The Importance of Additional Insureds in Insurance Contracts
Many contracts will require a party, or multiple parties, to be provided additioanl insured status. How you respond as the insurance professional is very important.
The Importance of Additional Insureds in Insurance Contracts
When it comes to insurance contracts, one common requirement that is often found is the inclusion of additional insureds. However, it is important to note that just because a contract asks for this provision, it does not necessarily mean that the insurance policy will automatically provide it. Insurance agents must exercise caution when declaring that a party or parties are named as additional insureds, as any errors made in this process can lead to potential liabilities for the agents themselves.
One of the most common ways insurance agents run into trouble with additional insured wording is through the creation of certificates of insurance that contain incorrect information. These certificates serve as proof that a party has been named as an additional insured on a particular insurance policy. However, if the information provided on these certificates is inaccurate, it can lead to serious consequences.
For example, if an insurance agent mistakenly includes the wrong party as an additional insured on a certificate, it can create a false sense of security for that party. In the event of a claim, the party may believe that they are in fact an insured under another's policy, but in reality, they are not. This can result in financial losses and potential legal disputes. And your client can lose trust in you.
Insurance agents play a crucial role in ensuring that the correct parties are provided additional insured status on insurance policies. They must carefully review the contract requirements and the actual policies in force.
Agents should also be aware of the specific language used in the contract when it comes to additional insureds. Some contracts may require additional parties be provided the status and an agent may assume that a so-called blanket endorsement will provide that, but will it? There's a good chance that it won't. In addition the contract may state primary and non-contributory status is required and a waiver of subrogation. Can the policies provide this?
Insurance professionals should maintain clear and open communication with their clients throughout the process. This includes discussing the purpose and implications of being named as an additional insured, as well as any limitations or restrictions that may apply. And of course, we can't forget the cost. Often these endorsements come at a premium.
To ensure that errors are minimized, insurance professionals, at a minimum, should:
Thoroughly review the contract insurance requirements and understand the specific language used.
Review the policy to confirm what it is currently providing and confirm any endorsements can be added by reaching out to your underwriter.
Understand that the certificate does not amend the policy and does not hold the insurance carrier responsbile for informaiton an agent supplies.
A good rule of thumb is that if you cannot copy and paste the wording from the actual policy, you shouldn't write it on the certificate.
Keep detailed records of all communication and documentation related to additional insureds.
Continuously educate oneself on the latest industry regulations and requirements regarding additional insureds.
Additional insureds are an important aspect of insurance contracts, but it is essential to approach their inclusion with caution and accuracy. It is crucial for insurance agents to understand their role in providing accurate and reliable information regarding additional insureds. By taking the necessary precautions and following best practices, agents can mitigate the risk of errors and protect themselves and their clients from potential liabilities.