Additional Insured Status in Professional Liability Insurance Policies: An Exploration of Policyholder Responsibilities

Who Should Be Concerned About Additional Insured Coverage on Professional Liability Policies?

Have you ever worked on a project where you were required to be added as an additional insured on the professional liability policy of another party? If so, you know that the process can be time-consuming and frustrating. But did you know that being added as an additional insured can also have a significant impact on your own professional liability coverage? In this blog post, we’ll discuss the importance of understanding the additional insured provisions in your professional liability policy and what you can do to protect yourself if you’re ever asked to be added as an additional insured.

Why is it Important to Understand Additional Insured Provisions?

When you’re added as an additional insured on someone else’s professional liability policy, you’re essentially being given the same coverage as the named insured. This means that you’ll be protected from claims alleging that you were negligent in your work, even if those claims are made by the named insured. However, there are some important limitations to keep in mind. For example, the policy may only provide coverage for claims that arise out of work that you performed for the named insured. Additionally, the policy may not provide coverage for claims that arise out of your own negligence.

Who Should Be Added as an Additional Insured?

In general, you should only be added as an additional insured on a professional liability policy if you’re providing services to the named insured that could potentially result in a claim being made against you. For example, if you’re a subcontractor who is hired to perform work on a construction project, you should be added as an additional insured on the general contractor’s professional liability policy. This will ensure that you’re protected from claims alleging that you were negligent in your work, even if those claims are made by the general contractor.

What to Do If You’re Asked to Be Added as an Additional Insured

If you’re ever asked to be added as an additional insured on someone else’s professional liability policy, you should carefully review the policy before agreeing to be added. Make sure that you understand the coverage provided by the policy and the limitations that apply. You should also consider whether you have adequate professional liability coverage of your own. If you do not, you may want to purchase additional coverage to protect yourself from claims that are not covered by the named insured’s policy.

Understanding the Importance of Additional Insured Coverage

By understanding the additional insured provisions in your professional liability policy, you can protect yourself from claims that could jeopardize your business. If you’re ever asked to be added as an additional insured, be sure to carefully review the policy before agreeing to be added. And if you do not have adequate professional liability coverage of your own, consider purchasing additional coverage to protect yourself from claims that are not covered by the named insured’s policy.

Additional Insured on Professional Liability Policy

What is an Additional Insured?

An additional insured is an individual or entity that is not named on the policy but is provided coverage under the professional liability policy. They receive the same coverage as the policyholder, but only for claims related to the work they perform for the policyholder.

Why Add an Additional Insured?

Adding an additional insured provides several benefits, including:

• Protection for contractors and subcontractors: It extends coverage to third parties who perform work on behalf of the policyholder, reducing the risk of litigation against them.
• Compliance with contract requirements: Many contracts require the inclusion of additional insureds, protecting both parties from potential liabilities.
• Peace of mind: It provides the policyholder with the assurance that their contractors and subcontractors are covered in the event of an incident.

How to Add an Additional Insured

Adding an additional insured is a straightforward process. The policyholder must submit a written request to their insurance company, outlining the name and contact information of the additional insured and the type of work they will perform. The insurance company may need to review the additional insured’s credentials and financial stability before approving the request.

Coverage Provided

The coverage provided to an additional insured is typically the same as that provided to the policyholder, including:

• Errors and omissions: Coverage for claims alleging negligence or errors in the performance of professional services.
• Breach of contract: Coverage for claims alleging that the professional services failed to meet contractual expectations.
• Bodily injury and property damage: Coverage for claims resulting from injuries or damage caused by the professional services.

Exclusions

While additional insureds receive similar coverage to the policyholder, there are some common exclusions that apply, such as:

• Willful misconduct: Intentional or reckless acts by the additional insured.
• Criminal acts: Acts that violate the law.
• Dishonest acts: Intentional misrepresentation or fraud.

Determining Liability

When a claim is made against both the policyholder and the additional insured, the determination of liability is based on the following factors:

• Negligence of the parties: The extent to which each party contributed to the incident.
• Contractual obligations: The responsibilities and duties outlined in the contract between the policyholder and the additional insured.
• Coverage limits: The amount of insurance coverage available to each party.

Benefits of Including Additional Insured Endorsement

Including an additional insured endorsement on a professional liability policy offers numerous benefits, including:

• Risk mitigation: Extends coverage to third parties, reducing the policyholder’s overall risk exposure.
• Increased credibility: Demonstrates a commitment to providing quality services and protecting clients.
• Enhanced contract negotiations: Provides leverage in contract negotiations by meeting client requirements for additional insured coverage.

Policy Limits

The coverage limits for an additional insured are typically the same as those for the policyholder, although some policies may offer the option to purchase higher limits for additional insureds.

Additional Premium

Adding an additional insured to a professional liability policy typically incurs an additional premium, which is calculated based on the type of work performed by the additional insured and the risk associated with their activities.

Importance of Communication

Effective communication is crucial in managing additional insured coverage. The policyholder and the additional insured should maintain open lines of communication to ensure a clear understanding of covered activities, policy terms, and potential risks.

Conclusion

An additional insured endorsement on a professional liability policy provides valuable protection for both the policyholder and their contractors and subcontractors. It extends coverage to third parties, reduces risk exposure, enhances credibility, and facilitates contract negotiations. Policyholders should consider adding additional insureds to their policies to ensure comprehensive coverage and peace of mind.

Frequently Asked Questions

1. What is the purpose of an additional insured endorsement?

An additional insured endorsement extends coverage to third parties who perform work for the policyholder, providing them with the same coverage as the policyholder for claims related to their work.

2. What are the benefits of adding an additional insured?

Benefits include protection for contractors and subcontractors, compliance with contract requirements, and peace of mind for the policyholder.

3. How are liability determined for additional insureds?

Liability is determined based on the negligence of the parties, contractual obligations, and coverage limits.

4. Are there any exclusions for additional insureds?

Yes, common exclusions include willful misconduct, criminal acts, and dishonest acts.

5. What is the cost of adding an additional insured?

The cost varies based on the type of work performed and the risk associated with the additional insured’s activities.