Being a Named or Additional Insured Not Always Necessary for Coverage

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...status is usually limited solely to liability coverage. It is not until after a loss happens and a dispute arises that the individual entity learns for the first time that its additional insured status does not apply to property losses.

A case in point is Ionian Corp. v. Country Mutual Insurance Company v. Ionian Corp. et al, No. 3:10-cv-0199-HZ (U.S. Dist. Ct. Dist. OR, 2012). This was an interpleader action where the insurance proceeds were deposited with the court by the insurer following a fire that destroyed a building that was leased to PSC. Ionian Corporation, the lessor of the building, was under the impression that as an additional insured, it was entitled to some of the proceeds. The issue before the court was whether Ionian’s coverage was limited to liability only.

The Achilles’ heel was the endorsement entitled, “Additional Insured – Multiple Interests,” which amended the policy’s “Who Is An Insured” provision stating: “If the person(s) or organization(s) shown in the Schedule … is an owner … from whom you have leased land, this insurance is limited to their liability arising out of the ownership, maintenance or use of the premises or land leased to you.”

While Ionian agreed that the endorsement in question only applied to liability insurance, it maintained that it was still covered for property insurance under the Building and Personal Property (BPP) Coverage Form. It asserted, in somewhat of an unusual argument, that this BPP Coverage Form which provided coverage for the fire loss to Ionian did not exclude additional insureds but only certain causes of loss and, therefore, provided additional insured coverage. It was, however, a futile attempt to obtain coverage because no forms or endorsements related to commercial property coverage mention coverage for additional insureds. The court, in ruling against coverage for Ionian, stated that to award proceeds for the property loss when the policy does not provide for such an award had no support in the law.

Departures from Being Named as an Insured

Tracing the history of property insurance reveals that for a person or entity to obtain coverage against fire or other causes of loss, it would have been necessary for them to be named as insureds. As a general rule, the fact that a person or entity had an insurable interest in the damaged property would not have been sufficient to qualify for coverage. This requirement that the person or entity be named as an insured has changed over time so that currently, depending on the policy and nature of the loss, being specifically named as an insured on a property coverage form is not a requirement to collect insurance against loss to covered property.

Some examples where coverage is provided despite the fact that an individual or entity is not specifically named as an insured are: The Commercial Output Program— Property Coverage Part CP-1Ed 2.0 of the American Association of Insurance Services (AAIS). The AAIS Business Personal Property coverage part CP-12. Ed 1.0 also applies to personal property of others that is in the named insured’s care, custody or control and located on or within 1,000 feet of covered locations. This coverage also applies to personal property of others that is sold under an installation agreement, where the named insured’s responsibility continues until the property is accepted by the buyer.

It is not until after a loss happens and a dispute arises that the individual entity learns for the first time that its additional insured status does not apply to property losses.


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