It is common for a business that hires a contractor to request protection under the contractor’s insurance policy. If a building owner hires a plumber to do work on his premises, for example, he wants to be sure that any claims made against him because of the plumber’s work are covered under the plumber’s policy, not his own.
This is normally accomplished through the use of Additional Insured endorsements to the contractor’s General Liability Policy, and these come in many forms. A contractor could schedule each customer requiring protection on an Additional Insured endorsement, making it clear which parties are to be covered. For a contractor with many contracts and many customers, though, this can result in numerous endorsements to the policy, with a charge made for each.
An option to endorsements where Additional Insureds are specifically named is an Automatic Additional Insured endorsement, sometimes called a “Blanket Additional Insured” endorsement. These come in many forms, which is where the confusion begins. Most require that there be a written contract or agreement wherein the Named Insured agrees to include another party as Additional Insured. After that, the endorsements begin to differ.
A subcontractor working on a jobsite could agree, in a contract, to add many others as Additional Insured on his General Liability policy. Examples include: the general contractor with which the contract was made, the building owner, the architect, the engineer, the bank that is financing the project, etc. Are all of these parties covered because the Named Insured subcontractor agreed to protect them? Probably not.
Nearly all Additional Insured endorsements require a specific relationship between the Named Insured and the Additional Insured. One common requirement is that the Named Insured be performing operations for the Additional Insured. In the example above, the subcontractor is working for the general contractor, and maybe for the building owner, but what about the architect and engineer? What about the bank? With this type of Additional Insured endorsement, these entities aren’t covered, even though there is a written requirement for the coverage. Separate endorsements for these others will be needed.
Another commonly used type of endorsement covers only the entity with which the Named Insured has entered into a contract. So although a subcontractor has agreed in his contract with the general contractor to include a list of Additional Insureds, only the general contractor is covered.
In order to avoid breaching contracts where you’ve agreed to include Additional Insureds, make sure to discuss the specific requirements of your contracts with your insurance advisor. It is important to let him know not just the names of the parties that need to be included as Additional Insured, but what their interest in the project is. This is the only way to be sure that the coverage you have agreed to provide is included in your policy.