When I started in this business in the early 90s, clients and I would often discuss additional insured requirements—specifically the fact that some companies charged for additional insureds while others didn’t. It was no easy task keeping it all straight.
Luckily it’s simplified today. The overwhelming majority of construction companies and larger, more sophisticated insureds have blanket provisions. (Think: automatic coverage.)
Blanket additional ensured endorsements (also referred to as automatic additional insured endorsements) grant insured status to “all persons and organizations meeting a particular qualifying threshold (such as their requirement in a contract that they be made additional insureds), without having to be individually listed.”
And while blanket provisions may make life easier for an account manger, if the provisions aren’t in writing, you may not be protected. The trap is in the policy language.
Understanding Policy Language
It’s all too common that there is only a verbal request from a general contractor to be added as an additional insured or for a waiver of subrogation on one or more policy. But as you can see in the two excerpts of typical language below, each request must also be in a written agreement to be valid.
1. Blanket Additional Insured activation clause:
“Who Is An Insured is amended to include as an insured any person or organization who you are required to add as an additional insured on this policy under a written contract or written agreement.”
2. Blanket Waiver of Subrogation activation clause:
“The following is added to the Transfer Of Rights Of Recovery Against Others To Us Condition:
If you are required by a written contract or agreement, which is executed before a loss, to waive your rights of recovery from others, we agree to waive our rights of recovery. This waiver of rights shall not be construed to be a waiver with respect to any other operations in which the insured has no contractual interest.”
If these requests are not in writing in the contract or a separate agreement, the status of the other party’s coverage (related to our insured’s) doesn’t change—regardless of what’s on the certificates.
Cover All Of Your Bases
As best we can, we attempt to limit our risk by including qualifying language on these provisions (think: “If/as required by written contract…”). But as agents, it’s our responsibility to help our clients understand their risk and ours—we open ourselves up to Errors and Omissions (E&O) lawsuits.
So when you’re checking the contracts, be sure to look for a written request. If it’s not there, ask clients to amend the contract or create a separate agreement. That way we can get the requester what they want, and ensure coverage.
As a last resort, you can always go back to the old days and formally endorse the policy.
Author: Dan M. Molyneaux, Jr., CPCU, ARM
Vice President of Molyneaux Risk Solutions, Dan Molyneaux Jr. is always looking to find the most equitable solution for all parties—regardless of the problem. With specialties in the construction and financial institution industries, as well as captive programs and executive liability product lines, he is no stranger to the challenges that come with managing risk. Molyneaux is a graduate of Notre Dame with a Business degree and a concentration in Finance.