An additional insured endorsement is a document prepared by an insurance company that indicates that another party, other than the primary insured that purchased the insurance policy, is also protected by the insurer. The endorsement usually has some limitations specified, but essentially provides insurance protection to the other party, called an “additional insured.” The rights of the additional insured are, subject to some specific exclusions, virtually the same as the party that purchased the insurance. The additional insured has an entire layer of “free insurance.”
The value of the additional insured endorsement cannot be understated. If the two parties have a contract, whereby one party (the indemitee) must indemnify the other (the indemnitor) pursuant to the contract, generally these “ indemnity clauses” are only triggered under specific circumstances. Further, they may not be deemed valid until much later in the litigation, when there has been some adjudication of the indemnitee’s responsibility. The indemnitor may be forced to defend himself, or through his own insurance policy, until the time when the determination is made.
The additional insured endorsement, however, is not an agreement between the contracting parties—it is a separate agreement between the indemnitor and the indemnitee’s insurance carrier. The insurance carrier must defend the indemnitor from claims that may potentially be covered under the indemnitee’s insurance policy—a much broader standard that only requires an allegation that may be covered, as opposed to a determination of fault and responsibility.
As a result, contracting parties are well advised to always attempt to secure an additional insured endorsement, which provides significantly more protection that a contractual indemnity clause.