Liability insurance shields protect policyholders from injury and property damage lawsuits. It shields the policyholder from legal liabilities like settlements and awards. This element of liability insurance provides supplementary coverage about an "additional insured" status. It covers additional entities or individuals in addition to the primary policyholder. Because of their frequent association with the activities or operations of the primary insured, these supplementary parties are exposed to novel risks.

The endorsements in question have emerged as a noteworthy phenomenon within the insurance industry since 2023. According to a report by the Insurance Enrollment Information Institute, nearly 35% of liability policies currently include some form of additional insured status. From 20% in the early 2010s, this represents a substantial increase.

When You Should Consider Naming Additional Insureds on Your Policy

By Contractual Agreements

Under contractual responsibilities, numerous proprietors of small businesses are compelled to add additional parties as additional Insurers to their insurance policies. This practice is significantly widespread within the event planning industry. They are often mandated as additional Insurers under venues' general liability insurance endorsement policies on behalf of event organizers. A 2019 survey revealed that venues were requested to be included as Additional Insureds by 63% of event organizers.

Adherence to Regulations from the Government

Government entities are occasionally required to be designated as Additional Insureds by specific professions, as mandated by law. Tradespeople, including electricians and plumbers, are particularly susceptible to this. Specific trades are obligated to carry insurance that designates the state or local government as an Additional Insured when undertaking public projects, with regulations differing by jurisdiction.

Supplements of Coverage Made Voluntarily

Voluntary extension of insurance endorsement coverage to third parties is a decision that business owners may make on occasion. This action is frequently interpreted as a strategic move or a display of goodwill. To bolster the appeal of their service offering, an IT consultant may elect to add a prospective client as an Additional Insured. Despite the lack of research, anecdotal evidence indicates that this practice is increasing, especially in extremely competitive sectors.

Meeting Landlords' Requirements

Landlords often request that commercial tenants add them as insureds on their liability insurance policies. This clause protects the property owner from tenant business lawsuits. A 2022 study found that 80% of commercial landlords in major U.S. cities include this clause in their standard lease agreements.

Thimble's Approach to Additional Insureds

Additional Insureds are provided at no additional cost by Thimble, well-known for its endorsement insurance solutions for small businesses. Business proprietors value this feature for its practicality and cost-effectiveness. Policyholders can effortlessly add Additional Insureds to their policies with Thimble, whether at the time of purchase or throughout their terms. Thimble is a favored option among small businesses seeking to efficiently manage their insurance requirements due to its adaptability and affordability.

Examples Of Additional Insured Endorsement

Landlords and Tenant Insurance Agreements

Renting commercial property often requires tenants to add them as additional insureds on their additional insured endorsement policies. It protects the landlord by ensuring the tenant's insurance covers property damage and accidents. Up to 30% of US metropolitan commercial lease agreements included such protections in 2019. Spreading the risk reduces landlords' financial risk in a property accident. Real estate investments should be protected, especially in busy commercial areas.

The Role of Contractors in Construction Insurance

As an additional insured on their insurance policies, general contractors frequently demand that subcontractors safeguard their interests in the construction industry. As the statistical risk of accidents and injuries is significantly higher in the context of large-scale projects, this practice is prevalent. In Canada alone, clauses requiring subcontractors to provide such coverage comprised over 70% of construction projects in 2020. Implementing this insurance framework safeguards the general contractor and the project owner if legal action is initiated about the subcontractor's work.

Manufacturers and Product Liability Coverage

Manufacturers frequently take preventative measures to manage the risks associated with product liability by including sellers as additional insureds on their insurance policies. Pharmaceuticals and electronics are two sectors that exhibit a notable prevalence of this practice, given their substantial liability exposure. The adoption of this additional insured endorsement strategy by manufacturers in these sectors is estimated to be around 60%, according to a 2021 industry report.

The supply of safety in opposition to capability product liability complaints acts as an incentive for dealers, thereby improving their self-esteem and confidence in advertising and marketing the goods. By correctly mitigating risks, this coverage association will make them the most effective, increase the supply chain's overall stability, and foster an improved partnership between manufacturers and dealers.

Limitations of Adding Insured Parties

There are particular restrictions when adding insured to a policy. This protection is primarily limited to services rendered directly to the policyholder. Consider a scenario in which a builder engages the services of a painter to repaint specific sections of a residence. The builder's endorsement insurance policy would exclusively provide coverage for the painter's labor claims on that particular undertaking.

Moreover, not all obligations are encompassed within this coverage. Importantly, professional liability additional insured endorsement prohibits the addition of an additional insured. Vicarious liability, in which your company may be held liable for the actions of a third party, is one of the potential liabilities to which the coverage may extend. The contractual agreement ultimately specifies the scope of protection. To clarify, the contractual terms establish the coverage boundaries and shall not surpass the amount specified in the contract.

Advantages of Being an Additional Insured

The benefits of being listed as an additional insured on a policy are substantial. It indicates that the policyholder's endorsement insurance covers you in case of a lawsuit or claim. This arrangement is especially advantageous because it minimizes your loss history. Over time, a more pristine loss history may reduce insurance premiums. On the contrary, any submitted claims are documented in the loss record of the primary insured, which may result in increased premiums.

This arrangement is a strategic approach that benefits all parties involved, not merely one of risk sharing. In 2019, 30% of small business proprietors incorporated supplementary insured provisions into their contracts, acknowledging the advantageous financial and security implications. This phenomenon is prevalent in numerous industries, ranging from consulting to construction, demonstrating the adaptability of this risk management tool and the confidence organizations have in it.