Category Archives: General Liability

Business Insurance, Film Insurance, General Liability, Insurance Terms

Why does everybody want to be an Additional Insured?

Sometimes I have to name other people as an Additional Insured. Sometimes I’m required to have my subcontractors name ME as an Additional Insured.

What’s it all mean, and why are so many Additional Insureds being thrown around?

The short answer is “sh** flows downhill.”

The medium answer is that Additional Insured allows for “risk transfer.” Risk Transfer allows the party closest to the actual negligence to be able to legally and financially (through insurance) respond to a claim.

And the long answer:

When YOU add someone to YOUR insurance “as Additional Insured,” you are protecting that entity against YOUR company’s negligence.

Similarly, when someone adds YOU to THEIR insurance “as Additional Insured,” you are protecting YOURSELF against THEIR negligence.

VERY IMPORTANT

Additional Insured is NOT THE SAME THING as Additional NAMED Insured. These are VERY different!

An Additional Named Insured is typically another operating company that has the same ownership constituency as your company does (e.g. you are 100% owner of both entities).

Most importantly, being listed As Additional Insured on someone else’s policy does NOT mean that you do not need insurance. Only your insurance covers your negligence. Their insurance covers their negligence. Additional Insured status does not change that.

Complicating the concepts of risk transfer and the use of Additional Insured, is that there are three generally different legal applications, depending in which state you/your company is domiciled & insured.  Some states allow (vicarious) liability to be contractually transferred to other entities. Others provide only for clearing of the non-negligent party’s name off of a lawsuit if they did not contribute.

In addition, contracts between main contractors and subcontractors will contain variously stringent applications of the concepts of “indemnify and hold harmless,” and these can affect who responds to a claim. More on that in another article.

The two main types of Additional Insured endorsement are:

  1. Blanket Additional Insured, -or-
    Blanket Where Required By Written Agreement
    This requires an agreement, in writing, executed prior to “occurrence” (and preferably prior to any working relationship) between the parties stating that one shall be required to name the other “as Additional Insured.” Very often this agreement will also have “indemnify and hold harmless” wording as well. There may be other requirements (below) in the agreement.

    1. When a “blanket” Additional Insured (AI) certificate is issued by an insurance agent, there is usually no official record with the insurance company themselves, and no specific policy paperwork that mentions THAT one Additional Insured entity. Certificates are kept on file with the agency. The only part of the insurance policy that indicates there is coverage is a “Blanket Additional Insured Endorsement,” and these come in several flavors (some for Owners, some for Permit Entities, some for Managers of Premises, etc).
  2. Schedule Additional Insured
    This type often does NOT require a written agreement be on file with the policyholder showing requirement of Additional Insured status.

    1. Scheduled AI status is accepted by the insurer (who may need to initially see the contract) and is recorded onto the policy documents for that specific AI entity. Often someone required Scheduled AI status will want to see the official policy document from the insurance company (not just the certificate from the agent) with their name on it.

There are additional clauses which can frequently come into play as regards Additional Insureds, including:

  • Notice of Cancellation
    Very often, interested parties with whom you work will have a requirement to know if your policy is going to be cancelled, say for non-payment of premium. These parties, subject to approval by the insurer and usually a written requirement, can be sent official notification from your insurance company of any changes in your insured status, due to non-compliance, change of market appetite, non-payment or other reasons. Typically requested is 30-day advance written notice of cancellation, with a special exception of only 10-days for non-payment of premium
  • Waiver of Subrogation, -or-
    Waiver of Transfer of Rights of Recovery (against others to us)
    This Waiver is the agreement by the insurance company to “be on the hook” for payout of an insurance claim, EVEN IF it was caused by the waived party. This requires a written agreement (in advance, before any occurrence or claim) that requires the waiver.
    Without a Waiver of Subrogation, in the event of a loss, the insurer reserves the right to “legally become YOU” in court for the purposes of recovering damages (money) that they may have paid out, but they have discovered that someone you work with was actually at fault or negligent in some way.
    See this post for more information
  • Primary and Non-Contributory
    Your policy agrees to pay first, and the other entity’s policy acts as excess after your policy limit is exhausted. However, this endorsement is mostly irrelevant, as the most-negligent party (remember what flows downhill) is the one who always has to pay first before anyone else.
Business Insurance, Film Insurance, General Liability, Special Events

General Liability doesn’t cover my Liability (venue/premises)???

Did you know:

  • General Liability excludes coverage for your liability for property damage to premises you use

With the exception of a few specific cases:

  • Damage to the building portion only,
    • IF by fire
    • Only for your legal liability (claim must arise out of tort/out of your negligence)
  • OR damage to the building and contents rented,
    • IF occupied by you for a week or less (defined as seven consecutive days)
    • For any reason that you would be liable OTHER than fire

Both of the above are:

  • Subject to the “Damage to Premises Rented” sublimit shown in the declarations (usually $100,000 or less – and possibly $0)
  • Only for that portion of the premises occupied by you (does not extend if your damage spreads to other areas of the building)

Any other damage to premises that you occupy is NOT covered by General Liability. If you pay attention to the statements above, you’ll see that a situation such as “FIRE damage to CONTENTS of a location rented for LESS than seven days” is NOT covered!

In addition, while General Liability contains Contractual Liability coverage, that you might think could help out with (lease or usage agreement) contractual requirement for coverage to premises,

  • No coverage is provided by your GL for premises solely by a requirement in a lease (if you are not legally liable, even if you have agreed to be responsible, there is no insurance coverage)

So, when you have a special event, or a film production, and you provide a certificate showing that $1 million per occurrence general liability coverage, and your agent has explained

Liability comes in two parts:

  1. Injury to people (bodily injury), and
  2. damage to property

you think that you’re covered.

You’re not.

This is very important, especially in film production, where a location may be used for more than seven days (including a production office). You have a coverage gap. You have an area where you believe you are covered, but you are not.

There are (at least) three ways to provide for this potentially huge coverage gap:

  1. Third Party Property Damage
    1. Covers property of others in your care, custody and control.
      1. This is the best coverage to add to cover a film location, but is generally NOT asked for by the locations who are asking for “General Liability only” certificates. So beware – without this coverage, you may have huge coverage gaps!
      2. Having a location owner listed as Loss Payee allows for direct payment and settlement with them in the event of a loss.
      3. This is the second most important film production insurance coverage to purchase, after General Liability!
  2. Tenant Liability Endorsement (up to $1 million)
  3. On a Commercial Property policy, you can add the Legal Liability Coverage Form, CP0040, which is for claims that arise from tort (you must be legally liable/negligent)