Bottoms up! Or, said otherwise, let’s start with the bottom line. ON BALANCE, you’d rather be an additional insured on someone else’s liability policy, not an additional named insured. For one, it isn’t even clear what is meant by “additional named insured.” There is a named insured and there is an additional insured. There are also some people who are automatically insured. (Those are employees and other people similarly related to a named insured.)
Look as you will in a commercial general liability (CGL) policy, but you won’t find an “additional named insured.” Search all you want, you won’t find a pre-arranged policy endorsement designating an “additional named insured.” Insurance professionals don’t agree on what one is, though they know what one might be. So, if they don’t know, why do some attorneys and other lease negotiators insist they know? Our guess is that it sounds better than a plain old “additional insured.” After all, “‘when I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’” [Through the Looking Glass, by Lewis Carroll].
There being no standard definition, let’s start with what we do know. When a CGL policy says the “insured,” it means both named insureds and additional insureds. CGL policies have at least one named insured. That’s important because the named insureds after the “first” one don’t have equal standing. The words “you” and “your” in a standard CGL policy refers to named insureds, not additional insureds. That’s important to know because to understand the difference between being a named insured and being an additional insured turns on those two words in the policy – “you” and “your.”
The “first” named insured gets some special benefits. That’s important to know because everyone agrees that an “additional named insured” is “additional,” never the “first” named insured. The special benefits to being the “first” named insured are: (a) it can authorize policy changes, including a cancellation; and (b) it gets notices of cancellation and non-renewal. So, if anyone thinks that being an “additional” named insured means that you’ll get the notices, you’re wrong. It’s also wrong if anyone thinks you’ll know if the policy was changed.
What do the other “named” insureds get that just plain, old “additional insureds” don’t get? They get the right to be liable for repaying the deductible to the carrier. They get the right to have the same duties to the carrier in the event of an occurrence, claim or suite as does the first named insured. They get the right to be bound by representations made to the carrier.
Yes, a named insured (and, by implication, an “additional” named insured) has to comply with stricter claim reporting requirements than does an additional (not named) insured. Also, there are certain policy exclusions, such as some property damage claims, that are excluded from coverage for an additional named insured, but not for a mere additional insured.
There appears to be one benefit extended to an additional named insured that is not extended to an additional insured – its directors, officers, and employees are also covered. That may or may not be important given that very few suits include those individuals and also that any party who is not carrying its own liability insurance “ain’t so smart” (in Ruminations’ humble view).
So, why was the bottom line: “ON BALANCE, you’d rather be an additional insured on someone else’s liability policy, not an additional named insured”? Here’s why: As an “additional named insured,” you get less coverage (yes, you are subject to more exclusions; you become obligated for the deductible (though not the premium, a “privilege reserved to the first named insured”; you undertake enhanced reporting obligations; you don’t get any different notice rights; and, you still have no control whatsoever over the terms of the policy or its early termination. Let’s repeat the very first item in a different way – an “additional” insured has greater coverage than an “additional named insured.”
Have any of us who have ever insisted or fought hard to get someone added as an “additional named insured” ever seen the endorsement that does such a thing? I doubt it. But, if you insist on seeing such an endorsement, expect what is called a “manuscript” endorsement. That’s one written from scratch on an otherwise blank form. What this means is that you have no idea what it is going to say, because it hasn’t yet been written. That being the case, why would anyone think it is better to be an “additional named insured” if there isn’t any such thing in the policy in the first place?
Are there any insurance gurus out there who want to pick a fight? Applications are being accepted at www.retailrealestatelaw.com.