Do you have risk protection from the companies and sub-contractors that are helping you get the job done?
As a contractor you are often working with other businesses and sub-contracting work for different services. It is important that when conducting your business in such a way you are protected as an additional insured.
When you add another entity as an additional insured on your policy you are protecting that entity from your company’s negligence. Likewise, if you are added as additional insured on another entity’s policy you will be protected from their negligence.
Let’s break it down in an example:
You run an electrical company called Electricity Central. Maximum Builders has contracted with you to do all the electrical wiring in a new restaurant building. The contract requires you add Maximum Builders as an additional insured, so you do. An exposed wire coming from a light fixture electrically shocks a visitor. The visitor sues you and Maximum Builders. Your insurance would cover Maximum Builders as an additional insured.
Now, using the same example above, let’s consider this possibility. Your company sub-contracted installing the light fixtures to Bright Lights. Your contract requires them to add Electricity Central as an additional insured. The exposed wire shocks a visitor and they sue Electricity Central and Bright Lights. Bright Lights would cover your company as an additional insured.
It is important to note that insured status must be added by endorsement. You must make sure to verify that the entities you work with have followed through the formal process of adding you as an additional insured. Request to see the actual endorsement, not just proof of insurance.
Additional insured status does not give the same coverage and rights to the additional insured that the named insured holds. It also does not mean that the additional insured does not need their own insurance. Additional insured policies help protect you from others’ negligence, but they do not take the place of your own insurance policies.
It should also be noted that most general liability policies for contractors include a provision that requires them to be named as additional insureds on all subcontractor or independent contractor policies whom they subcontract work to.