The primary reason you or your company is required to add another party as an Additional Insured, also known as an “AI” to your insurance policy or, in turn, that you may require another party to add you or your company as an Additional Insured to their insurance policy, is to shift the burden of risk. What essentially happens is that the Additional Insured status extends coverage beyond the basic policy forms to the requestor of the endorsement. The one who receives the Additional Insured status from another, also receives limited insurance coverage from the other.
An Additional Insured endorsement is part of nearly every risk transfer program. Risk transfer programs are simply used to shift risk from one party to another. For instance, if you have signed a contract which requires special insurance endorsements or coverages such as: Primary Non-Contributory Wording or Waiver of Subrogation, you’ve already been a part of a risk transfer program.
In the construction industry, this is extremely common. Whether it’s a General Contractor requesting their subcontractor list them as an Additional Insured, or if it’s a Homeowner asking the General Contractor to list them as an Additional Insured prior to a remodel, it’s all in part to transfer the risk burden. However, even if you do receive Additional Insured status from another party, it does not replace the need for your own insurance, as the Additional Insured endorsement does not cover or respond in all instances or circumstances.
In general terms the additional insured form states the following:
“Section II – Who Is An Insured is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured.”
The Blanket Additional Insured form differs from the standard from, as there’s a trigger for the Blanket Additional Insured form to apply. That’s the requirement in which Additional Insured status must be stated in a written, signed, and executed contract.
This same requirement applies to the Waiver of Subrogation endorsement. As long as it’s mandated in a contract, the coverage will extend, assuming your policy is endorsed as so.
The main advantages of the Blanket Additional Insured endorsement is that you’re able to avoid multiple endorsements and fees incurred to your insurance policy throughout the year, as well as the fact that it will protect against failure to add a party as an additional insured in accordance with a contractual agreement. It also relieves the administrative burden of making each request individually.
When it comes to a Scheduled Additional Insured Endorsement, they must be requested individually. This means that you must give your clients’ specific name and address wherein the work is being performed, so that they can become scheduled onto your policy. For example, if you’re requesting your subcontractor lists you and your company as an additional insured, it is extremely important that you ask for a copy of the endorsement, in order to ensure that your name has been listed appropriately and correctly.
As you may now understand, there a few key differences between the Blanket Additional Insured endorsement versus the Scheduled Additional Insured endorsement. A Scheduled Additional Insured endorsement requires that the person or organization being given insured status be identified individually in a list, a “schedule,” in the endorsement itself. While the Blanket Additional Insured endorsement specifies that all persons or organizations meeting a particular qualifying threshold (their requirement in a contract) are automatically insureds under the endorsement, without having to be individually listed.
As always, we recommend that you review every contract before signing it, ideally with legal counsel. We also encourage all of our clients, and prospective clients to share a copy of their insurance requirements of any contract with us prior to execution, so that we’re able to ensure your current coverage is in compliance, and/or advise where it is not, and find a solution in order to comply.