28
Jun
2010
Should you add Additional Insureds?
The entry below is featured in this month’s TechAssure Newsletter.
Contributed by Noel Bertman
Chubb Group of Insurance Companies
Risk managers, CFOs and CEOs are routinely asked by their clients to obtain additional insured status under their liability policies. Too often, this request is agreed to and passed through to the insurance company without thought of the consequences to your company.
Some points to consider before you act on the next request:
- Limits of Insurance
Have all considerations been undertaken to ensure that you are not giving away the coverage you’ve purchased for your own defense? Many insurance policies will defend and indemnify your client if you agreed to do so in a written contract. The money spent on defending your client could potentially be reducing your liability limits (in policies where defense expenses reduce the limits). By accepting only the liability for exposure within your control, you can retain the most value from the coverage for yourself. An example might be limiting status to financial interest only.
- Reporting
Some policies have provisions that all insureds (includes additional insureds) have the duty to report claims in a timely manner to the insurance carrier. For example, can the additional insured prejudice my coverage by untimely reporting? - Separation of Insured Provision
If your policy contains this coverage, you may be allowing the additional insured (your client) to use your own policy to bring suit against you. - Blanket Additional Insured Wording
Most contracts require you to indemnify and hold your client harmless. Many blanket additional insured provisions are very generic, and can apply to many different situations.
Therefore, you need to make sure that the additional insured provision is tailored to comply with your contract. It is always best to review the additional insured provision and ask yourself, “Are there limitations in the policy regarding retention of defense counsel and control of a suit that require certain pre-loss agreement that is not in the contract?”
