It’s a regular occurrence for contractors. Another party (an owner, general contractor, lien holder, other contractor, or government entity) asks you to add them as an additional insured on your insurance policies. This party often makes it clear that if you want to do business with them, not adding them is not an option.
However, this isn’t necessarily a good idea. For example, you probably bought your excess liability coverages – such as those under an umbrella policy –to protect you from catastrophic financial loss. If an additional insured, who might be well within their rights, is added to your basic coverages and protected up to your basic coverage amounts, will they also be allowed to “piggyback” up to your highest limits of protection?
We’d advise you not to set up any procedure that automatically makes all of your coverage limits available to any additional insured. Add them to the specific coverages and the specific limits they request, but go no further. If in doubt, consult with your attorney about contractual requirements and possible gaps between what the entity is requesting and what your coverage will actually provide.
Once you’re certain what you’re being asked to do, and have decided to meet this request, there’s one more action to take before adding the additional party to your coverages. Contact us to determine if your current policy already meets the needed conditions, or what modifications (if any) might be required to do so. Remember – we want to help you meet your needs, but our focus is always on protecting you, even if this means against unreasonable demands from other entities. We’re here to help.
