Responding to “Additional Insured” Requests

Before entering a construction site to perform work on any given project, contractors and subcontractors must typically show proof of insurance as a condition to commence work. Providing evidence of existing insurance coverage, together with the extent of such coverage, is usually negotiated before the parties execute a contract.

During such negotiation, the party for whom work will be performed will usually ask that you to list such party as an “additional insured” on your existing insurance policy. A party named as an “additional insured” is a person or entity who receives a certain degree of insurance coverage, even though such person or entity is not automatically protected under the insurance policy at issue.

Requests for “additional insured” status will likely trend upward as society becomes more litigious, and parties seek out ways to minimize exposure and risk. An “additional insured” is added by endorsement, and the scope of coverage can be limited by either the endorsement itself or within the scope of coverage offered to the named insured on the policy. Once added as an “additional insured,” the insurer is generally obligated to indemnify and defend the additional insured in accordance with the policy terms and conditions.
Parties who are both named insured and additional insured should take the time to read both the policies and the endorsements in order to understand the extent of coverage afforded to both parties. While customary to add additional parties to insurance policies in order to comply with contractual requirements, contractors and subcontractors should note that the newly insured parties are transferring risk without having to pay a premium. When negotiating your contract, analyze whether such risk transfer can be used to request more favorable contractual terms in other sections of the contract.

Authored by attorneys, these articles are meant to bring awareness to these topics and are not intended to be used as legal advice.

For more information, contact Mike Sterling at 757-446-8626 or Bill Franczek at 757-446-8600. Visit www .vanblk.com, for our library of Construction Law Tips. Suggestions for a topic? E-mail bfranczek@vanblk.com.