What Rights Does An Additional Insured Have?

When you get added as an additional insured on someone else’s insurance policy, you gain certain protections and rights under that coverage. However, these rights are limited compared to being the named policyholder. Understanding exactly what an additional insured is entitled to – and not entitled to – is important for managing risk.

Who Is Considered An Additional Insured?

An additional insured is an individual or organization added to an existing insurance policy who is not the original, primary policyholder. They are “piggybacking” off the named insured’s coverage.

Common examples include:

• A landlord added as an additional insured to a tenant’s policy
• A general contractor added to a subcontractor’s policy
• A property owner added to a vendor’s policy when working onsite

The key factor is a direct business relationship or risk connection between the additional insured and the primary policyholder.

Why Do Businesses Seek Additional Insured Status?

Being added as an additional insured on another company’s policy provides important protections including:

• Liability coverage – If the additional insured is sued over an incident related to the named insured’s operations, the policy can help cover defense costs and damages.

• Better loss history – Any claims post against the named insured’s policy rather than the additional insured’s own policy, helping the additional insured maintain lower premiums.

• Right to file a claim – The additional insured can submit a claim to the insurer just like the named insured if an incident occurs.

• Proof of coverage – The additional insured can request a certificate of insurance proving coverage.

Bottom line: Additional insured status provides crucial risk transfer and financial protection.

Key Rights Afforded To Additional Insureds

While additional insureds do benefit from the coverage, their rights are limited compared to the named policyholder. Here are the key rights typically extended:

1. Third-Party Coverage

A major right is liability coverage against third-party claims that result from the policyholder’s conduct or work performed. For example, if a subcontractor’s negligence on a job causes property damage and the general contractor (additional insured) gets sued, the subcontractor’s liability policy would provide protection.

However, there are caveats:

• Coverage usually only applies to liability directly tied to the named insured’s acts. The additional insured typically does not receive coverage for their own sole negligence.

• Any limitations, exclusions, or caps that apply to the named insured also apply to the additional insured.

• Coverage may be restricted to a specific project or time period rather than the full policy term.

2. Defense From Covered Claims

If a claim or lawsuit is filed against the additional insured that falls within the scope of their granted coverage, the insurer is obligated to provide legal defense. The insurer assigns counsel to defend the additional insured and pays all legal costs and fees.

3. Right to Notification

Additional insureds have the right to be notified by the insurer if the primary policy is cancelled or non-renewed. This prevents being left unaware without coverage.

4. Right to File Claims

For any covered incidents that occur, the additional insured can file claims just like the primary policyholder and receive payouts from the insurer subject to the policy terms.

5. Right to Review Relevant Policy Information

The additional insured is entitled to review portions of the policy outlining the scope, limitations, and exclusions of their coverage. However, they do not have full rights to access the entire policy.

What Rights Are Not Extended to Additional Insureds?

While additional insureds receive valuable protections, they do not step into the full shoes of the primary policyholder. There are restrictions on an additional insured’s rights:

• No control over the policy – Additional insureds typically can’t make changes to the policy or cancel it. Only the named insured has this right.

• Limited access to the full policy – Additional insureds can only review the sections detailing their coverage, not other proprietary portions.

• Can’t file claims for own losses – The additional insured can’t file claims for damages unrelated to the named insured’s conduct or work.

• Not entitled to full policy limits – All additional insureds combined often share reduced policy limits compared to the named insured.

• No right to premium refunds – Only named insureds are entitled to premium refunds if the policy is cancelled.

• No right to notice of premium changes – Additional insureds do not receive notices from the insurer about premium increases or other billing changes.

Bottom line: Additional insureds should not assume they have the same rights and control as the primary policyholder. Their permissions are restricted under the coverage.

Best Practices for Managing Risk as an Additional Insured

To make the most of the additional insured coverage you’ve been granted while also protecting your business interests, keep these tips in mind:

• Read the endorsement – Carefully review the additional insured endorsement to understand all exclusions, limitations, and conditions imposed on your coverage. Never assume you have unlimited protection.

• Request policy certificates – Ask the named insured to provide current certificates of insurance proving your status as an additional insured. Keep these certificates on file for future claims.

• Report incidents promptly – If an event occurs that could potentially trigger coverage under the policy, notify the insurer immediately to put them on notice, even if you do not plan to file a claim yet.

• Maintain your own insurance – Do not rely entirely on being an additional insured. Make sure your company still carries adequate insurance limits of its own as a backup.

• ** Renew verification** – Check that your additional insured status carries forward when the named insured’s policy is renewed and request updated documentation. Don’t get caught with a lapse in coverage.

Additional Insured Coverage Offers Limited Protections

While being an additional insured on someone else’s policy does provide some risk transfer and financial protection, it is not a complete substitute for securing your own adequate insurance. Because additional insureds have restricted rights and coverage under the policy, you need to understand exactly what protection you actually have. Never presume you can fully control the coverage or have access to the maximum limits. Discuss your specific additional insured coverage with your insurance agent or broker to ensure your risks are properly protected.