Certificate holders and additional insureds are a daily activity in our business. Most of our clients need at least one certificate of insurance. Some of them need hundreds of certificates every year. However, we find that most people really don’t know what these certificates actually mean.
Let’s start with a certificate holder. When someone asks you for a certificate of insurance, they just want to see proof that you carry the appropriate insurance coverage. We send that proof to them on your behalf at no charge. If the coverage in force is acceptable to the third-party, then your transaction or activity can continue as planned.
It works a little bit differently if they want to be an additional insured on your policy and ask for a certificate of insurance reflecting that. When someone is an additional insured, it means that, in the event you both get involved in litigation like a slip-and-fall incident, or a products liability claim, your policy will extend coverage to them.
This is very common in landlord/tenant situations. Your landlord won’t give you the keys to your new office or warehouse space until they receive proof that they are an additional insured on your policy. If someone comes to visit your office, slips and falls in the lobby and then decides to sue, they will sue you for sure, but they will probably sue the landlord as well, because they own the building. Your policy will cover you, but it will also extend coverage your landlord as well.
If you are a distributor or a manufacturer, it is also very common for your customers to want to be listed as additionally insured.
Because the insurance company is extending coverage to someone else, they usually charge additional premium. Generally, the price is $100 – $200 for each additional insured.
Waiver of Subrogation
Your client or landlord may ask for a little more than an additional insured. They may ask for a Waiver of Subrogation. Subrogation is also called recovery. Let’s go back to the example of a slip and fall in your office. A person falls in your office and sues you and the landlord. Because your landlord is an additional insured on your policy, your insurance carrier will defend you and the landlord, and in this case the carrier settles the claim for $20,000.
After handling the claim, your insurance carrier determines that the landlord was really at fault because the incident happened in the lobby. They decide to sue your landlord to recover their $20,000. That is subrogation.
If your landlord asks for a waiver of subrogation, they are asking your carrier to waive that right. Waiver of subrogation can usually be obtained, but we need to request it from the carrier, and it costs more than additional insureds.
Both additional insured and waiver of subrogation can be obtained on a “blanket” basis, meaning that we don’t have to handle them on a case-by-case basis, they are all included automatically. That can get expensive and is only useful if you get a lot of requests over the course of the year.
Sometimes, certificate holders will have even more requirements. They may want “primary and noncontributory language” or they want to be an additional insured with a certain policy form that was produced in a specific year. Those need to be handled on a case by case and often can be accommodated.
There are a few situations when additional insureds do not apply. These include:
• Management liability policies like Directors and Officers, Professional Liability and Errors and Omissions: These policies have an insured vs. insured exclusion to prevent coverage for disputes or suits between partners or fellow board members. Naming someone as additional insured would negate their coverage.
• Workers Compensation: The rights and coverage under a workers compensation policy are primarily for the benefit of the injured employee, rather than the company. The company can’t extend the employee’s rights to someone else. Waiver of subrogation status can however be granted on workers compensation.
• Commercial Auto: The business auto policy defines an insured more broadly than the commercial general liability policy and specifically adding someone as an additional isn’t necessary. However, if a client or a vendor absolutely requires it, generally an accommodation can be made.
For additional questions about additional insureds, or if you are having trouble meeting certificate requirements, contact Phil Yanan in our Commercial Department at firstname.lastname@example.org or 786-454-8383.