What is an Additional Insured?

The term “additional insured” refers to the coverage provided by an insurance policy when circumstances require that someone other than the policy's owner enjoy the benefits of the coverage. The policy's owner is the named insured, and the policy will specifically state the circumstances under which people other than the policy owner will be covered.

For instance, in many countries, it is a legal requirement that automobiles be insured. An automobile's owner will arrange for insurance coverage, and the policy will routinely cover any legally licensed drivers whom the owner permits to operate the car. Without that provision, it would be very complicated for a company to provide a vehicle for an employee, because the employee would have to obtain separate insurance coverage for the time spent driving the employer's vehicle. Additionally, it would be almost impossible for private automobile owners to allow anyone else to drive their cars. A related issue is the requirement that any lien holders be named as additional insured in the case of loss.

Additional insured clauses are commonly found in property and casualty insurance, as well. For example, someone renting property will often be required to obtain casualty insurance and name the landlord as an additional insured. Thus, if a person is injured on the property, sues the tenant for negligence and adds the landlord to the suit, the tenant's insurance will cover the landlord's liability. Likewise, property owners who have taken out a mortgage to purchase the property are usually required to obtain homeowner's insurance and name the lender as an additional insured.

Commercial General Liability (CGL) insurance policies nearly always have additional insured clauses. For example, a CGL policy may name as additional insured all of a company's officers, employees and agents, covering them for any acts they perform in the normal course of carrying out their duties. However, such coverage doesn't extend to acts outside the employment or business relationship. For instance, a company's CGL policy might name all salespeople as additional insured, thus covering sales agents for liability incurred in the course of selling the company's product. However, sales agents who incur liability as a result of other actions not connected to selling the company's products cannot count on the coverage afforded by the CGL policy.

This type of coverage is not the same in all cases &emdash; many policies spell out very clearly the limits on such coverage. Thus, the best guidance is always to read the specific terms of the policy carefully when determining the extent of coverage for additional insureds and whether obtaining additional coverage is necessary.