A blanket extra insured endorsement is a type of additional insured wording that allows a named insured to extend coverage to several third parties without having to name or request additional insured status for each of them individually.
What does it mean to be an additional insured on an insurance policy?
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.
What must be in place for a blanket additional insured endorsement?
Before being awarded coverage, insurance firms are likely to establish one or more requirements that any party not mentioned in the policy must meet. The named insured and the party seeking extra insured status must have signed a contract or agreement in which the named insured indicates that it will add another party to the policy. The contract or agreement must be written, and the insurer may review it to see if coverage is required. If the party is eventually determined to be an additional insured, the insurance company will provide a certificate of insurance to the party.
What is the purpose of an additional insured endorsement?
To begin, an endorsement is a modification to an insurance policy that is introduced as an amendment. Endorsements can either increase or narrow the scope of an insurance policy’s coverage.
An additional insured endorsement is an example of a policy supplement that broadens the definition of “Who Is An Insured.” The term “additional insured” refers to someone who does business with the named insured.
The purpose of an additional insured endorsement is to amend the ‘Who Is An Insured’ section of an insurance policy to cover the additional insured for the vendor’s or those working on the vendor’s behalf’s negligent acts or omissions.
For example, the “named insured” on a subcontractor’s commercial general liability (CGL) insurance coverage is the subcontractor. By way of an endorsement, they might list a general contractor for whom they are working (along with any other required entities) as additional insured on their policy. If the general contractor is mentioned in a suit relating to work the subcontractor completed, the general contractor can look to the subcontractor’s insurance policy. Although an additional insured shares many of the same duties as a named insured, the former does not pay premiums, receive cancellation notices, or negotiate policy conditions.
What does blanket AI mean in insurance?
Blanket Additional Insured Endorsement is a liability insurance endorsement that automatically confers insured status to a person or organization that the named insured is required by contract to add as an insured.
What rights does an additional insured have?
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.
When should I request additional insured status?
When a client is exposed to prospective litigation suits based on the work of the named insured, additional insured status is frequently requested. A General Contractor who engages an Architect to design a home will almost always need Additional Insured status on the Architect’s Professional Liability insurance.
What is a blanket waiver in insurance?
A Waiver of Subrogation is an endorsement that prevents an insurance provider from recovering money from a negligent third party for a claim they paid out. The carrier must get permission from the specified insured to subrogate against a third party if a Blanket Waiver of Subrogation is issued.
What is the difference between a named insured and 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.
What are the two main types of additional insured endorsements?
Contracts document the particular promises made by the parties. Contract discussions can be time-consuming, difficult, and irritating at best. Contracts for construction are no different. The type and amount of insurance necessary for a building project is one of the pledges that the parties make to each other. Contractors on a project will be required to list the project owner as an additional insured on their casualty insurance policy (excluding workers’ compensation). Subcontractors will be required to do the same by general contractors. It is critical that both project owners and contractors, referred known as “the parties,” comprehend the additional insured endorsements’ coverage. It’s also crucial for the parties to understand what limitations or conditions these endorsements have.
Additional Insureds
For a variety of reasons, project owners want to be added as an additional insured on a contractor’s casualty program, including but not limited to:
- A third party may claim that the project owner is responsible for the activities of a contractor working on the project. Consider the case of a project contractor who is erecting scaffolding over a sidewalk. Pedestrians are allowed to pass through the scaffolding. Three pedestrians are injured when the scaffolding collapses. The pedestrians have filed a lawsuit against the contractor and the project owner. The scaffolding was not erected by the project owner, and the contractor was not told how to install it. Despite this, the project owner is accused of being held vicariously accountable for the contractor’s activities.
- There are indemnity clauses in commercial contracts. An indemnification clause is a condition in a contract that compels one or both parties to pledge to compensate the other for any loss, harm, or responsibility coming from the contract. Indemnification clauses are included in contracts by project owners. Because the project owner is unsure whether the contractor will have the cash without insurance, the project owner requires insurance to assist fund the contractor’s commitment to pay.
- Some project owners prefer to transfer some (or all) of their risk to the contractor’s insurance policy. The capacity to delegate this type of risk to a contractor varies by state.
Project owners demand additional insured status and other insurance coverage on a contractor’s casualty program for these and other reasons. Contractors will also be required to provide equivalent coverage to contractors in lower categories.
Additional Insured Endorsements
In the insurance industry, there are many different forms of supplementary covered endorsements. However, the focus of this paper will be on four popular ISO supplementary insured endorsements for contractors’ commercial general liability policies. Despite the fact that the endorsements stated are widely available, insurance firms may decide to give their own version of these endorsements. The following are some of the extra insured endorsements that will be discussed:
- Scheduled Person or Organization – Additional Insured Owners, Lessees, or Contractors (CG2010 4/13)
- Completed Operations – Additional Insured Owners, Lessees, or Contractors (CG2037 4/13)
- When required in a construction agreement with you, Additional Insured Owners, Lessees, or Contractors Automatic Status (CG2033 4/13)
- When required in a written construction agreement, Additional Insured Owners, Lessees, or Contractors Automatic Status For Other Parties (CG2038 4/13)
Specific information on the additional insured and the project is required for the first two ISO endorsements. The third and fourth ISO endorsements are “blanket” additional insured endorsements, meaning they don’t require specific information about the additional insured or project information to be included. Instead, they demand the existence of a written contract requiring the additional insured status. In this essay, we’ll refer to the endorsement form numbers.
CG2010 4/13
Since the 1980s, this support has shifted dramatically, and not for the better. The following are some of the key features of the CG2010 supplementary insured endorsement:
- The additional insured (for example, the project owner or general contractor) is not covered if they are solely responsible for their own negligence. Before the extra insured can seek compensation under this endorsement, the insured/contractor must be liable in whole or in part for a loss.
- The additional insured is only covered for active operations. In other words, this supplementary insurance endorsement expires after the contractor’s work on the project is completed. Any future purported claims by the extra insured under this endorsement must have occurred while the insured/contractor was working on the project.
- Coverage under the endorsement is only allowed to the degree that it is permissible under the law (which can vary by state).
- The endorsement does not necessitate the existence of a written contract requiring this enhanced insured status.
- If a contract exists, however, the coverage offered by this endorsement will not be more than the contract’s requirements. Furthermore, the endorsement will pay the smaller of the contract’s required amount OR the policy limit.
While the coverage may be fairly comprehensive and advantageous to the additional insured, the endorsement is full of terms, limitations, and exclusions. A savvy project owner or general contractor may try to circumvent these criteria and limitations by informing the contractor that they are not permissible. However, most insurance companies are unlikely to (or even able to) change the endorsement. As a result, all the project owner or general contractor has accomplished is potentially putting the contractor in a breach of contract situation since he or she is unable to meet the demand.
CG2037 4/13
This endorsement has the same limitations and conditions as the CG2010, with the exception that it covers the additional insured for the contractor’s finished operations rather than ongoing operations. This endorsement is in addition to the CG2010.
As a result, if an extra insured requests additional insured status for a project, the contractor will need BOTH the CG2010 and CG2037 endorsements to comply.
ABC University, for example, is seeking contractor bids to construct a new student facility. ABC University requests that each contractor on the project adds ABC University as an additional insured on the commercial general liability policy, which will cover ABC University both during and after the construction phase. In this case, the CG2010 (or its equivalent) would be necessary to insure ongoing operations as well as the CG2037 (or its equivalent) for completed operations once the work was finished.
CG2033 4/13
The following limitations and conditions apply to this additional insured endorsement, which is a blanket additional insured endorsement:
- The additional insured (for example, the project owner or general contractor) is not covered if they are solely responsible for their actions. Before the extra insured can seek compensation under this endorsement, the insured/contractor must be liable in whole or in part for a loss.
- The additional insured is only covered for active operations. In other words, this additional insured endorsement expires after the insured/work contractor’s on the project is completed. Any future asserted claims by the additional insured must have occurred while the insured/contractor was working on the project.
- When a party’s additional insured status is required by a written contract, the additional insured status is automatically granted. The designated party who enters into a contract with the contractor receives additional insured status.
- The coverage provided by this endorsement will not exceed the contract’s requirements. Furthermore, the endorsement will pay the smaller of the contract’s required amount OR the policy limit.
Despite the fact that an endorsement automatically covers additional insureds, there are still a number of conditions, limitations, and exclusions. Furthermore, because this endorsement excludes finished surgeries, a second endorsement is required to cover completed operations for the extra insured.
CG2038 4/13
This endorsement looks a lot like CG2033. The most significant distinction between these two endorsements is that CG2038 pertains to a party or parties requesting supplementary insured status within a construction agreement who are not the original contracting parties with the contractor. In other words, the parties are mentioned in the building contract but not precisely named. “Upstream parties” refers to these “quiet” celebrations. Additional insurance coverage for these upstream parties, such the CG2033, is only for ongoing operations. As a result, if the contract requires it, a second endorsement should be provided that covers finished operations.
Conclusion
Additional insured endorsements are not as broad as they were years ago, whether they are issued by ISO or by insurance firms using their own equivalent endorsements. Limitations, conditions, and other exclusions are included in these endorsements that were not previously included. Project owners may ask for more coverage in their construction contracts than can currently be provided through supplementary insured endorsements. As a result, the contractor may not always be able to secure the desired insurance coverage, producing irritation for both parties. It is critical for all contractual parties to be aware of the additional insured endorsements available in the market and to manage their expectations accordingly.