC from any liability caused by the Trade Contractor based on their written contract.
For example, if the Trade Contractor or anyone performing work on their behalf causes damage to the GC or Project Owner, the GC would normally be covered. However, if a third party unrelated to the Trade Contractor causes harm, the Trade Contractor may be covered, but the GC or Project Owner might not be. In the situation where the GC causes damage that is covered by the Trade Contractors policy, the GC is not entitled to coverage under the additional insured endorsement.
Coverage extended to an additional insured is limited. Should a situation arise which creates liability for both parties, coverage under the policy is shared between the named insured and additional insured.
For example,
In the event a named insured has $50,000 in liability coverage, an additional insured will also have $50,000 in coverage.
Should either the named insured or additional insured cause liability, $50,000 will be available to cover that liability.
However, if both parties incur liability, they will be required to share the $50,000 total coverage.
Additional Named Insured
An “additional” named insured has all the benefits of the actual policy owner. Following the above scenarios, the “additional” named insured would be covered from damage caused by a Trade Contractor, as well as damage caused by the “additional” named insured. Thus, in the event, there would be $50,000 in coverage for the policy owner and $50,000 in coverage for the “additional” named insured.
However, the “additional” named insured does not have all the privileges and/or obligations of the policy owner or original named insured. They are not able to pay premiums, cancel coverage or receive policy notifications.
It’s important to evaluate the expectations, goals, benefits, and coverage a party seeks to receive under a policy. If limited coverage is sufficient, an additional insured endorsement should suffice. However, if complete coverage from all potential liability is needed, an “additional” named insured should be required.
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