Requests to add additional insureds to general liability policies are one of the most common occurrences in the daily insurance routine. They are so prevalent that insureds—and many insurance practitioners—often agree to them with barely a second thought.

Additional Insured Provisions

Manufacturers name vendors, tenants name landlords, associations name volunteers, contractors name owners. The list goes on and on. ISO currently publishes nearly thirty standard additional insured endorsements, seemingly one for every situation imaginable. In addition there are the special carrier endorsements and those that must be designed particularly for that "special situation."

They're so prevalent that we hardly pay attention to them when reviewing an insurance policy. But the subject of additional insured coverage often is misunderstood.

One of the most frequent problem areas is the idea that a contractual requirement to add an additional insured to an insurance policy is the same as a contractual hold harmless or indemnification agreement. While both clauses frequently appear in the same contract, they are separate and distinct from one another.

Indemnification Clauses

Contracts frequently include clauses in which Party A (the indemnitor) assumes the legal liability of Party B (the indemnitee) for damages arising from activities outlined in the contract. These clauses, called hold harmless or indemnification agreements, fall into the risk management technique of non-insurance transfer. They transfer the potential financial impact of an exposure from Party A to Party B. Examples of contracts that often contain this type of clause are purchase agreements in which the manufacturer (Party A) assumes the legal liability for damages arising from its products from the retailer (Party B). Other types of agreements that commonly include such clauses are rental agreements, equipment leases, and construction contracts.