September 5, 2012

Are You Really an Additional Insured?

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An additional insured is a person or organization that is provided insured status under another parties’ insurance policy. It is a common requirement in many contracts where transference of risk is desired. Additional insured status grants protection from risk and liability that may arise out of the named insured’s operations, performance, negligence or conduct.

Many organizations collect Certificates of Insurance when doing business with a third party to make certain that the third party has certain levels of specified workers compensation, commercial auto and general liability coverage in place. Depending on the risks involved and the types of services being provided, some organizations request to be named as an additional insured for protection against liability and claims that may occur while the third party is performing services or for a period of time after services have been rendered.

If you are only collecting Certificates of Insurance and asking for additional insured status to be conveyed through the Certificate of Insurance, without an endorsement to the policy, you could be exposing yourself to substantial risk and liability. Additionally, if you aren’t requesting and reviewing the policy limitations and exclusions, you may not have the coverage you expect.

Contrary to popular opinion, Certificates of Insurance do not convey additional insured status on the named insured’s policy. Certificates of Insurance are only valid the day they are issued–they are a snapshot in time. The policy holder can cancel coverage, neglect to pay their premium or alter coverage at any time without you being notified. You need to be proactive and verify your actual policy by reviewing the endorsement forms granting the status.

The Acord Certificate of Insurance form specifies the following:

This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not affirmatively amend, extend or alter the coverage afforded by the policies below. This certificate of insurance does not constitute a contract between the issuing insurer(s), authorized representatives or producer, and the certificate holder.

So how can you ensure that you have the status as an additional insured that you require and expect if it cannot be provided through a Certificate of Insurance?

If you are seeking additional insured status you should request three things:

  1. a Certificate of Insurance
  2. the appropriate additional insured endorsement form naming your organization as additional insured
  3. a copy of the policy declarations to review for exclusions and limitations that may exist that would limit your coverage.

If this seems like a lot of extra work–it is. Fortunately, myCOI can request, track, manage, maintain and validate this information for you with a proven process and intuitive web based platform. Additionally, ask your insurance agent for steps that should be taken to properly limit liability by getting additional insured status. If this is done effectively, it could mean a premium reduction for you in the near future!

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