Certificate of Insurance vs. Additional Insured vs. Additional Named Insured

Certificate of Insurance vs. Additional Insured vs. Additional Named Insured

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A common request we receive in our office is a situation involving one of our farm clients.  Our client rents a significant amount of land that is owned by someone else.  This other person requests a Certificate of Insurance from our client.

 

What are they requesting?  What are they looking for?  Usually, they are checking to see that our client has liability insurance while on the land preforming their normal farming operations.  We will fill out only the liability section of the Certificate of Insurance.  This could include both underlying liability coverage on the farm owners' policy as well as umbrella coverage if this coverage is in place.  We will not outline any coverage for property such as homes, buildings, and equipment.

This request could ask that we add the landowner as an additional insured.  Now, what do we do?

 

We use the same form but there is a small box where we place an " A " that designates that there is now an Additional Insured named endorsement attached to the policy.

 

What does this endorsed coverage do?  What does it not do?  We have now extended liability coverage from our client's farmowners policy to the owner of the rented land.  However, only to the extent that the land owner is drawn into legal liability from the actions and operations of the farm.  So, if the land owner is drawn into a lawsuit due to the actions or operations of the farm, our farmowner's insurance company will pay for defense of the land owner and/or any amounts awarded to the plaintiff.

What we have not done is provide primary insurance to the land owner.  The landowner could face a lawsuit that has nothing to do with the farm or farm operation.  For example, a hunter being injured on the land or a snowmobile accident occurring on the land.  Our farmowner's insurance would not respond.  Any landowner renting out their land should have their own insurance policy providing their own primary insurance.

What is a certificate of insurance?

A certificate of insurance is any document that summarizes the terms, conditions and duration of an insurance contract, but it is not the contract itself. The certificate shows what type of insurance is in place at the time it is requested. It does not tell you what is in place a month from now or a year from now. This is why it is commonly referred to as a “point in time” or a “snapshot in time” document. It was originally created to serve as an outline of coverages in place and was used in lieu of producing the entire policy for review.

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What can it NOT do?

A certificate cannot alter, amend or change any coverages that are currently in place. No changes can be made to the policy by way of using the certificate to manuscript coverages. If a person prepares or issues a certificate of insurance that purports to amend, expand or otherwise alter the terms of an applicable insurance policy, then that person would be in violation of New Hampshire Revised Statutes Annotated Section 412:6-b.

 

What rights or coverages does a certificate holder have?

Under RSA Section 412:6-b, a certificate holder only has a contractual right to notice of cancellation, nonrenewal, or any similar notice concerning a policy of insurance if the person is identified and designated within the policy or any endorsement to that policy as an additional insured and that policy or endorsement requires notice to be provided. If a certificate holder is not listed on the policy as an additional insured, the certificate gives no coverage or rights to the certificate holder. The only way that someone can be listed as an additional insured is by endorsing the original policy.


What is my insurance agent allowed to do for me?

Your insurance agent can give you a completed certificate of insurance that acknowledges effective dates, what coverages or policies, endorsements and limits are in place at the time of the request. In addition, your agent may prepare or issue an addendum to a certificate that clarifies and explains the coverage provided by any policy of insurance referenced in the certificate and otherwise complies with the law.

Conversely, your agent CANNOT:

  • add language at the request of the certificate holder when it does not exist in the policy (for example, a primary and noncontributory clause, waiver of subrogation or hold-harmless agreement);
  • provide coverage to someone who is not designated in the policy as an insured entitled to coverage; or
  • provide notice of policy cancellation to someone who is not designated in the policy as entitled to such notice.

Do you need to add an additional insured or a named additional insured?

Add an insured to a commercial general liability policy and what do you get? An additional insured. Add a named insured to a CGL policy and what do you get? Probably, still just an additional insured. Why, then, do insurance practitioners persist in seeking named-insured status for an additional insured? There could be a valid reason for it, but more likely it is due to misunderstanding or anachronous understanding.

We will attempt to resolve some of the quandary over whether to endorse a policy with an additional named insured or an additional insured. When someone requests that a policy be endorsed with an additional named insured, there is an expectation that greater rights and/or more comprehensive coverage will be afforded than if endorsed as an additional insured. For the most part, it doesn’t really matter what you call the added insured, because the real scope of protection lies within the language of the endorsement and the policy, not the title given the insured.

More rights? 

The right to be notified in the event of termination of the policy is one of the rights most sought after by additional insureds and certificate holders. When endorsing the 1973 edition of the ISO CGL policy, the right to be notified upon termination will be acquired by designating the insured as an additional named insured, because in this version of the CGL policy, all named insureds receive notification. Adjunct to this, though, all named insureds incur the obligation to pay the premium. I wonder if an additional named insured really wants this obligation in the event other named insureds default on paying the premium.

Of course, the whole mixture changed when the 1985 edition of the CGL policy was introduced. Only the first named insured is promised notification of termination and only the first named insured is responsible for paying the premium. In addition, the first named insured may cancel the policy, request changes and receive premium refunds, while also being obligated to keep pertinent records for auditing purposes. Other named insureds, whether original or additional, are left in the dark about policy termination, so there is no advantage to being shown as an additional named insured in the 1985 or later ISO editions.

More duties?

By requesting additional named insured status, an unintended consequence may result. “Duties in the event of occurrence, offense, claim or suit” found in the conditions section of the CGL policy require named insureds to promptly notify the insurer of an occurrence or suit. Enforcement of the insurer’s obligations in the policy is contingent upon full compliance with all of the policy’s terms, including the “duties in the event of occurrence, claim or suit.” Choosing additional named insured status may inadvertently add the risk of claim denial for late reporting.

More protection?

The extent to which an additional named insured enjoys an advantage in coverage over an additional insured requires careful analysis of all policy and endorsement provisions. The most significant provisions will be found in the endorsement adding the insured because this is where limitations to coverage for an added insured are likely to appear.

It is possible for an additional named insured endorsement to place more restrictions on coverage than would appear on an additional insured endorsement. ISO and other rating organizations file only additional insured endorsements. Consequently, additional named insured endorsements must be independently filed or manuscripted, so the potential exists for more extensive restrictions to be written into them.

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CONCLUSION

Call the insured what you want, but recognize the substance of coverage lies in the wording of the endorsement. If you persist in calling a rose a tulip, don’t be deceived into thinking you can avoid the thorns.

Information from PIA Resource kit