April 2007

Additional insureds require additional awareness

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It's important to understand the effects of naming additional insureds

by Stephen M. Phillips
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For some time now, roofing contractors have been contractually required to name other parties as additional insureds. For new construction projects, roofing contractors typically are required to name general contractors, owners and architects, as well as their officers, agents and representatives, as additional insureds on commercial general liability (CGL) insurance policies. Similarly, owners and property managers often require they be named as additional insureds in roof system replacement and repair contracts. However, you need to be aware of how naming additional insureds can affect you.

Naming others

There is a huge difference between naming someone an additional insured and providing a certificate of insurance or maintaining contractual liability insurance coverage. Providing a general contractor or owner with a certificate of insurance and naming either as a certificate holder is intended to show you have the described insurance in place. (Most CGL insurance policies include often overlooked contractual liability insurance coverage, which provides insurance coverage when you contractually agree to accept responsibility for tort liability [liability imposed by law in the absence of a contract or agreement] to pay for bodily injury or property damage to a third person or organization resulting from your acts.)

But when you name someone an additional insured, you entitle that person to the benefits of the insurance coverage you purchased to protect yourself, thereby increasing the risks borne by your insurance carrier. If a claim against an additional insured is paid, the policy limits available to you are reduced. Also, claims against the additional insured may lead to premium increases and adversely affect your ability...

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