Being a Named or Additional Insured Not Always Necessary for Coverage

ADJUSTERSINTERNATIONAL.COM

...equipment before they are paid by the owner, this is an important provision because the contractors do not have to be insureds to obtain coverage and it may be the only source of insurance on the property. Not to be overlooked, either, is the fact that contractors in this category also pay for this protection because they in all likelihood reduced their construction bids by an amount they would have paid had they purchased their own insurance for this exposure.

Relatively Recent Developments

As mentioned, additional insured status has customarily applied solely to liability insurance. In recent years, however, some insurers have introduced endorsements adding certain persons or entities as additional insureds under property coverages. One such example is the endorsement introduced by ISO in 2007: Additional Insured – Building Owner CP 12 19 06 07. This endorsement may be a little confusing because its title refers to “additional insured,”whereas the language of the actual endorsement refers to the building owner as a “named insured.”

This endorsement should alleviate some of the problems that have developed over time on how to protect a property owner’s interest. For example, in one instance the following question was asked: “We have an insured who is leasing a building from its owner on a triple net lease basis —meaning responsibility for all taxes, insurance and maintenance. The owner, however, wants to be named as a mortgagee on our insured’s property policy written on that building. How can this be accomplished, since showing the owner as a mortgagee would be inappropriate?”

It is true that showing the owner as a mortgagee would be inappropriate because to qualify as a mortgagee requires some kind of financing arrangement between the building owner and the insured lessee in this case. What eliminates this kind of question is issuance of the above-mentioned Additional Insured endorsement CP 12 19.

If this endorsement were used with a liability coverage form, it would likely be confusing because there are significant differences between being a named insured and an additional insured. It does not matter for purposes of property coverage because this endorsement limits the building owner’s coverage to that provided under the applicable coverage part or policy for direct loss or damage to the described building. As a result, it does not matter whether the building owner is a named insured or additional insured. The reason is that in the event of a covered loss, the insurer is only required to pay an amount that corresponds to the building owner’s insurable interest.

The second endorsement introduced in 2007 was Business Income – Landlord as Additional Insured (Rental Value) CP 15 03 06 07. This endorsement deals with the situation...

… contractors and subcontractors commonly install and purchase materials and equipment before they are paid by the owner, this is an important provision because the contractors do not have to be insureds to obtain coverage and it may be the only source of insurance on the property.


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