Curious about how to add an additional insured in Canada? Read this.
It all adds up. After months of negotiations, your company is about to sign an important contract. Your firm just secured the perfect location for your newest retail outlet and the lease just arrived. A major new prospect is about to become a client or buyer once you sign on the dotted line. Whether it’s a lease, contract or sales agreement that’s in front of you, it’s important to understand what you are signing. That’s because when you review the insurance requirements section you may find a request by another company to be added as an additional insured to your commercial policies. The company may ask you for a certificate of insurance or a specific additional insured endorsement.
Before you agree, it’s important to first connect with your ALIGNED broker about the request. Your broker will review the additional insured request and explain what the implications will be to add a third party.1
Why might you add an additional insured?
There are several reasons why you might want to add an additional insured. If your organization has a close relationship with another company it may make sense to provide additional insured status. You may have a contractual arrangement that requires your organization as the named insured to do so. This may be the case with customers, project owners, or owners of property that’s leased by the named insured.
From a liability perspective, “additional insured” is often used together with an indemnity agreement. The agreement is between what’s known as a named insured – the Indemnitor – and the party that’s the additional insured – the indemnitee. When the rights of an insured are listed under an indemnitor’s commercial general liability policy, the indemnitee generally views this as a promise of indemnification.
Should the indemnity agreement be unenforceable, the indemnitee may still be able to get liability coverage. They would do this by making a claim as an additional insured under the commercial general liability – aka CGL – policy that’s held by the indemnitor.2
The devil is in the details. How an additional named insured differs from an additional insured
Insurance terms have distinctly different meanings. In the case of an additional named insured, this entity is typically an affiliated of the primary insured. As such, an additional named insured has rights to amend or cancel coverage. Because of this, you and/or your organization will likely not be able to add or be added as an additional named insured to another organization’s policy.
Likewise, you also should not add any third parties as additional named insureds to your policies. If a contract specifies adding an “additional named insured” as a requirement, it should be removed. In most cases, the intention was to use the term “additional insured” and can be amended as such.3
Talk to an ALIGNED broker about additional insureds and your contracts
Risk adds up. That’s why any request to add an additional insured to your commercial insurance policies should be carefully evaluated. Speak to your ALIGNED broker about additional insured requests, contractual risk transfer and risk management best practices.
Sources: 1,2,3 ALIGNED Insurance: Additional Insured Explained