Can An Additional Insured Sue A Named Insured?

  • Liability insurance coverage is extended beyond the stated insured to include other individuals or groups.
  • The additional insured under the listed insurer’s policy is protected by an additional insured endorsement, which allows them to file a claim if they are sued.
  • Subcontractors may be required by a general contractor to name the general and the owner on their insurance policy.

Can a named insured sue another named insured?

When two covered parties obtain cross-liability coverage, one of the insured parties can sue the other, even if they are both covered by the same policy. A cross-responsibility clause known as a “Separation of Insureds” agreement is commonly included in standard liability insurance.

What are the rights of an additional insured?

In a previous piece, we discussed the critical role that “In the construction sector, the position of “extra insured” is vital. An is a “Any entity other than the primary insured that is covered by the primary insured’s insurance policy is referred to as a “additional insured.” The right to file a claim for damages directly against the primary insured’s insurance carrier; the right to a legal defense against third-party claims; and coverage for any damage caused – the additional insured enjoys these rights while keeping its own loss history clean and protecting itself from future premium increases – the additional insured enjoys these rights while keeping its own loss history clean and protecting itself from future premium increases.

Importantly, the only way to lawfully achieve additional insured status is by an endorsement to the primary insured’s policy, and the scope of the additional insured’s coverage is completely controlled by the four corners of the endorsement itself. The importance of the endorsement phrase is demonstrated by a recent case from New York State. In the New York case, a construction manager mistakenly believed it was an additional insured under the general contractor’s insurance policy discovered the hard way that it was not, all because of the difference between the words “with whom” and “for whom.”

The City of New York initiated a project including the construction of a 15-story building on the Bellevue Hospital NYC campus for use as a DNA lab for the Chief Medical Examiner of New York City in Gilbane Building Co. v. Liberty Insurance Underwriters. For the project’s funding and operation, the City signed a contract with the New York State Dormitory Authority. Gilbane was hired as the project’s construction manager or CM by the Authority. The Authority’s contract with the CM stipulated that the prime contractor must name the CM as an extra insured under the prime’s liability policy.

After that, the Authority signed a contract with Samson Construction Company to be the project’s prime contractor. Samson agreed to seek CGL coverage with an endorsement designating the CM as an extra insured as part of its contract with the Authority. Samson did exactly that, obtaining a policy from Liberty Insurance Company that stated that the basic policy was amended to include any organization as an additional insured “With whom” Samson agreed to add as an additional insured – not “for whom” the primary insured agreed to provide coverage, as many additional insured endorsements provide.

As a result of the prime contractor’s excavation and foundation work, surrounding buildings are said to have sunk, causing substantial (and expensive) structural damage to those structures. The Authority filed a lawsuit against the prime contractor as well as the architect. The architect filed a third-party claim against the construction manager, who submitted a claim with Liberty for a legal defense to the litigation, believing it was an additional insured under the prime’s insurance policy with Liberty.

Liberty refused coverage to the CM’s surprise, claiming that the CM did not qualify as an extra insured, despite the fact that the CM was designated as such on the sample Certificate of Insurance issued. The CM subsequently sued Liberty, requesting a court declaration that it was, in fact, an extra insured under the prime’s policy. The Court, on the other hand, concentrated on the terms “with whomagreed to include as an extra insured,” arguing that there was no additional insured coverage because the prime had never entered into a written contract with the CM agreeing to add the CM as an additional insured. The bag was left in the hands of the CM.

What is the takeaway from the New York case? To confirm that you have been added as an additional insured properly and lawfully, 1) ensure that an endorsement has been granted definitively; 2) Carefully study the endorsement’s text; and 3) double-check with your legal team to ensure you’ve been correctly identified as an additional insured.

What does it mean to be named as an additional insured?

An additional insured in an insurance policy is someone who is covered by the policy but is not the policyholder. Coverage could be limited to a single occurrence or extend for the duration of the policy.

Can an additional insured make a claim?

Yes. In the event that they are sued as a result of a risk event, additional insureds have the right to bring a claim. However, the outcome of that assertion will be strongly influenced by the endorsement’s specifics. Even if there is a misunderstanding of what is covered and what is not, the AI may be held liable for all or part of the resulting damages.

That makes it even more critical for all parties involved to grasp the endorsement’s terms, which we’ll go over in greater detail below.

Does a cross suits exclusion apply to an additional insured?

Most construction contracts include insurance clauses that specify the insurance coverage that the contractor or other downstream parties must have. Some provisions are lengthy and complex, while others are brief and to-the-point, but all are vital and should be thoroughly understood by the contractor prior to signing the contract. Furthermore, every insured should be aware of not just what the contract requires, but also what the actual policy indicates, as the policy, not the contract, will determine whether or not coverage is provided. Although certifications may match contractual criteria, much of what the policy covers is not reflected on a certificate. The policy, which is hidden behind the certificate, is where the actual coverage is found. The policy’s endorsements or exclusions can render the certificates useless pieces of paper.

There are a number of exclusions that can cause coverage for a contractor’s work to be canceled. Exclusions such as height, residential, and EFIS exclusions, among others, are based on the type of work or materials that the contractor is conducting or using. However, one exclusion focuses on who is insured, and that exclusion by itself can void all coverage.

Although cross-party exclusion is prevalent, many people are unaware of its implications.

An insured party cannot sue another insured party under the same policy because of this exclusion.

This occurs in two situations: I when an owner and contractor are both named insured under the same policy, sometimes known as a “wrap-up policy” or “mini-wrap policy,” and (ii) when a party is named as an additional insured under another’s policy.

In the first situation, it’s customary for the project owner to buy (or have the contractor buy and reimburse the owner) a policy that covers both the owner and the contractor.

What happens, though, if a third party’s property is damaged and the owner sues its own contractor?

A cross-party exclusion nullifies any coverage for either the owner or the contractor, effectively leaving the policy ineffective for both.

The following is an example of a cross-party exclusion: “Any claim or suit initiated, alleged, brought, or caused to be brought by any Named Insured against any other Named Insured is not covered by this insurance.”

You could be scratching your brain right now, thinking to yourself, “How can there be no coverage if the objective of the insurance is to cover the insureds?”

You’re not on your own. Why would anyone buy a policy like this? It may be to save money in various cases. When there is personal injury or property damage to a third party without coverage, however, no money is saved. While the cross-party exclusion appears to go against the grain, it was designed to prevent the parties from wasting time and money on unnecessary litigation because the damaged party may simply rely on the indemnification in the wrap-up policy to protect them. In addition, the exclusion helps to avoid conflicting policies and subrogation. However, if the insureds’ relationship breaks down and/or an insured claims they paid out of pocket to cover third-party costs, they may sue each other, only to discover there is no coverage. A party covered by these types of policies with a cross-party exclusion should be wary of thinking that suing the contractor will compensate them for the contractor’s negligence. A policyholder should file a claim against the insurance for the carelessness of one of the listed insureds without filing a claim against another named insured.

In the second situation, the owner and contractor agree to hire a contractor to complete specific tasks. The contractor subcontracts all or part of the work to one or more subcontractors, and the subcontractor must list the owner and the contractor as extra insureds on the subcontractor’s insurance policy. So, what happens if an employee of a subcontractor is injured on the job? To provide coverage, the owner would look to the contractor, who would look to the subcontractor and the subcontractor’s insurance policy. However, if the subcontractor’s policy includes a cross-liability exclusion that excludes coverage for the owner and contractor, the owner, contractor, and subcontractor (as well as their workers) are all in danger. Claims between insureds are barred by the cross-party exclusion. 385 Third Avenue Associates v. Metropolitan Metals Corp., 916 N.Y.S.2d 95, 2011 N.Y. Slip Op. 00787 (1st Dep’t 2011), and Amerisure Insurance Co. v. Scottsdale Insurance Co., 795 F.Supp.2d 819 (1st Dep’t 2011). (U.S.D.C Ind. Div. 2011).

The court rejected an additional insured’s argument that there was an expectation of coverage and that the additional insured had no opportunity to negotiate or bargain for the coverage (or lack thereof) because the cross-party exclusion was unambiguous and clearly stated in the policy, regardless of expectations. The Burlington Insurance Company v. Transcontinental Contracting, Inc., 2010 WL 40554157.

“Who is an insured is amended to include as an additional insured, the person(s) or organization(s) shown in the Schedule,” or, in the case of a blanket additional insured endorsement, “Who is an insured is amended to include as an additional insured, any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement1.” Furthermore, an employee of an insured is likewise an insured under conventional ISO plans, resulting in an even greater exclusion for an injured subcontractor employee, as decided in the situations above.

It’s good to have additional named insured or additional insured status in your contract, but if the underlying policy includes a cross-party exclusion, it could mean no coverage. It’s a good idea to specifically declare in contracts that the policies necessary do not contain cross-party exclusions. However, it’s critical to check the policy to make sure the cross-party exclusion isn’t in place, since you won’t be able to use it “By enforcing a contractual requirement, you can “create” coverage where none exists. It’s always about what’s written in the policy.

What is the intention of other insurance clause?

When alternative insurance coverage may be developed to cover the same damage, “other insurance” clauses in insurance policies are designed to “range or restrict the insurer’s obligation.” 1 Courts rely on other insurance when two or more insurance firms “offer contemporaneous coverage for the same risk at the same level.”

Should I be named as an additional insured?

Do you know the difference between being a “Additional” insured and a “Additional Named” insured when it comes to your insurance coverage? If you haven’t already, you should.

A widespread misunderstanding is that there is little or no difference between being an additional insured and being a named insured.

However, there is a significant difference in terms of culpability.

The majority of individuals believe that if they are listed as an additional insured on a personal or commercial insurance policy, they will receive the same advantages as the policy’s owner.

However, this is only partly correct.

First and foremost, a named insured is the policy’s actual owner.

A named insured is entitled to the full extent of the policy’s benefits and coverage.

An additional insured is someone who is not the policy’s owner but may be eligible to some of the benefits and a certain amount of coverage under the policy under certain circumstances.

Under the terms and circumstances of the named insured’s policy, the named insured extends protection to the extra insured.

It’s worth noting, too, that the additional insured endorsement’s coverage is frequently limited to responsibility stemming from conduct performed by or on behalf of the named insured.

What exactly does this imply?

If you’re an additional insured, your policy will only cover responsibility caused by the named insured.

When it comes to the extra insured, any other liability for which the named insured may be protected under the policy will not be covered.

In most cases, an individual or entity needs additional insured status if the policy owner has agreed to indemnify the additional insured.

A common example is a landlord who rents his or her property to a tenant.

Typically, the property owner demands the renter to hold the property owner harmless from any liability incurred as a result of the tenant’s actions.

As a result, the tenant’s insurance policy frequently names the property owner as an additional insured.

The property owner will (most likely) be covered if the renter or its agents do something that makes the property owner or tenant liable.

However, if damage is caused by a third party unrelated to the renter, the tenant may be protected, but the property owner will not.

Similarly, if the property owner does something that causes liability that is covered by the tenant’s policy, the property owner will not be covered under the additional insured endorsement.

Furthermore, the coverage provided to the additional insured is limited and/or split with the named insured.

As a result, if a circumstance happens that exposes both the named insured and the extra insured to liability, the policy’s coverage is shared between the named insured and the additional insured.

For instance, if the named insured has $100,000 in liability coverage, the additional insured will have the same amount.

As a result, if either the named insured or the extra insured creates a liability, $100,000 will be available to cover it.

However, if both the named insured and the supplementary insured are held liable, the $100,000 total coverage must be shared.

As a result, when dual liability results in a coverage gap, a situation can easily occur.

An additional named insured, on the other hand, receives all of the same advantages as the policy owner.

An additional named insured will be covered in the cases above from responsibility caused by the renter and/or the tenant’s agents, as well as liability caused by the additional named insured itself.

Similarly, if the initial named insured had $100,000 in coverage, the subsequent named insured will have a separate and different $100,000 in coverage.

It should be emphasized, however, that an additional named insured may not always have the same rights and responsibilities as the original named insured (e.g., the obligation to pay premiums or the right to cancel coverage or receive policy notifications).

At the end of the day, one must assess the expectations as well as the desired goals/benefits to be acquired from the policy’s coverage.

If the policy’s limited coverage and rights are sufficient, an additional insured endorsement is generally the best option.

Being identified as an additional named insured is your best bet if you want complete and separate coverage against all potential liabilities.

Does an additional insured have a right to a copy of the policy?

Even if the additional insured is officially named in the policy (through a “scheduled” endorsement), the additional insured usually does not have a right to get a copy of the policy from the insurer.

Who should be listed as an additional insured?

Additional Named Insureds could include principal owners of the Named Insured entity, subsidiaries, and possibly joint ventures in which the Named Insured controls 50% or more of the voting shares.

Is additional insured the same as certificate holder?

Certificate holders have proof of commercial general liability insurance, whereas extra insureds are people who have been covered in addition to the original policyholders.