Every day we receive multiple requests to add additional insured endorsements to our policyholders’ policies. Typically these requests are initiated by a contract our named insured willingly signed to add the additional insured in exchange for being granted some kind of work or sales transaction.

As insurance professionals, we need to make sure we are cautioning our customers about the effect of these additional insured requests before the time of a loss. Some additional insured requests are reasonable, but many are not. Is there a good reason for our insured to share their limits of liability protection with the additional insured?

Thinking it through

We have had some unusual requests. In one case, our insured was a retail store. They were selling a locally manufactured product and the manufacturer was requesting to be an additional insured on the retailer’s policy. The retail store did not understand that they were being asked to provide the manufacturer with products liability coverage while diluting their own liability protection. When they refused, the manufacturer said “Ok” and continued to sell their product through the retailer.

In another case, we had a tenant asking that they be added as an additional insured on a landlord’s policy. With a little discussion, we found the tenant thought he or she could get by without a liability policy if the landlord provided coverage. The tenant finally agreed to purchase his or her own coverage when the landlord refused.

We cannot protect our policyholders from everything. They have to make their decisions and we are not going to act as their attorneys. If we help them to understand what they are agreeing to as it regards the dilution of their own insurance protection, we have done our best.