In most cases, any business owner understands who the named insured is on their commercial insurance because they see it listed in black and white on the declaration page. However, many business owners do not understand that the named insured could change during the term of the policy depending on the obligations of the business. In many cases, affiliates of the business or interests in the business may change during the term of the policy. Yes, it can be confusing for the business owner and the agent, but it's better to get it done right in the first place, than to go to court and prove your intentions after a loss.
For personal insurance like a homeowner or personal auto policy, the named insured is very apparent and typically refers to the person taking out the insurance and their spouse. But, if you dig a little deeper in the policy jacket, the company usually defines what a named insured is, and it may be a little broader than the names on the policy. For example, an auto policy may define a named insured as the person(s) listed on the declaration page and resident relatives. Since the text in an insurance policy package is written by lawyers and insurance experts, the best method is to have an agent or broker explain the terminology for you.
In the case of business, the business and its owners and subsidiaries are typically considered "named insureds." The "named insured" in a business policy has the broadest coverage protection regarding coverage and indemnity under the policy. They are the party or parties that choose the coverage, limits, and deductibles, and receives the important notices from the insurer. Once again, most commercial insurance policies will provide a definition of the "named insured" somewhere in the policy package, typically at the beginning.
An additional insured (AI) typically refers to a person or entity that is added to the "named insured's" policy by an endorsement (policy change). This endorsement is used to provide coverage for the person or entity named on it only for claims that arise out of the acts or omissions of the primary insured. The additional insured is not included on the list of parties that receive notices concerning the policy.
For example, if you are the owner of a painting business and you hire a subcontractor to paint a building that you have been contracted to paint, you would require your subcontractor to add your company as an additional insured on the subcontractor's general liability policy. Therefore, if a claim arises that the subcontractor is liable for, your company would be protected to the extent of liability limits in the subcontractor's general liability policy.
Although some insurers will automatically add additional insured status that results from contractual obligations, many will require the agent of record to submit an endorsement to get the additional insured coverage and charge an additional premium per request. This means that if you are the party requesting to be listed as additional insured, you should request proof that the change was completed by other means than an insurance certificate. Anyone can print out a blank certificate since they are available online.
Finally, it's important to point out that an additional insured is only entitled to coverage for claims related to its relationship and dealings with the named insured.
Additional Named Insured
An "additional named insured" is typically a party named elsewhere in the insurance contract than the declaration page. This party has the same coverages afforded to the named insured and is entitled to notices of policy changes and cancellation notices, but is not responsible for premium payment. For practical purposes, the "additional named insured" is typically an affiliate, co-owner, or partner of the primary insured.
In the case of an "additional named insured," the party is covered for claims, whether the named insured is named or not and whether the loss is related the dealings that the "additional named insured" has with the primary "named insured."
The good news is that for most businesses, you need only to be concerned about the named insureds and on occasion, additional insureds. But, you are not alone. Your business can rely on the insurance professionals at Skyline Risk Management to make certain that your interests are well protected in every business relationship you share with us.
If you have questions or concerns regarding additional insureds contact Skyline Risk Management, Inc. at (718) 267-6600.