In the course of doing business, you may sometimes find yourself entering into contracts requiring that your business be named as an additional insured on another party's insurance policies.
This is often done to protect your business from losses for which you may be legally liable as a result of the business relationship you have with the other party, but that are not due to your own business's direct negligence.
An additional insured is defined as an individual or entity that not automatically included as an insured under the policy of another, but for whom the named insured's policy provides a certain degree of protection.
When to opt for additional insured status
There are many instances when you may want your firm included as an additional insured on another's policy. Here are just a few examples:
If you are to become an additional insured on another company's policy, you need to confirm that the other party has indeed named your company as an additional insured with its insurance company. Be sure to get a copy of the policy that explicitly lists your company as such. You want to see a copy of the policy and not the certificate of insurance, which is not sufficient proof that your company has been added.
Additional insured status is effectively conferred through an additional insured endorsement to the other party's original insurance policy. An endorsement essentially serves as an amendment to the terms of an insurance policy that is incorporated into the relevant insurance policy.
These amendments can take the form of an endorsement that specifically names a particular additional insured or a general endorsement that identifies some class of parties as additional insureds.
However, if there is ever a dispute about your company's status as an additional insured, you will want to have the other party's certificate of insurance, a copy of the policy itself, and the endorsement that makes your company an additional insured.
Ensuring your additional insured status is properly secured
There are a few best practices that you can implement to help make sure your firm's status as an additional insured has been properly secured: