Risk Transfer: Managing Additional Insured Relationships

By Edward A. Schirick, CPCU, CIC, CRM
January 2016

Camp directors may have questions about what it means to be an additional insured on a general liability insurance policy, when to ask a third party for additional insured status in favor of your camp, and when it is appropriate for other entities to have additional insured status on your camp's general liability policy.

Named Insured versus Additional Insured

Each general liability insurance policy Declarations Page has a space designated for the Named Insured. The Named Insured is a person or legal entity such as a corporation or limited liability company who enters into the insurance contract with the insurance company. The first Named Insured on a policy has special significance. This entity controls the policy and is responsible for paying the premium, receiving notices from the insurance company, communicating with other Named Insured's, and is authorized to make changes to the coverage terms.

In contrast, an Additional Insured is a third party with whom the Named Insured has a close business relationship. When additional insured status is provided to another entity, the limits and coverage of your camp general liability policy are extended laterally to the third party. Each additional insured situation is different. Each additional insured endorsement has its own terms and conditions.

Examples of camp business relationships that may generate a request for additional insured status from a third party include:

  • Mortgagees and other lenders
  • Landlords
  • Governmental agencies that manage public land
  • Vendors from whom equipment is leased
  • Organizations such as guides or outfitters who conduct an activity with your campers
  • Owners of saddle animals leased for the summer and kept on the camp premises

Most additional insured status requests are easily understood and managed. Consider the following business relationships.

When a financial institution loans money and takes a mortgage on your camp property, the agreement typically requires the borrower to add the financial institution to the borrower's general liability policy as additional insured. This status is acknowledged by your insurer with an endorsement to your general liability policy.

The most common endorsement used by camp insurance companies to add mortgagees as additional insureds limits the mortgagee's protection to their liability as mortgagee arising out of the ownership, maintenance, or use of the premises by the borrower.

If your camp is a tenant, your lease with the owner/landlord most likely requires additional insured status for the landlord. Once again, the endorsement used by camp insurers to grant this protection limits the coverage to liability arising out of the ownership, maintenance, or use of that part of the premises leased to your camp. These are simple and clear relationships from a risk management standpoint.

A variation of this simple landlord-tenant relationship develops when the tenant wants the camp owner to provide certain services such as food, lifeguards, or facilitating the ropes course program. This complicates the relationship and creates confusion about additional insured requirements.

Under these circumstances the relationship changes and the landlord becomes an independent contractor for the tenant camp in addition to the landlord. Such a relationship brings with it certain operational risks for the landlord and may cause the tenant camp to ask for additional insured status on the camp owner's general liability policy as protection against negligence in the delivery of these services.

Make sure to clearly communicate with your insurance advisors the extent of your business relationship with any party seeking additional insured status on your camp's general liability insurance. In the preceding scenario the insurance underwriter should choose an additional insured endorsement that limits the protection of the additional insured to liability caused by your camp's acts or omissions, or the acts or omission of those acting on your behalf (employees, for example). The additional insured status might be further limited to your ongoing operations (providing food, lifeguards, or facilitating the ropes course), or in connection with the premises you own.

Contracting with an outfitter or guide service to conduct white water rafting activities for your campers creates a business relationship that necessitates the outfitter/guide company to provide your camp with additional insured status on its general liability policy.

There are a couple of complicating issues to be aware of and manage in this relationship. While most camp general liability insurance is somewhat standardized, the general liability insurance policies available to outfitters and guide businesses are not standardized.

Make sure all arrangements are made in writing, clearly spelling out the services the outfitter and/or guide company will be performing for your camp. Don't simply sign an agreement presented by the outfitter. Some negotiation to make sure the agreement properly reflects the reality of the relationship may be needed.

In addition, because of the lack of standardization in the general liability insurance policies available to the company, the contract you sign with the outfitter or guide company should include an additional insured status requirement for your camp, on a primary and noncontributory basis. This means the outfitter and guide's general liability insurance will pay first and not seek any contribution from general liability insurance where your camp is the Named Insured.

Good risk management practice recommends avoiding the exchange of mutual, unqualified, additional insured endorsements. If you don't take the time to manage the relationship in advance and make sure the additional insured requirement is properly aligned, dealing with a subsequent liability claim can be a legal nightmare.

Furthermore, even though you have negotiated additional insured status on other entities' general liability insurance, don't rely on it as your sole protection. Make sure your camp general liability insurance covers the activity you have subcontracted just in case the other entity's insurance doesn't respond or isn't available. Remember, additional insureds only benefit from the scope of the insurance protection the other party has arranged. Sometimes the other entity's policy contains a limitation or an exclusion that might make coverage for your camp unavailable. Or, on occasion, the other party's policy may have been cancelled for nonpayment of premium rendering additional insured status academic.

Proof of Insurance

How would you know if your camp has additional insured status under other entities' general liability insurance? The minimum acceptable proof of insurance and additional insured status is a certificate of liability insurance. The certificates of liability insurance should be requested in advance and received from the other party before the program begins or the user group arrives.

Understanding the certificate of liability insurance can also be a bit challenging. Additional insured status for general liability is often designated by checking a box on the certificate, but this can be hard to find if you are not familiar with the certificate's format. In addition, a notation may be made qualifying the nature of the additional insured status toward the bottom of the certificate under the description of operations. Don't hesitate to refuse the certificate if additional insured status is not shown.

Good risk management practice has evolved and now dictates that, in addition to the certificate of liability insurance, a copy of the actual additional insured endorsement issued by the other organization's policy to your camp's benefit be attached to the certificate, or provided at a later date.

Keep these certificates of liability insurance permanently along with your other valuable insurance documents in the event the information is needed in the future.

If you have any question about the need for additional insured status or locating additional insured status on the certificate of insurance, contact your insurance broker for assistance.

Edward A. Schirick, CPCU, CIC, CRM, is area senior vice president of RPS Bollinger Sports & Leisure in Monticello, New York, where he specializes in arranging insurance coverage and offering risk management advice for camps. Ed is a chartered property casualty underwriter, a certified insurance counselor, and a certified risk manager. He can be reached at 877.794.3113 or Ed_Schirick@ RPSins.com. Visit www.campinsurancepro.com.