Understanding Additional Insured Requirements
In the commercial general liability policy coverage form, there is a section which defines "who is an insured". The entities defined do not include the entities known as "additional insured". It is necessary to add coverage for "additional insureds" either through a modification of the form or more commonly, by attaching a separate endorsement.

There are a number of endorsements developed to add additional insureds so it is important to understand the relationship between the named insured and the additional insured. The additional insured endorsement should limit the coverage to the extent of the relationship between the named and additional insureds (i.e. the work performed or the equipment leased). Restrictions should be placed on the amount and length of coverage being provided by the endorsement so that you are not providing more coverage than intended or required by the contract.

Most contractors are aware that it is common for contracts to require job owners, construction managers, and/or architect/engineers to be included under their general liability policy as additional insureds. Although the requirement is now widely accepted, it should not be taken lightly. There can be legal and financial consequences from including additional insureds under your policy. Additional insureds may be given direct access to the named insured's policy for both defense and settlement. Limits of liability are being shared with additional insureds and any claims paid on behalf of additional insureds, will decrease the aggregate amount available to the named insured and go against the loss experience of the named insured. There should be a legitimate reason why someone would want to be an additional insured on your general liability policy. The requirement should be viewed as an area of negotiation and not a pre-set requirement.

It is important to have your risk management advisor review your contract language in advance of signing so that the additional insured relationship can be determined and the appropriate additional insured form added to the policy. In the case of a contractor overlooking the contractual requirement to add an additional insured to their policy, the insurance carrier will not defend or provide limits to the additional insured, as your commercial general liability form does not apply to the upholding of performance agreements and they would view the omission as a breach of contractual agreement.

In many cases, insurance carriers are now providing "blanket" additional insured endorsements which automatically respond to a number of additional insured relationships on an automatic basis. The intent is not to forego having your contracts reviewed for additional insured language but instead to allow the additional insured status to be triggered by the actual signing of the contract instead of by endorsement to the insurance policy. This is helpful in eliminating the possible omission of an additional insured when required by contract but may not address every additional insured requirement that a contractor encounters. Additional endorsements to your general liability policy may become necessary to meet contractual language even when a blanket additional insured endorsement is in place (i.e. primary additional insured or completed operations coverage).