Adding another company as an Additional Insured under your own Commercial General Liability (CGL) policy is a common practice. The addition protects that other entity against your company’s negligence. The coverage is almost always limited to “your” work, meaning the work being performed by the Named Insured, not the Additional Insured.
This is commonly done in conjunction with an indemnity agreement between the parties. Additional Insured status is a method to make certain that the indemnity promise is enforced and that this risk is covered by insurance.
Additional Insured status is almost always added by endorsement. There are several forms commonly used in the insurance industry. Be sure to read yours carefully to make certain it is accomplishing what you want it to accomplish in your risk transference plan.
Most endorsements will, at a minimum, amend the “Who Is an Insured” clause to add another person or organization as an additional insured to the policy. The policy often also limits “tail” coverage for an Additional Insured, too. This is coverage after additional insured is off of the job or his business with the named insured has ended.
An Additional Insured only has coverage to the same extent of the Named Insured, never more, and often less. It is almost always limited to the acts or omissions of the Named Insured. In other words, it does not provide a substitute for the Additional Insured’s own all risk policy coverage. See, e.g. SFH, Inc. v. Millard Refrigerated Services, Inc., 339 F.3d 738, 744 (8th Cir. 2003) (the purpose of an additional insured provision is to extend the policy coverage to others, not to change the nature of the coverage nor to change declarations nor to remove exclusions).
The Additional Insured’s rights are derivative or vicarious. For example, the Additional Insured has:
- No right to notice of cancellation of policy
See, e.g. City of Columbus v. Swanson, 270 Neb. 713 (2005)
- No right to negotiate terms and conditions.
See, e.g. City of Cedar Rapids v. Ins. Co. of N. Am., 562 N.W.2d 156, 159 (Iowa 1997)
- No right to CGL coverage that is not tied to the additional insured’s work or an omnibus clause in auto policy.
See, e.g. Whelchel v. Sommer, 413 F.2d 521, 527 (8th Cir. 1969)