WHY ADD ANYONE AS ADDITIONAL INSURED
Why would I add a contractor as an additional insured to my Liability Insurance? What does doing so mean?
Atlas Security & Alarm Service LLC
A question easier asked than answered, and I hope some of the expert alarm brokers chime in with their follow up comments.
There are really a few good reasons to name another as an additional insured. Perhaps we should start with who might you be adding as an additional insured?
- a subcontractor
- your central station
- a vendor involved in on going service to the subscriber [like alarm.com or Honeywell Total Connect]
- your subscriber
- a general contractor if you're a subcontractor
Good reasons for adding another to your policy as an additional insured are:
- you signed a contract that requires you to obtain the insurance and name the other as additional insured
- you have agreed to indemnify the other
- you'd rather avoid issues of who is to blame and which carrier is going to cover the claim
- you don't want to risk subrogation actions
If you name another on your insurance policy it generally means that your insurance policy is going to cover claims and pay defense and damages for those claims that are covered by the policy for both you and the additional insured. Making it simple, the claims covered would be those that arise from your covered performance, not the additional insured's. Your policy shouldn't be used to cover a claim against the additional insured when the claim has nothing to do with you. As an example, Dealer A covers Central Station as an additional insured. Dealer B, using a different insurance carrier, also names Central Station as an additional insured. One of Dealer A's subscribers sues the Central Station. As an additional insured the Central Station can expect to be covered by Dealer A's carrier, but can the Central Station also look to Dealer B's carrier to cover that same claim?
I believe the correct answer is no, Dealer B's carrier has no coverage because the claim has nothing to do with Dealer B. But, that answer is too simple, because insurance policies are contracts and they can be worded differently, usually through endorsements. Using the same scenario, Central Station is also able to look to its own insurance carrier for coverage. If Dealer B's policy is broadly written, which it most likely won't be, Central Station could interpret it as primary coverage, not necessarily having nothing to do with Dealer B. That argument could be made by Central Station's own insurance carrier looking for a carrier to share the claim, or a claimant, looking for another deep pocket if the damages are significant enough to exceed one or more carrier's limits.
Central stations require dealers to indemnify them. The easiest way a dealer can protect itself and comply with that contractual obligation is to name the central as an additional insured. Using the same insurance carrier would also make sense. It certainly will avoid a battle of carriers over who is primary and who is secondary or excess if there is a claim. The Standard Form Agreements require the subscriber to name the alarm company as an additional insured. That insures that the subscriber's carrier can't sue the alarm company since a carrier can't sue its own insured for the insured loss.
So when we talk about Additional Insureds we need to be careful, and all of the expert insurance brokers on The Alarm Exchange understand this issue. All of you are welcome to comment.