Okay, we get it. Lots of potential additional insureds,and the landlord wants dictatorial powers as to who gets named. But here are two of the potential traps created that were either overlooked or dismissed by the contract drafter:

1. Trap for the landlord. Exactly what protection does the landlord think he is getting with this requirement? Even if the carrier is willing to name both the current and potential future required additonal insureds, ISO endorsements typically limit the coverage to vicarious liability, and only for certain parties. For example, here is the applicable language from the ISO CG 20 11 04 13: “Section II – Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to you and shown in the Schedule.” A landlord can require naming every entity in the county, but the liability coverage will only apply for an additional insured which meets the “only with” requirements. So this appearance of broad additional insured powers is clearly much broader in the landlord's mind than reality.

2. Trap for the agent. Many agents have found life easier because carriers increasingly make available appropriate “blanket” or “automatic” additional insured endorsements. Yet note the contract drafter included two words in the above provision that derail such an approach: “shall name.” Whatever the intent, the lease clearly requires each of those additonal insureds  — and any arising in the future — be specifically named. No endorsement that fails to do so meets the clear lease language.

Sure, whoever wrote the lease likely overreached and included language that was imprecise. But that is the exact problem, isn't it?

Related: Tackling 'stupid' policy decisions

Imprecise policy language can be corrected by carefully reading the ISO forms — and not making assumptions to the form's intent. (Photo: Shutterstock)

An agent's assumption

Our second example involves a refusal by an agent to acknowledge clear forms language.

The insured had a boat dock that was able to be removed and stored during the off season. The agent argued that any loss suffered while the dock was removed from the water was not subject to the following ISO commercial property policy (CP 00 10 04 02) provision: “Property Not Covered: Bulkheads, pilings, piers, wharves or docks.”

The agent's opinion was reasonable that the items referred to in the exclusionary wording were all non-removable items, so a dock that was removable was not intended to be excluded. He noted that some carriers allow such an interpretation because they consider permanent docks as a building item, whereas portable or removable docks are considered business personal property. A few of the potential flaws in that reasoning:

• Nothing in the form language modifies the noun “docks.” Because the forms drafters had the option to include exceptions, yet didn't, it has to be read exactly as worded (see, for example, in the same section of the CP 00 10, the provisions regarding cars, vehicles, personal property and grain). Wherever the docks may be located at the time of claim, they are “property not covered.”

• While the discussion as to whether an item of covered property under a CP 00 10 falls under “building” or “CPP” potentially has a bearing on multiple policy provisions, including perils insured against, it has no meaning in this specific discussion because the specific “Property Not Covered” provision cited — j. — applies to both categories. And note j. does not make any exception for whether those “bulkheads, piling, piers, wharves or docks” are building or business personal property, so for this scenario the point is moot.

• There appears to be an assumption that the carrier would not want to insure a dock in the water, but would have no reason not to insure the same if removed from that exposure. Again, the form language reveals no basis for this argument. And there is a solution to nailing down coverage for the dock, regardless of location or usage at time of claim — the CP 14 10 06 95 Additional Covered Property form. The sentence says it all: “The following is withdrawn from PROPERTY NOT COVERED and added to COVERED PROPERTY.”

You have to love endorsements like that: short, clear and to the point. That's why reading the forms is the ultimate resolution to all discussions, arguments and conflicts. No obfuscation, provision bloat or mental triumphs of fantasy over reality.

Chris Amrhein, AAI, is an insurance educator and speaker, and serves as the chief fun officer at insuranceisfun.com.

Related: Do you know the ISO Commercial General Liability Form as well as you think?