Think Twice Before Adding that Additional Insured!

Every day we receive a request from at least one client requiring a certificate of insurance for an “Additional Insured”. When we ask why the certificate is needed, the usual response has to do with a new funding source or mortgagee contract, lease agreement, special event agreement or rental requirement.

What many clients fail to realize, however, is that every time you add an additional insured on to your General Liability coverage, you are sharing your liability limits with the additional insured. In other words, if a covered liability claim is filed by your additional insured, it is your limits that are decreasing in order to provide the liability coverage to the additional insured.

“Additional Insureds” represent the cost of doing business. The explosive growth in the requests for “Additional Insureds” stems in large part from the nature of our litigious society. When collaborating with other organizations, make sure they carry their own liability coverage and negotiate agreements in which each entity is required to carry appropriate liability limits. If you are not in a situation where the “Additional Insured” requirement can not be negotiated, then consider increasing your own liability limits so your organization has ample liability protection. We recommend a commercial umbrella policy to protect against a catastrophic liability loss. Your attorney should also advise you as to appropriate agreements or waivers that can help limit your organizations liability exposure.

With regard to Special Event Collaborations, the vendors you hire may not be covered under your liability policy. To protect your organization make sure that every vendor and independent contractor provides the appropriate certificate of insurance and endorsement. You can also have contractors sign Hold Harmless agreements as a part of your risk management plan. Again, have your attorney review all agreements.

Make sure to review your liability policy and let us know if you have any questions. We are here to help.

This is intended for informational purposes only and should not be construed as legal advice.