Additional Insured Endorsements. What are they?
What is an Additional Insured Endorsement? Is this is the same as an Additional Insured Certificate?
Any endorsement to a policy is a change to the insurance contract. When an entity is added as Additionally Insured to your policy they are given the right to make a claim directly against your policy. This is because they are an "insured" on the policy. A certificate of insurance is basically a statement about what should be in the policy. If an Additional Insured Certificate is issued but the policy does not have the required endorsement then it is basically false.
There are several types of AI endorsements. The CG 2010 11/85, CG 2010 10/1 and the CG 2010 10/93 are the three most common. Other endorsements are usually modifications to one of these types generally referred to as "Manuscript AI Endorsements." Recently the CG 2033 and CG 2037 have become widely utilized.
Of the three endorsements the cg 2010 "11 85" has stronger wording. An entity added with an 11/85 is an additional insured for "your work". This means that even after you have completed the job, even years later, the AI can make a claim directly on your policy for a liability claim. The 11/85 endorsement is increasingly hard to obtain. Some claim that it is even gone but we still see it being issued for commercial work. Update: (2012-2013) - Despite all of the predictions that the 11/85 endorsement would be going away it has proven to be a continually referred to and used endorsements. Several carriers have once again started to include the 11/85. The intention of the Insurance Services Office was to replace the 11/85 with a combination of CG 2033 and CG 2037. These two endorsements are still pretty much the same thing as the 11/85 but the 11/85 continues to be the go-to endorsement.
The 10/93 form provides the AI coverage for "your ongoing operations". In this case the AI would only be able to make a claim directly during the time that your project or operations are ongoing. After the job is completed their status as additional insured is no longer in force. The 10/01 is very similar to the 10/93
With this in mind one should be conservative with endorsement requests and they should only be made when required by a written contract.
(Feb 2010) Lately we have seen an increased willingness for 11/85 equivalent endorsements to be issued for remodeling operations. While this wording is still not available for new residential 11/85 equivalent wording is available from some carriers for remodeling and service jobs.
Regarding the question of, "What does and Additional Insured Endorsement Cover?" , the only correct answer to the question is, "It depends on the language of the endorsement."
For a comprehensive list of articles on the subject of Additional Insured Endorsements click here.
(CG20101185,CG 20 10 11/85, CG2010, CG 20 10, CG20101093, CG 20 10 10/93, CG 20 33, CG 20 37)
Venture Insurance Services
PO Box 469
Burbank, CA 91503
Avoid paying too much.
How do you avoid paying too much for insurance?
The best approach is to find a broker who knows and is familiar with the type of work you perform and who understands the underwriting process and how policies are rated. Then, provide your broker with an accurate survey of your exposures; gross receipts, payroll, number of full time and part time employees and sub-cost. As well as all of the other details asked for about your company. Keep in mind that your policy will run 12 months into the future and your estimates are for future work (you will also be asked about past amounts as well). You should also be alert to any offer that seems too good when compared to other quotes that are available. The most expensive insurance there can be is one that provides no coverage when there is a claim regardless of how cheap it was when you bought it.
Things to watch out for:
- Are are all of the fees disclosed?
- Typical fees are, Policy Fee, Inspection Fee and Broker Fees.
- For non-admitted carriers there will also be a tax.
- Does the payroll include any owner that is active in the field?
- Are the Gross Receipts and Subcost correct?
- Is the name of the carrier disclosed?
- Does the policy have a Sunset Clause?
- Is it a Manifestation Form policy?
- Is it a Claims Made policy?
- Look at these actual proposal samples for examples of what to look out for.
Be careful of an insurance proposal that does not disclose all of the fees. Insurance brokers are expected to make full disclosures of premiums and fees but some still do not do this. Watch out for a proposal that is based on less exposure than what you have. We have seen some quotes where the broker took the gross receipts or payroll estimates and cut them in half. This can be very expense as the resultant rate is often higher based on the lower estimated annual gross receipts or payroll. If the policy is audited the you can end up paying an inflated rate for the coverage. Remember that just about every policy you will be offered is subject to audit at the company's discretion. Audit premiums can be quite a shock if the original policy was based on inaccurate figures.
This brings up the point of the estimated figures to base the rating on. The best approach is to be as accurate as possible, being careful not to be over optimistic about the estimated numbers. If you do less than you project you will have paid more than you should have. Many policies are only upward on audit. At the same time, if you low ball the numbers you will most likely be given a higher rate and when you have your audit you will be paying more than you would have if your estimates were accurate. And, if the figures are very far off you run the risk of being accused of misrepresentation and no coverage in the event of a claim.
The proposal that you are given should disclose the rating basis and the carrier that is being offered. We have seen contractors spend thousands of dollars on down payments without even knowing who the carrier was. You would never buy a car without knowing the make, why buy insurance without knowing the carrier?
Finally the type of policy will affect the price. Traditionally coverage for contractors is on an Occurrence Form. In recent years a Modified Occurrence form has appeared. Be sure you understand the implications of this type of policy form. There is also a Claims Made form and policies with Sunset Clauses. If your broker cannot easily explain the differences to you consider a broker who understands the differences.
Venture Insurance Services
PO Box 469
Burbank, CA 91503