It is the question many in the industry have asked in light of the 2018 New York Court of Appeals decision in the Gilbane case. (Gilbane Bldg. Co./TDX Constr. Corp., et al. v. St. Paul Fire & Marine Ins. Co., et al., 31 N.Y. 3d 131 (2018)). In Gilbane the court held that a party was not entitled to coverage as an additional insured when such party did not have a written contract with the policy holder requiring such status. Additional insured status may be very important in that, in addition to affording an additional insured a legal defense, it may provide coverage against risks that are not adequately covered by the additional insured’s own insurance.
Gilbane involved a project manager who was listed as an additional insured on a general contractor’s insurance policy, but did not have a written agreement with the general contractor obligating it to insure the project manager as an additional insured. When a claim arose and the project manager sought coverage from the general contractor’s carrier, coverage was denied because the language of the contractor’s policy required that there be a written contract between the parties in order for additional insured status to be afforded. This policy provision, which is extremely common, was deemed to be enforceable.
Gilbane involved sophisticated commercial parties in connection with a large-scale construction project, but the ruling affects anyone seeking coverage as an additional insured in New York. Property owners, both commercial and residential, commonly require any contractor working on their property to deliver a “certificate of insurance” naming the property owner as an “additional insured.” This often arises when a resident owner wishes to renovate his/her apartment in a co-op or condo building or an adjacent owner is performing construction, and in connection with the construction, requires access to the neighboring co-op or condo. The co-op or condo typically reviews an insurance certificate provided by the contractor’s insurance broker to confirm the covered parties as well as the limits and types of coverages that are in place. However, even after this due diligence is completed, the reality is that the listing of the additional insureds on the certificate of insurance may be ineffective to actually confer that additional insured status. In fact, the industry standard ACORD forms used for certificates of insurance contain disclaimers specifically intended to defeat claims that their issuance creates any rights in favor of the parties to whom they are issued.
Additional insured requirements and endorsem*nt review have always been essential in New York, but Gilbane caused those in the industry to reconsider what had long been accepted as standard practice. In order to effectuate additional insured status, many insurance companies now require a separate contract under which the insured has agreed with the relevant parties to add them as additional insureds to the subject policy. This can be accomplished with a simple agreement, but it still needs to be carefully drafted and reviewed and it must be entered into before the incident giving rise to the claim takes place. A standard indemnification or hold harmless clause will not suffice. Insurance policies may also require that additional insureds be added to policies by special endorsem*nt.
In short, be wary of any certificate of insurance purporting to convey “additional insured” status from a party with whom you are not in direct contractual privity or whose insurance policy has not been reviewed as to how an additional insured is to be designated. When in doubt, it is always best to double-check with your insurance broker, managing agent’s risk manager, or counsel.
FAQs
The bottom line is if you are having anyone work on your property as a contractor, tenant, or as a vendor, they need to name you as an additional insured on their insurance policy AND you need to verify that on the COI they give you BEFORE they do any work whatsoever.
How do you explain additional insured status? ›
An additional insured extends liability insurance coverage beyond the named insured to include other individuals or groups. An additional insured endorsem*nt protects the additional insured under the named insurer's policy allowing them to file a claim if sued.
What is the advantage of being an additional insured? ›
The purpose of additional insured endorsem*nts is to keep the burden of risk closest to those parties most likely to create losses, which typically is third parties contracted to perform the work.
Why do companies want to be additional insured? ›
The benefits could include the right to legal representation against third-party claims or coverage for damage caused. As an additional insured, they'll be able to keep losses off their history and protect their premiums.
What are the risks of being additional insured? ›
There is also a risk of being under-insured or uninsured as additional insureds. Second, there is the risk of breaching a contract, thus potentially becoming the insurer of the other party when they are the party obligated to provide additional insured coverage.
Why list someone as an additional insured? ›
By providing coverage for the subcontractor via an additional insured endorsem*nt, you are protecting yourself in the case that the subcontractor makes a costly mistake that leads to a lawsuit and the subcontractor is also protected in the event that you make a mistake that leads to a lawsuit in which they are named.
What is the difference between named insured and additional insured? ›
A named insured is entitled to 100% of the benefits and coverage provided by the policy. An additional insured is someone who is not the owner of the policy but who, under certain circ*mstances, may be entitled to some of the benefits and a certain amount of coverage under the policy.
Should you add your landlord as an additional insured? ›
Your landlord shouldn't be listed on your renters insurance policy as an additional insured. Having an additional insured on your renters insurance means that you would be paying to cover them and their personal property too.
How do I list an additional insured on my certificate of insurance? ›
To get your company added, your contractor will need to communicate to their insurance agent or broker to add an endorsem*nt form. There are plenty of endorsem*nt forms available, and you need to know who is being added, what type of protection you have, and the limit of that protection.
Does it cost money to add an additional insured? ›
These parties may have an interest in a project you're taking on, so an additional insured endorsem*nt helps get everyone on the same page with respect to insurance coverage. There is typically no cost to name an additional insured, but some insurance companies may charge a nominal fee to amend the existing policy.
Additional insureds are third parties granted limited protection under the policy, extending coverage beyond the initial policyholder to safeguard against liabilities in specific circ*mstances.
What is the difference between additional insured and interest? ›
Additional insured is only available to owners of the property looking to gain the financial benefits and protection that homeowners insurance can provide. Additional interest is a person or entity that has a financial interest in your property but isn't an owner and can't collect a claim payout.
What is the alternative to additional insured? ›
The Owners and Contractors Protective (OCP) policy is an alternative to just naming the owner as an additional insured, though each method has its advantages and disadvantages. The OCP policy is usually purchased by the contractor, with the owner being the named insured.
Should I add a client as an additional insured? ›
Explain to your client why the request is not in its best interest. Tell your client that being named an additional insured on your PL policy provides no added protection against your firm's errors and omissions and could, in fact, put coverage in jeopardy since the client cannot sue itself.
Should my contractor add me as an additional insured? ›
Property owners, both commercial and residential, commonly require any contractor working on their property to deliver a “certificate of insurance” naming the property owner as an “additional insured.” This often arises when a resident owner wishes to renovate his/her apartment in a co-op or condo building or an ...
Does adding additional insured increase insurance? ›
Adding a loss payee to a policy will not generally cost extra since it creates no additional risk. If you are adding an additional insured, your premium will increase. Adding a loss payee to a policy will not generally cost extra since it creates no additional risk.
What does it mean to list landlord as additional insured? ›
An additional insured is different from an additional interest. Your landlord shouldn't be listed on your renters insurance policy as an additional insured. Having an additional insured on your renters insurance means that you would be paying to cover them and their personal property too.
What is the difference between name insured and additional insured? ›
A named insured is entitled to 100% of the benefits and coverage provided by the policy. An additional insured is someone who is not the owner of the policy but who, under certain circ*mstances, may be entitled to some of the benefits and a certain amount of coverage under the policy.
