by Aneeta Kumar –

There are circumstances in which you may ask a contractor, supplier or other business partner to add you to its insurance policy as an additional insured.  You may make the request in order to reinforce or fund an indemnity obligation or to seek protection under the other party’s insurance policy for liability arising out of that party’s work.  When making such a request, obtain a copy of the actual endorsement adding you to the policy, and request a copy of the policy itself.  Avoid relying on just a certificate of insurance, if possible.  Depending on the specific facts, a court may find that the certificate is not sufficient to establish a contractual right to coverage under your business partner’s policy.

An endorsement issued by the insurer will confirm your status as an additional insured.   It also will identify the scope of coverage provided.  For example, you may be receiving protection for only derivative liability–i.e, liability that flows from the named insured’s acts–or for both derivative liability and liability that flows from your own acts.  If only derivative protection is received, determine if your business partner is a named insured on the policy or if the named insured is a parent company or other entity uninvolved in your business deal.  You may face liability because of your business partner’s acts, but the insurer may dispute coverage arguing that coverage only extends to you, as an additional insured, for liability flowing from the acts of the named insured—the parent or other entity.

Also request a copy of the insurance policy.  It will let you see what is covered or excluded.  Having a copy may prove valuable if a claim or loss occurs.  You easily can determine the policy’s notice requirement, the available coverages and what possible exclusions or conditions may apply, and any applicable deductibles, retentions and limits.  Further, you can assess if the policy limits are adequate and whether defense expenditures erode the limits.  Keep in mind that all insureds on the policy likely will share the limits applicable to any one occurrence.

In your business transactions, it is prudent to obtain additional insured endorsements and copies of insurance policies.  Then, carefully review those documents, or have them reviewed by counsel, to ensure that you are receiving the coverage requested and that there are no potentially problematic coverage concerns.

Aneeta Kumar
Aneeta Kumar is an attorney and partner in Kumar & Gerchick. Her practice focuses on representing and advising policyholders regarding insurance coverage matters.