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The leasing companies' requests are understandable. The companies are trying to protect themselves for the vicarious liability they might have for providing the employees. The contractors you handle should realize, however, that every time additional insureds are added to their policies, the limits are diluted and they may pick up broader exposures than anticipated.

Employee leasing is becoming more and more the norm rather than the exception. Despite this, the arrangement still raises underwriting concerns because it represents a change in the way things have been done and requires some insurance analysis.

First of all, you should refer to the leasing contracts. It is fair to assume that they spell out each party's responsibilities in the relationships and require that the contractors name the leasing companies as additional insureds. Using a seemingly absurd example, an office equipment leasing company would require that it be added as an additional insured on the lessee's CGL policy when it leases him a copier. This usually is required in the equipment leasing contract. A similar situation applies with leased employees. The leasing companies want to be insured on a primary basis under the contractors' liability policies for their vicarious liability in supplying the workers to the contractors.

Remember that the definition of “employee” on current editions of the ISO commercial general liability policy includes leased workers. Therefore, under such forms, negligent acts of leased workers are covered under the lessee's CGL policy the same as negligent acts of traditional workers. Should the leased worker negligently injure someone or damage a third party's property, coverage would be triggered (unless some other exclusion applies). Despite the fact that the contractor supervises the leased employee, the leasing company probably would be named in the suit because they “supplied” the worker. They want to be an additional insured for this vicarious exposure.

You may want to send a copy of the contracts to the underwriters to help explain why the leasing companies should be added as additional insureds. The additional insured status should be restricted to the terms spelled out in the leasing contracts. If the underwriters still refuse to add the lessors as additional insureds, the contracts may have to be amended or other insurer companies found.