In the construction industry, what does an “Additional Insured” do and what is the “Additional Insured Endorsement”?

Many construction contracts require contractors to sign pages containing detailed insurance requirements, coverages, and minimum dollar amounts.  Review any contract’s insurance requirements carefully before signing to ensure that your current insurance complies with the contract’s requirements, including coverage types and financial limits.  Your contractor insurance specialist is a great resource for help in this regard, if you are in doubt.

A common request is for owners to be added to a general contractor’s policy covering commercial general liability (CGL).  Subcontractors are often required to name their general contractors as additional insureds on their general liability, business auto, workers compensation and umbrella and or excess policies.

So, what is an “additional insured”?  Additional insureds are anyone who is covered by the primary insured’s insurance policy, but not the primary insured.  If someone wants to be added to someone else’s policy, how does that work?

To obtain additional insured status, the insurance company must issue an endorsement to the primary named insured’s policy.

It is the wording of the endorsement that determines the scope of an additional insured’s coverage.  A certificate of insurance cannot grant additional insured status, although certificates are often presented as proof of additional insured status. As proof of coverage, an additional insured endorsement must be attached to the certificate of liability insurance.

In the event that additional insured status is properly obtained, the additional insured is entitled to a wide range of important rights.  A claim may be filed directly against an insurance company by an additional insured.  This right entitles an individual to either legal defense against third-party claims, or to coverage for damages caused.  Furthermore, by retaining the loss off of their own loss history, the additional insured may be able to prevent price increases in the future.

Please check with your contractor insurance specialist if you receive a request to add someone else as an additional insured on one of your policies. The status of additional insured is important for the construction industry, but care must be taken to ensure that this status is granted correctly.