It’s the Law

How to wade through insurance-ese
By KEN GORMAN and BRAD SULLIVAN
What does it really mean to be insured?
Named insured, additional insured and additional named insured.
Though the three phrases are strikingly similar, they have
different meanings that can significantly affect the types and
amount of coverage available.
How to wade through insurance-ese

By KEN GORMAN and BRAD SULLIVAN

What does it really mean to be insured?

Named insured, additional insured and additional named insured. Though the three phrases are strikingly similar, they have different meanings that can significantly affect the types and amount of coverage available.

Most insurance policies define these terms but you have to slog through dozens of pages to find them and then try to understand insurance-ese. Insurance policies in California have been starting to evolve into “plain English” as directed by the Legislature, but the evolution has been gradual as illustrated by one of the authors’ favorite insurance industry quotes, “We are now writing our policies to eschew obfuscation.”

  A layperson should take solace if confused because even the insurance industry has trouble explaining. A couple of the online insurance industry glossaries say, “the term additional named insured has not acquired a uniformly agreed-upon meaning within the insurance industry and use of the term in different senses often produces confusion and requests for additional insured status between contracting parties.

We will try to clarify.

Named insured

This one is easy. This is the person(s) or business(es) actually named in the policy, usually on the first page and the Declarations page, as “named insured.” There can be more than one named insured. For example, on an automobile policy, typically a husband and wife and perhaps children are named insureds. In the case of a business, usually the business is the only named insured, but the owners or subsidiaries are often also “named insureds.” “Named insureds” are the persons or entities that have the broadest protection in terms of coverage and indemnity under the policy. They choose coverage types and amounts, get the premium notice, notices of cancellation, etc., they are responsible for payment of premiums.

Additional insureds

Because the industry has decided to adopt the phrase “additional insured” instead of something like “other insured” it is perhaps easier to understand by contrasting it with an example of “unnamed” additional insured. In California, automobile policies by law provide liability coverage to all licensed drivers who drive an insured vehicle with the consent of the owner. When someone loans a car to their friend, the friend is covered even though the friend is not named in any part of the policy. (But the policy owner, not the friend, has the obligation to report the accident).

“Additional insured,” or “AI,” usually refers to a person or entity added to the policy by an “endorsement.” Endorsements typically provide coverage to the people/businesses named on them only for claims arising out of the acts or omissions of the primary insureds. Additional insureds are not obligated to pay premiums and typically do not receive notices of policy changes or cancellations.

An “additional insured” is more common in commercial general liability (CGL) policies. Perhaps the most common application is in construction contracts, where the general contractor requires all of the subs’ to name it on their policies, and the general becomes a “named” additional insured. This is usually done by an addendum to the insurance contract or by a Certificate of Insurance. Some insurance policies automatically provide additional insurance status to parties when required from the Named Insured in a written contract, agreement, or permit.

Additional named insured (and named additional Insureds)

These phrases mean people or businesses named in the policy someplace other than the declarations page who have the same rights as the “named insureds.”

A better way to think of this denomination is by taking the first word out of either title.  That is, an (additional) named insured or a (named) additional insured. 

The additional named insured usually does not have to bear any of the paperwork and typically are not responsible for the premium, however, they are entitled to notice of policy changes and cancellations. They have the same coverage as the “named insureds” but share the policy limits. Usually an “additional Named Insured” is an affiliate, partner or co-owner of the primary insured. 

Are there any practical differences?

Between a named insured and an additional named insured, no. 

Each is entitled to full benefits of the policy. The difference between them and a named additional insured is not because of the name, but because of the terms of the endorsement. 

Typically the endorsement limits the coverage for claims made against the named additional insureds stemming from claims made against the primary insured. They do not have coverage for claims against them which aren’t related to claims against the primary insured. An additional named insured is covered for claims regardless of whether the primary insured is named.