Changes to the Additional Insured endorsements and what it means.
By: Rocco Abate (Capstone Brokerage) November 2013
The Insurance Services Office announced early this year that major changes were going to begin when it comes to obtaining Additional Insured certificates for General Liability Coverage. The changes are as follows:
1. Insurance provided to an additional insured will only apply to the extent permitted by law.
2. If additional insured coverage is required in a contract of agreement (which is customary), the additional insured will not be provided coverage that is any broader then required in the contract or agreement in the named insured
3. The limits available to an additional insured will be the lesser of the limits required by contract or available under the policy
To help make this more understandable
“Insurance Provided to an additional insured will only apply to the extent permitted by law.” Prior to this change, in states where anti-indemnity laws apply to Additional Insured coverage, state-specific Additional Insured endorsements were needed; if the wrong form were to be used, the Additional Insured coverage could be lost. The 2013 amendment addresses this issue by obviating the need for such state-specific endorsements.
“If additional insured coverage is required in a contract of agreement (which is customary), the additional insured will not be provided coverage that is any broader then required in the contract or agreement in the named insured.” In the past additional insured provisions in construction contracts varied. Some required adding additional insured while others wanted detailed descriptions of the scope of additional insured coverage or reference to specific ISO additional insured endorsement forms. However under the new law, additional insured endorsements, owners and contractors will need to specifically identify the scope of additional insured coverage or risk having no coverage at all despite being named an additional insured.
Lastly, “the limits available to an additional insured will be the lesser of the limits required by contract or available under the policy”. Previously, an insurance carrier providing additional insured coverage of a $1 million policy limit might be obligated to extend its full limit to an additional insured even though the contract only required a $500,000 limit. However now under the new additional insured endorsements, owners and contractors must be specific and identify the limits of additional insured coverage. The changes will affect required wording in contracts, and will limit the coverage amounts to only those set forth in contract.
One more thing to keep in mind when you’re named as an additional insured, don’t just rely on the party naming you as an additional insured giving you a certificate of insurance. As mentioned in a previous blog, Certificates of Insurance “DO NOT” confer insurance coverage or insured state. Best course of action is to require an actual additional insured endorsement that names your company specifically as an additional insured.
