There is no question if you have ever worked for someone else, especially if you are a contractor you have had to supply a certificate of insurance. In some situations, you may have even been asked to add the entity as an additional insured and add a waiver of subrogation too. But did you understand what you were adding?
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Let’s Talk Additional Insureds
When a business asks you to add them as an additional insured to your insurance policy, essentially they are asking you to extend your coverage to protect them if things go south.
The term additional insured means a person or entity that is covered under another party’s insurance policy. Additional insureds are often included under general liability, commercial property or commercial auto policies.
One of the most common reasons for providing additional insured coverage is a contractual requirement. When one business performs work for another, the hiring company often demands coverage as an additional insured under the other party’s general liability policy. The obligation to provide coverage is specified in a written contract signed by both parties.
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A second reason for providing additional insured coverage is a government statute. A business may be required to cover a government agency as an additional insured as a condition of obtaining a permit to erect a sign over a public sidewalk. A business may also provide additional insured coverage voluntarily. For instance, a church insures its members under its liability policy for activities they perform on the organization’s behalf.
What is a Waiver of Subrogation
Chances are if you have been asked to add this, you have done so dutifully but may not have understood exactly what is. That’s okay, that’s why we are here. It’s important though, you have a basic understanding of what it is. So here goes.
According to the International Risk Management Institute subrogation means, in a legal sense, one party has the right to “step into the shoes” of another party to bring a claim for damages. Not all types of claims may be subrogated. The most common type that can be subrogated is property damage claims.
For example, if you are involved in an auto accident where no one is injured, but the vehicles are damaged, and you are free of fault, your insurer will pay to have your vehicle damage repaired. If your insurer pays for the “property damage” to your vehicle, in most states, your insurer then becomes “subrogated” to your rights for that property damage. In other words, your insurer can “step into your shoes” and make a claim against the other driver in your auto accident that caused the damage to your vehicle for which your insurer had to pay the repair cost.
If the other driver does not voluntarily pay for the damage, your insurer may even bring a lawsuit against the other driver, and by “stepping into your shoes,” your insurer may bring that claim in your name—just as if you were bringing the suit yourself. In most states, the suit would be brought in your name or your company name.
A waiver of subrogation clause is placed in the professional services contract to minimize lawsuits and claims among the parties. The result is that the risk of loss is agreed among the parties to lie with the insurers, and the cost of the insurance coverage is contractually allocated among the parties as they may agree. The risk, once assigned to the insurers by the parties, is determined to stop there, without allowing the insurer to seek redress from the party “at fault.”
The clause usually provides that the owner and design professional waive all rights against each other and against others for damages covered by any property insurance in place during construction. To ensure the effectiveness of the waiver of subrogation clause, the owner and design professional generally require the same type of waivers from the contractors, other consultants, and agents. Most form contract documents assign the responsibility for procuring the applicable insurance, for demonstrating the coverage is in place (e.g., certificates of insurance), and for the cost.
Wrapping It Up
Remember, additional insureds and a waiver of subrogation have to be added by endorsement to your policy. And typically there is a premium for doing so. These are different from a certificate holder. Certificate holders usually just want proof you have the proper coverage in place.
If you need a certificate of insurance or need more clarification about additional insureds or waivers of subrogation, don’t hesitate to give us a call today at 860-684-5270. Our insurance experts are here to help!