One of the most common policy endorsement requests is to add an additional insured to a commercial general liability (CGL) policy. Parties who add others as additional insureds are sharing their liability insurance with that other entity, and may have to pay an additional premium in order to do so. These endorsements generally promise to defend the additional insured in the event of a claim or suit.
Typically, the insured who controls the work or the property provides the primary insurance, adding the owner or landlord as an additional insured. For example, tenants add building owners as additional insureds; manufacturers add vendors; and subcontractors add contractors or owners.
One relationship that may not be as obvious is that of a facility owner that insists on being added as an additional insured on a temporary occupant’s CGL policy. This doesn’t seem unusual when a seasonal or holiday retail outlet sets up a kiosk or temporary sales site in a mall. But what about civic and social groups that use school or retail areas for fund raisers or meetings? In my community, a newly formed religious group holds services in the high school building. The Scouts, sports booster groups, and various self-health organizations meet in a variety of facilities, from malls to school district buildings and churches.
Questions about whether these not-for-profit organizations—some of which are part of a national association (like the Scouts) and some of which are more loosely organized (like sports boosters)—should have to add the owners of facilities as additional insureds on a liability policy frequently arise. I’ve been on both sides of that fence.
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As an insurance professional I have recommended that building owners always require evidence of CGL insurance and additional insured status from all facility users, temporary and otherwise and regardless of amount of rent. As a member of civic organizations, I have grappled with how the groups can afford the liability insurance premium and possible additional premium for adding an additional insured.
I’ve been trained to think of the worst-case scenario, when a serious injury or damage is caused by something the temporary occupant does. What if the local civic association inadvertently blocks a fire exit with its fundraising display, and people are injured because they cannot exit the facility? Or what if a bystander trips on a power cord that the Scout troop did not appropriately route and secure?
I believe two things: Serious injuries or damage may be rare, but they do occur; and claims are likely to be filed against every conceivable party when such losses happen. This is the business we’re in, and all of us have seen both. Although I empathize with civic groups that think they cannot afford to pay for liability insurance and AI endorsements, we must be realists and understand that having the appropriate coverage and additional insured provision is necessary.
I’m not sure that the owners of facilities can afford not to require additional insured status from every organization that uses their facilities. Do you think not-for-profit groups should be forced to provide AI coverage, or are there situations when it isn’t necessary?
This blog post is meant to provide insights into insurance coverage issues in general, and does not necessarily account for the differences in law and practice in different venues. As such, the opinions expressed within should not be construed as legal advice for the unique circumstances of any particular claim or suit.
