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Contracts requiring one party or another to be
added as an additional insured to your policy
are considered common and effective methods for
the concerned party to protect itself from the
liabilities created by your actions taken on their
behalf. You’re the one “on the scene”
and most likely to create the liability. Thus,
it appears reasonable that you should bear the
primary responsibility for avoiding such liabilities
– or, in the event those efforts fail, to
be the primary provider of defense and insurance
coverage for the claims.
But although such provisions may be “common,”
whether they are also “effective” is
another matter.
Gaps in Coverage
If for any reason the contract language requirements
are going to be met, at least in part, by your
insurance coverage, now is the time to sit down
with your agent and review possibilities. Too
often gaps in coverage provisions are discovered
only after the claim is filed. At that point it
is too late to discover you’ve agreed by
contract to an action that is either uninsurable
– or, even more depressing, was easily insurable
if only some action had been taken to notify your
agent and carrier of the need.
There are always limits. The request for additional
insured status may be common. However, the burden
to shoulder responsibility for liability the other
party may be seeking to transfer to you can sometimes
be drawn so broadly that the insurance carrier
will find it unreasonable to provide such insurance.
In fact, the request may be so broad that you
would be well advised to refuse such a burden.
For this reason, it’s also advisable to
have your legal advisers review the language required
of you in all such contracts. Don’t take
the requesting party’s word for it. If the
provision is standard language, your legal advisers
will tell you so, and we likely can help you arrange
the proper insurance. It’s better to know
prior to risking your hard-earned assets.
Additional Insured
Your attorneys also can help you draft appropriate
language to utilize in your own requests to others
to be added as an additional insured under their
policies. After all, successfully getting the other
party to take on the broadest possible responsibilities
to protect you may seem like a winning strategy.
But if the protection is needed and neither they
nor their insurance carrier is capable of responding,
all of that liability falls right back in your lap.
Utilizing so-called “additional insured provisions”
that are reasonable and standard are the best method
to gain confidence the desired protection will actually
be in place precisely when the need arises.
Talk with your legal advisers. Then call us!
We stand ready to help.
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