What is a Secondary Insured?

A secondary insured is an individual or entity that is covered under another party’s insurance policy, in addition to the primary policyholder. Secondary insureds receive certain protections and ability to file claims under the policy, but their coverage is more limited compared to the named insured.

Understanding secondary insured status, how to be added as a secondary insured, and the benefits and limitations is important for businesses and contractors looking to mitigate liability risks.

What is a Secondary Insured?

A secondary insured, also known as an additional insured, is a person or organization added to an existing insurance policy who is then afforded some of the same protections as the primary policyholder.

The primary policyholder is also known as the named insured. This is the individual or business that originally obtained the insurance policy.

A secondary insured is added to a policy through an endorsement or amendment. This provides them coverage under the policy even though they are not the primary holder.

Common situations where secondary insured status is useful include:

• A landlord requiring tenants to add them as a secondary insured on their renters policy.

• A general contractor requiring subcontractors to add them as a secondary insured on their liability policy.

• A manufacturer requiring product retailers to add them as a secondary insured on their commercial policy.

The secondary insured is then covered in the event they need to file an insurance claim or lawsuit that relates to the named insured’s operations and conduct.

Why Add a Secondary Insured?

There are two main reasons to add a secondary insured to an insurance policy:

1. To Protect Against Liability Risks

Many businesses require secondary insured status from contractors, subcontractors, tenants, and other third-parties who may pose liability risks back to them.

For example, a slip-and-fall accident on a tenant’s premises could create a liability risk for the landlord. Being added as a secondary insured on the tenant’s policy provides protection for the landlord if they are sued.

The same concept applies between general contractors and subcontractors, property owners and event promoters, businesses and vendors, etc.

2. To Fulfill Contract Requirements

Most service contracts and vendor agreements require one party to add the other as a secondary insured.

This is common practice for mitigating liability, especially when work is being done on a third-party’s property or products are being distributed on behalf of a third-party.

Before signing contracts, businesses should review secondary insured requirements carefully and add them to their own vendor and subcontractor agreements as needed.

What Policies Allow Secondary Insureds?

The most common policies that permit secondary insured amendments are:

• General liability insurance – Protects against 3rd party bodily injury, property damage, personal injury and advertising injury claims. Secondary insureds are often added when working on a third-party’s premises.

• Commercial auto insurance – Protects against liability claims arising from the business’ vehicle use. A secondary insured like a vehicle owner may need to be added.

• Umbrella insurance – Provides additional liability coverage above general liability and auto policies. Clients often require to be added as secondary insureds on umbrella policies.

• Commercial property insurance – Protects the property itself and contents against damage. A landlord may require tenants to add them as an additional insured.

• Professional liability – Protects against claims of negligence and errors arising from services. Secondary insureds are not permitted on these policies.

How to Add a Secondary Insured

To add a secondary insured to your business insurance policy, follow these steps:

1. Review Your Policy

Check your policy documents or speak with your insurance agent to confirm the policy allows secondary insured amendments. There is usually an endorsement form required.

2. Fill Out the Endorsement Form

Provide details on the policy, named insured, who you want to add, and their relevant interest. Your agent can assist with completing the correct endorsement form.

3. Inform the Additional Insured

Let the new secondary insured know they have been added to your policy and provide a certificate of insurance documenting their status.

4. Report Any Policy Changes

Notify your insurer if the secondary insured relationship changes or you need to remove them from the policy during renewal.

Blanket vs. Specific Endorsements

There are two main types of secondary insured endorsements:

Blanket – Automatically covers any secondary insured required by contract without needing to be individually named. This is the broadest option.

Specific – Covers only the individual or entity expressly named in the endorsement. This offers more limited and customized coverage.

Talk to your insurance agent about which endorsement meets your particular business needs.

What is Covered for a Secondary Insured?

The scope of coverage for a secondary insured depends on the specific insurance policy and endorsement language. But some of the key protections may include:

• Legal defense costs if the secondary insured is sued
• Judgements or settlements against the secondary insured up to the policy limits
• Right to submit a claim to recoup covered losses
• Coverage for certain claims involving bodily injury, property damage or advertising injuries

However, coverage is usually limited to situations connected to the named insured’s operations or conduct. Issues stemming directly from the secondary insured’s own negligence may not be covered.

Exclusions and Limitations

While adding secondary insureds can provide important protection, there are some liability exclusions and limitations to be aware of:

• May only cover claims related to the named insured’s work or operations

• Typically won’t cover independent negligence or liability caused directly by the additional insured

• Doesn’t apply to professional liability insurance

• Could be cancelled if the named insured cancels their policy

• May not meet all the coverage needs of the secondary insured

Tip: Secondary insureds should carry their own insurance policies to ensure adequate coverage. An addition insured endorsement is not a replacement for having your own insurance.

Why Insureds Request Secondary Status

There are some key reasons an individual or company may request to be added as a secondary insured on another’s policy:

Contract Requirements

Most service agreements and contracts require secondary insured status as standard risk management practice. Failing to add required secondary insureds could void the contract.

Liability Protection

Being an additional insured allows tapping into the named insured’s coverage for protection against uncovered legal liabilities. This provides another source to pay for claims.

Access to Coverage

Some high-risk businesses may struggle to obtain insurance. Being added as an additional insured gives access to coverage they may not be able to secure on their own.

Independent Contractors

Independent contractors and freelancers often aren’t eligible for employment practices liability insurance. Adding them as an additional insured on a client’s policy can meet contractual needs.

Proof of Insurance

Existing insurance policies may exclude cover for specific projects. Additional insured status provides proof of coverage for certificate of insurance requirements.

When to Add Secondary Insureds

Common scenarios where adding a secondary insured should be considered:

• If required by a written contract or service agreement
• Using subcontractors for jobs or projects
• If another business is operating on your premises
• If you’re contracting work on another company’s premises
• When utilizing rented equipment from another business
• If you’re distributing or selling another company’s products
• Special events being held on your property

Requiring secondary insured status from vendors and contractors whenever work intersects or when liability risk is introduced is a best practice for many businesses.

Secondary Insureds vs. Certificate of Insurance

A secondary insured gives coverage under the direct policy, while a certificate of insurance (COI) simply provides proof of coverage.

Any party can request and be given a COI document without needing to be added to the policy. But only contracted businesses that have risk exposure through their relationship should be made secondary insureds.

A COI is useful for verifying policy details. But secondary insured status should be considered for vendors, contractors, and partners that warrant a direct coverage relationship.

Are Secondary Insureds Named on the Policy?

Sometimes. But often secondary insureds are simply covered by the blanket endorsement without being directly named.

The endorsement may broadly define a category like “all vendors required by contract” rather than listing individual businesses. Talk to your insurance provider about the most practical way to structure endorsements.

Being named directly under the policy does allow greater visibility for premium auditors and claims adjusters. But generic endorsements offer more flexibility.

The Bottom Line

Understanding secondary or additional insured status is important when transferring liability risks to vendors, contractors, tenants, and other third-parties.

Following proper procedures to add secondary insureds to commercial policies provides an added layer of coverage. But it’s not a replacement for requiring contractors, tenants, and vendors to carry their own adequate insurance.

Balancing protective measures for all parties involved is the smartest approach. Consult experienced insurance advisors when needing to add or request secondary insured status on a policy.