Introduction
Additional insured requirements are among the most requested – yet frequently misunderstood – provisions in commercial contracts. Whether your company is a landlord requiring a tenant to name it as an additional insured, a general contractor flowing down insurance obligations to subcontractors, or a vendor agreeing to add a client to its policy, the stakes are significant and yet, often ignored. Additional insured provisions are typically an afterthought, and boilerplate language is usually carried over from one contract to another with little contemplation.
A failure to properly document and manage additional insured obligations, either as the party requesting additional insured protection, or as the party required to provide it, can leave your organization exposed to unexpected risks, such as uninsured losses, coverage disputes with carriers, liabilities for breach of contract, and/or defense and indemnity costs for failing to comply with specific insurance requirements.
Recently, we have seen numerous issues involving disputes arising from a business counterparty’s failure to comply with insurance requirements. It is difficult enough for an additional insured to obtain coverage under a counterparty’s insurance given insurance company reluctance to provide coverage to a “stranger” to the insurance contract, but a failure to obtain the required coverage in the first instance compounds this problem for both sides of the relationship. These disputes have involved not just the failure to have a counterparty added as an additional insured, although those situations occur with frequency, but also situations where the counterparty procured a policy with inappropriate additional insured endorsements, exclusions that attempt to preclude coverage for the counterparty’s work, and/or inadequate limits. In every case, this has led to unnecessary disputes.
This article provides a practical overview of how to approach additional insured requirements from both sides of the equation: Ensuring your counterparties comply with their insurance obligations to you, and ensuring your own organization meets its contractual commitments to others.
What is an additional insured?
An additional insured is a person or entity that is added to another party’s insurance policy – typically a commercial general liability (CGL) policy – and thereby gains certain rights under that policy, even though it did not purchase the coverage itself. In general, an additional insured must be treated as a separate insured under the policy, but its rights may be limited in several respects.
The purpose of an additional insured requirement in general is to allocate risk: The party requiring additional insured status seeks to shift the financial burden of potential claims arising out of the contractual relationship to the other party’s insurer, and away from itself and its own insurance program. In many cases, in addition to requiring additional insured status, the party will also seek to require its counterparty to provide indemnification against certain claims or losses, and these indemnification provisions must also be carefully considered and managed.
An additional insured does not always have the same rights as a named insured. For example, a named insured may have the right to receive notice of cancellation and to make changes to the policy, whereas an additional insured’s rights may depend heavily on the language of the endorsement used to add it to the policy. Gaining an understanding of the scope of coverage provided is something that should happen before an occurrence that might give rise to a claim.
Why additional insured requirements matter
The consequences of failing to comply with contractual insurance requirements or to obtain the protection you contracted for can be substantial. If your contract requires a counterparty to name you as an additional insured, for instance, and the counterparty fails to do so, you may find yourself without the expected layer of protection when a third-party claim arises. Instead of having insurance protection, you might be limited to whatever indemnification obligation the counterparty agreed to provide and/or a claim for breach of contract against the counterparty. Even if the counterparty does include you as an additional insured, the additional insured protection may still not be commensurate with what the contract required. Those situations can be equally dire.
Likewise, if your organization has agreed to add another party as an additional insured and fails to follow through, it may face breach of contract claims, indemnification obligations, and potential liability for the other party’s uninsured losses. In either case, the gap is often discovered only at the worst possible time – after an incident has occurred.
Ensuring counterparty compliance is critical
Drafting clear and specific contract language
The first and most critical step to ensure compliance is to make sure contract provisions are drafted in a clear and specific way, so that the requirements are understood by both sides and other involved parties, such as insurance brokers. Vague statements such as “Contractor shall maintain adequate insurance” invite disputes and leave room for problems down the road. Effective contract provisions should, at a minimum, address the following:
First, the contract should expressly state which policies must include additional insured coverage. In most cases, this will include the counterparty’s CGL policy and, in building leases, property insurance, but depending on the nature of the relationship, it may also extend to automobile liability, umbrella or excess liability, and, in some circumstances, professional liability or pollution liability policies. The contract should also specify the minimum limits of liability required for each policy and should make clear that the additional insured requirement applies to each such policy. Deductibles and/or self-insured retentions should also be addressed in the contract – making clear that a self-insured retention still complies with the obligation to provide additional insured coverage.
Second, the parties should determine the type of additional insured endorsement required. The additional insured endorsement will set forth the scope of coverage afforded to the additional insured and, therefore, matters enormously. There is a wide range of endorsement forms in the market, and not all provide the same scope of coverage. Some endorsements limit coverage to liability arising out of the named insured’s “ongoing operations,” while others extend coverage to “completed operations” as well. Some endorsements further restrict coverage to liability caused, in whole or in part, by the acts or omissions of the named insured, while others provide broader coverage. Your contract should specify the form of endorsement required or, at a minimum, describe the scope of coverage the endorsement must provide.
Third, the contract should require that the counterparty’s insurance be primary and non-contributory with respect to the additional insured’s own policies. Without this language, the additional insured may find that its own insurance is called upon to respond first or to contribute on an equal basis with the counterparty’s coverage, undermining the purpose of the additional insured requirement.
Fourth, the contract should include a waiver of subrogation provision. This prevents the counterparty’s insurer from seeking reimbursement from the additional insured after paying a claim. Without a waiver of subrogation, the additional insured may ultimately bear the financial burden of a claim that the counterparty’s insurance was supposed to cover.
Requiring certificates of insurance, additional insured endorsements, and copies of policies
A certificate of insurance (COI) is a summary document issued by the counterparty’s insurance broker that provides a snapshot of the counterparty’s coverage. While COIs are a useful tool for tracking compliance, they have significant limitations. Most COIs contain disclaimer language stating that the certificate is issued as a matter of information only and confers no rights upon the certificate holder. Courts have generally upheld this language, meaning that a COI alone may not be sufficient proof that additional insured coverage is actually in place.
Moreover, COIs are often prepared by clerks at brokerage firms and may not accurately report the true coverages provided by the policy and so could be misleading to the party intended to be named an additional insured. If the coverage is misreported on the COI, there may be little recourse if a claim arises and the coverage actually obtained is not what was represented in the COI.
For these reasons, the best practice is to require the counterparty to provide not only a COI but also copies of the additional insured endorsements and, where feasible, the relevant policy declarations pages, and even the policies themselves. Such documentation requirements should be spelled out in the contract to avoid any dispute as to what information the counterparty must provide. Reviewing the documentation is the only reliable way to confirm the scope of additional insured coverage matches what the contract requires, including the scope of coverage and the adequacy of coverage limits.
Implementing a compliance tracking system
Tracking compliance by counterparties is critical but often overlooked. For organizations that manage a large volume of contracts (such as property owners, general contractors, and large corporations with extensive vendor networks), manual tracking of compliance with contractual insurance requirements is impractical. Many organizations use dedicated insurance tracking software or third-party compliance services that automate the process of collecting COIs, flagging deficiencies, and sending notices to counterparties when their coverage lapses or fails to meet contractual requirements. Investing in a robust compliance tracking system can dramatically reduce the risk of discovering a gap in coverage after a loss has occurred.
For important contracts, especially those that might give rise to substantial liabilities, engaging an expert to conduct a thorough compliance review should be considered.
Addressing non-compliance promptly
When a counterparty fails to provide the required insurance documentation or when a review reveals that the coverage does not meet contractual standards, it is important to address the issue promptly. The contract should include provisions that give your organization the right to take specific actions in the event of non-compliance, such as withholding payment, debiting the counterparty’s account, suspending the counterparty’s performance, or procuring the required insurance at the counterparty’s expense. Exercise of these rights, combined with written notice to the counterparty identifying the specific deficiency, sends a clear message that insurance compliance is taken seriously and is not merely a formality.
Ensuring your own compliance with additional insured obligations
Evaluating whether requests can be fulfilled
When negotiating contracts and fielding requests from counterparties to provide additional insured protection, it is necessary to determine whether what the counterparty is requesting can be provided. Certain types of insurance do not permit additional insureds, or provide only limited protection; your organization’s policy limits might not meet the requested coverage amounts; or your organization might be self-insured for certain risks. Those within the organization negotiating contracts with additional insured requirements need to consult with others familiar with the organization’s insurance profile before signing a deal.
Understanding your contractual commitments
Once an agreement is made, the organization must ensure the requirements are properly implemented. It is critical to carefully review the insurance provisions of every contract your organization enters into. Ideally, the organization should also maintain a centralized record of all additional insured obligations. This record should identify the party to be added, the policies to which it must be added, the required scope of coverage, and any special requirements, such as primary and non-contributory status or waiver of subrogation.
Failure to comply with such requirements can lead to difficult legal issues, including litigation between business partners and the termination of such relationships.
Coordinating with your insurance broker and carrier
Once you have identified your additional insured obligations and confirmed they can be met, the next step is to coordinate with your insurance broker to ensure that the required endorsements are obtained and other requirements are complied with, such as required coverage limits. Your broker can work with your carriers to issue the appropriate endorsements and can advise you on whether your current policy is capable of accommodating the specific requirements of each contract. It is important to communicate the details of each additional insured request clearly and promptly to your broker, including the exact name of the party to be added, the contract or project to which the requirement relates, and any specific endorsement forms or coverage terms required by the contract.
Some CGL policies include a “blanket additional insured” endorsement that automatically extends additional insured status to any party with whom the named insured has a written contract requiring such coverage. If your policy includes such an endorsement, it may satisfy many of your additional insured obligations without the need to issue individual endorsements for each counterparty. However, blanket endorsements vary in scope, and it is important to review the endorsement language carefully to confirm it meets the specific requirements of each contract. In some cases, a blanket endorsement may not provide completed operations coverage or may contain other limitations that fall short of what the contract requires.
Providing timely documentation
Once the required endorsements are in place, your organization should promptly provide the counterparty with the requested documentation, including COIs, copies of additional insured endorsements, and any other documentation specified in the contract. Delays in providing documentation can create friction in the relationship with the business partner. Establishing an internal process for responding to insurance documentation requests – including designating a point of contact and setting target response times – can help ensure that your organization meets its obligations efficiently. These arrangements can be worked out with your broker, and many brokers have specific processes in place to field and respond to requests for insurance information.
As noted above, we have seen situations where COIs prepared by brokers contain incorrect information, so it may be a good practice to at least review a certain number of COIs prepared by your broker for accuracy before turning over the entire process to the broker sight unseen.
Monitoring and renewing coverage
Additional insured obligations do not end when the initial documentation is provided. Insurance policies are typically issued on an annual basis, and specific endorsements must be renewed each year. If your organization’s policy renews and the additional insured endorsement is not carried forward, the counterparty’s coverage may lapse without either party’s knowledge. Your organization should implement a process for reviewing additional insured obligations at each policy renewal and for confirming that all required endorsements remain in effect. Similarly, if your organization changes carriers or restructures its insurance program, it should ensure that all existing additional insured obligations are addressed under the new program.
We have seen instances where the insured changed carriers at policy renewal and this change led to a serious lapse in coverage for an additional insured that only came to light after an event occurred that gave rise to a claim.
Common pitfalls and how to avoid them
One of the most frequent pitfalls in the additional insured context is the assumption that a COI is equivalent to actual coverage. As discussed above, a COI is an informational document and does not, by itself, create or modify coverage. In addition, COIs sometimes contain inaccurate information that might lead a counterparty to believe they are protected, or protected at a certain level, when that may not be the case. Organizations should resist the temptation to treat the receipt of a COI as the end of the compliance review process and should instead insist on reviewing the underlying endorsement language, policy declarations, and even the complete policy.
Another common issue arises from the use of outdated or overly narrow endorsement forms. The insurance industry has revised its standard additional insured endorsement forms multiple times over the years, and each revision has generally narrowed the scope of coverage provided. Organizations should be aware of the differences between endorsement editions and should specify in their contracts which edition or scope of coverage is required. Of course, the best practice is to review the actual wording of the endorsement being provided to make sure it provides appropriate protection.
A third pitfall involves the interplay between additional insured coverage and indemnification provisions. In many contracts, the insurance provisions and the indemnification provisions are drafted independently, and the two may not align. For example, a contract may require the counterparty to indemnify the additional insured for all claims arising out of the counterparty’s work, but the additional insured endorsement may limit coverage to claims caused by the counterparty’s negligence. Ensuring that the insurance provisions and the indemnification provisions are drafted in harmony is important to avoid gaps in protection. The party agreeing to provide additional insured protection and indemnification will want the insurance to be the main source of protection for the counterparty and not indemnification.
Finally, organizations should be aware of the impact of anti-indemnity statutes, which exist in many states and limit the enforceability of certain indemnification and additional insured provisions. These statutes vary significantly from state to state, and a provision that is enforceable in one jurisdiction may be void or unenforceable in another. Contracts with additional insured requirements should be reviewed for compliance with the applicable anti-indemnity statute in each relevant jurisdiction.
Conclusion
Additional insured requirements are a critical component of the risk allocation framework in commercial contracts. By drafting clear and specific insurance provisions, diligently tracking counterparty compliance, and maintaining a disciplined approach to your own insurance obligations, your organization can significantly reduce the risk of coverage gaps and disputes. Given the complexity of the insurance landscape and the high stakes involved, organizations are well advised to involve experienced legal counsel and insurance professionals in the drafting, negotiation, and administration of additional insured provisions. The time and resources invested in getting these provisions right on the front end will pay dividends when a claim arises and the insurance program is called upon to perform as intended.
Client Alert 2026-95