Originally posted Friday, 10 February 2012

Written by John Sier

Some Owners believe that being an Additional Insured means that they have an absolute first layer of insurance coverage in the event of a claim. Several states, though, limit the scope of coverage available to an Additional Insured to liability only arising out of the named insured’s negligence. The states limiting the scope of coverage also typically prohibit indemnification from one’s own negligence. In essence, the Additional Insured coverage would apply to claims arising out of the acts or omissions of the contractor, but not necessarily acts or omissions of the Owner. State legislatures periodically consider similar limitations on the scope of Additional Insured coverage, and the Insurance Services Organization (ISO) has state-specific forms that are used for that limited coverage.

The limited scope Additional Insured coverage is actually reflected in the ConsensusDOCS 200 at Par. 10.5.2, the 500 and 410 at Par. 11.5.2, and the 300 at Par. 21.6.2. The COAA commentary in the ConsensusDOCS Guidebook recommends that Owners carefully consider their risk management and insurance program when reviewing these provisions, since most states still allow broader form Additional Insured coverage.

Owners should not take Additional Insured status for granted. Over the years, some Owners have been assured that the contract language alone was sufficient to grant Additional Insured status, but several carriers are now requiring the Additional Insured to be added by specific endorsement, and not by a reference on the ACORD Certificate of Insurance. The best practice to verify Additional Insured status is to review the actual endorsement identifying the Owner as an Additional Insured to the particular policy.