What does “Additional Insured” mean?

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Shippers want to avoid any financial cost that may occur because of a bodily injury or property damage to a third party caused by or contributed to by a Trucking company who is hauling the Shipper’s goods.

There are three ways for them to accomplish this. The first is to have the Trucking company add the Shipper to the Trucker’s insurance policy as an Additional Insured.

There are 3 levels of “Insured” status: 1) the Named Insured (listed on the Declaration page of the policy and responsible for premium, etc.); 2) Automatic Insured (e.g., employees of the company); and 3) Additional Insureds.

The Trucker’s insurance company cannot seek to recover from an “Insured”, doing so violates the purpose of insurance, and as stated above, an Additional Insured is an “Insured”.

Being named as an Additional Insured on the Trucker’s insurance policy, therefore, prevents the Trucker’s insurance company from trying to recover for any claim caused in whole or in part by an “Insured”, that is, Additional Insured, Shipper.

The second way for the Shipper to avoid any financial cost from a claim of the Trucking company is to require the Trucker to name the Shipper on a Waiver of Subrogation endorsement. The Waiver of Subrogation endorsement on the Trucker’s insurance policy states: “The Transfer of Rights of Recovery Against Others to Us condition does not apply to the person or organization shown in the Schedule (the Shipper) but only to the extent that subrogation is waived prior to the “accident” or the “loss” under a contract with that person or organization“. Which is another way of saying the Trucker’s insurance company can’t try to collect from the Shipper because the Named Insured on the policy has waived the right to subrogate against the Shipper listed on the Waiver of Subrogation.

As you can see, both the Additional Insured designation, and the Waiver of Subrogation, individually prevents the Trucker’s insurance company from trying to recover any monies from the Shipper.

The third way for the Shipper to avoid any financial cost from a loss by the Trucking company is a Primary and Non-Contributory coverage endorsement. Basically what this endorsement does is change the “Other Insurance” condition in the Trucker’s insurance policy to read, “If the person or organization in the above Schedule (the Shipper) under a written contract or agreement with the Insured requires this insurance to be primary and non-contributory, regardless of some of the other provisions in the Other Insurance conditions, this insurance will be primary and non-contributory to any other insurance that the Scheduled person or organization is a Named Insured, with respects to the Insured’s sole negligence.” So the Trucker’s insurance policy is “Primary” and the Shipper’s insurance policy is “Non-Contributory”, i.e. it will not contribute to the payment of the loss.

All three of these ways are subject to a state’s anti-indemnification statutes.

As you read the descriptions of each of the above endorsements, you can see that they are redundant. The Additional Insured endorsement along with the Waiver of Subrogation gives the Shipper the same protection as the Primary and Non-Contributory coverage endorsement, in the event of a loss. Therefore, it is not necessary to have the Primary and Non-Contributory endorsement when the other two are on the policy. Each prevents the Trucker’s insurance policy from trying to collect from the Shipper.

As most insurance companies will allow Additional Insured status as well as add a Waiver of Subrogation to the policy, there are more and more insurance companies reluctant to, or refuse to, also include the Primary and Non-Contributory coverage.

 

Looking for more detail? Call us at (800) 747-6247 or send us an email at contactus@ntlrisk.com.