Certificates of Liability Insurance & Additional Insureds

Three Quick Additional Insured Myths And How They Impact The ACORD 25 - For The General Liability Policy

Myth 1: The general liability policy automatically provides additional insured status under the "Insured Contract" Definition and exception to the contractual liability. This means you can always check the Additional Insured Column on the ACORD 25 for the general liability policy.

NO! The policy has a clear section where it defines each party that is considered an insured. Nothing under the exception of the "Insured Contract" changes that in any way. In this exception it tells us that reasonable attorney fees and necessary litigation expenses incurred by and for a party other than an insured are deemed to be damages. This means the third party's defense costs would be reducing the limit of liability available to pay out in the claim.

Later in the policy, under the Supplemental Payments Section, we bring up the term indemnitee. If a third-party meets certain conditions, the defense may now be treated as a supplement payment and not reduce the limit. But this still is not calling them an insured. They do not have rights under the policy.

If a party does not meet the definition of an insured inside the policy, an endorsement is needed.

Myth 2: The CG 20 33 - Additional Insured - Owners, Lessees or Contractors - Automatic Status When Required In A Written Construction Agreement With You is a blanket endorsement covering all parties in any contract.

NO! Any ISO Automatic Additional Insured Endorsements have very specific wording on who is considered an additional insured and for what type of loss.

The CG 20 33 is one of the most common automatic additional insured endorsements in use, but it's not giving any and everyone additional insured status. It is only giving additional insured status to the party who signed a written construction agreement with the insured. This endorsement does not extend to other parties named inside the contract, nor would it provide coverage for parties entering into non-construction written agreements, such as a landlord.

In addition, this endorsement is only for on-going operations, and does not cover completed operations.

Myth 3: It's ok to say the certificate holder is named as an additional insured when using an automatic additional insured endorsement.

Insurance professional have to be careful with any extra wording they write on the certificate, whether in the Description of Operations Box, or the ACORD 101 - Additional Remarks section. The role of the professional is to create an accurate representation of coverage. The only time it should ever be said that anyone is named as additional insured, or for the box to be checked, is when a scheduled additional insured endorsement, such as the CG 20 10 - Owners, Lessees or Contractors - Scheduled Person or Organization endorsement is used. Many of these endorsements require naming the party and the location of the project, so you need to make sure it's also for the correct job. Take care in making sure the name on the endorsement is a perfect match to the name on the certificate.

The reason you should not be checking off the additional insured box when it is an automatic status is because you never know when the contract is actually going to be signed. Nor can we guarantee the insured may not do another small, side job, without a written contract and the certificate your issuing that day is for that job.

Recommended Tip

As the insurance professional you should make it clear that any additional insured status is provided per the provisions of XX Endorsement(s) mm/yy and with your insured's permission and understanding, attach the endorsement to the certificate.

This helps protect you, your insured and the third party relying on you to provide them with accurate information.

Also, be mindful that some states now have official laws and regulations regarding agent duties for adding information to certificates. Know the laws in which you operate!