Updated May 2010

Additional Insureds - Are They Worth The Money?

Events where there are contracts (venue leases, sponsorship agreements, etc.) requiring one party or another to be added as an additional insured to your policy are considered common and effective methods for that party to protect itself from the liabilities created by your actions. You’re the one “in the spotlight” and most likely to create the claim. Therefore, it appears reasonable that you should bear the primary responsibility for avoiding such liabilities – or, in the event those efforts fail, to be the primary provider of defense and insurance coverage for the claims. But although such provisions may be common, whether they are also effective is another matter.

To make certain the contract language requirements are going to be met, at least in part, by your insurance coverage, now is the time to talk to us and review responsibilities. We'll want to see a copy of your contracts and venue rental agreements to see what liability you are assuming. You'll also want your legal advisor to review all contracts before they are signed.

Too often gaps in coverage are discovered only after the event is over and a claim is filed. At that point it's too late to discover you’ve agreed by contract to something that is either uninsurable – or, even more depressing - was easily insurable if only you had told us about it. It’s better to know prior to risking your hard-earned assets.

Your attorneys can also help you draft appropriate language to utilize in your own requests to others to be added as an additional insured under their policies. After all, successfully getting the other party to take on the broadest possible responsibilities to protect you is a prudent risk management strategy. But if the protection is needed and neither they nor their insurance carrier are capable of responding, all of that liability falls right back in your lap. Talk with your legal advisers. Then call us.

Here are our 3 rules for prudent additional insured risk management:

1. Make sure you list everyone you are contractually required to. As stated above, you will have a gap in coverage if you fail to do this.

Example: you sign a title sponsor agreement with "Great Beer" that requires you to name Great Beer as additional insured and hold them harmless from all claims - not an uncommon scenario. You fail to do this and someone is injured at your event. Obviously, because Great Beer's name was plastered everywhere, they are also named in the lawsuit, even though they had no involvement in the claim. Now Great Beer is looking to you to hire attorneys for them and defend them in court. You turn around and look to your insurance company for protection. But because Great Beer was not an additional insured on your policy, that protection is not forthcoming and you'll probably have to foot Great Beer's legal bill yourself. (This example is oversimplification of a complex issue and if your policy has contractual liability coverage, you may or may not have to come out of pocket initially for their legal bill. But the moral of the story is clear; read your contracts and comply with all requirements.)

2. Don't list anyone unless contractually required. The more people you have named on your policy, the more people you have to share your policy limit with in case of a claim! Think about it. You might think you are being a good guy by listing any and everyone on your policy, but you risk financial suicide. Your policy limit is per occurrence, not per additional insured. In a worst case scenario you could easily find yourself with an inadequate policy limit simply because you listed someone you did not have to list and they are using some of your policy limit that you desperately need. In this scenario, you would have to come out-of-pocket for any judgment/settlement amount over your share of the policy limit.

3. Make sure you get named as Additional Insured every chance you get.

In every single situation where you have sub-contractors or where you have contract negotiating power with others, make certain there is wording requiring the other party to name you as additional insured and to hold you harmless. And make certain you obtain a certificate of insurance from them showing that you have indeed been named as additional insured on their policy. We'll be happy to review these certificates to make certain they are adequate.

At a minimum, anyone you name as additional insured on your policy should also name you as additional insured on their policy. This may not be possible when dealing with the site/venue, but should apply to everyone else.