Insurance 101: You own it, you insure it! Most people understand that when they own something, they must insure it. When people co-own items, however, they often forget to mention this to their insurance agents or carriers and it can leave a HUGE gap in coverage!
Joyce Schuett senior personal lines underwriter, explains if you own something, in whole or in part, it's vital that you're listed as an “insured” on the insurance policy.
When something is co-owned, one party must add it to their insurance policy and list the other co-owner(s) as Additional Insured(s) because they also have ownership. If that co-owned item causes injuries or damages to others, only those parties listed on the insurance policy are protected if they're sued for those injuries or damages.
For example, let's say two brothers co-own a cabin. Brother #1 adds the cabin to his insurance policy, but doesn't list Brother #2 as an Additional Insured. Someone is injured on the property and sues both brothers/owners, however, only Brother #1 is protected because he's the only insured listed on his policy. Brother #2 doesn't have protection and could be personally sued, thereby risking the loss of his home, investments, and other assets.
If that's an Additional Insured, what's an Additional Interest? An Additional Interest is a party who may be INTERESTED that an item is insured, but DOESN'T have any ownership in that item and therefore they CANNOT be listed as an Additional Insured.
For example, a condominium association would have an INTEREST in all unit owners within the complex having insurance. If a unit owner is responsible for causing damage to the main buildings, the association’s insurance shouldn't have to pay for it. A unit owner would list the condominium association as an Additional Interest on their condo policy. The association would receive a copy of the unit owner's policy, as well as notification if the policy cancels. Being listed as an Additional Interest, however, does NOT provide any coverage to the association because the association doesn't own the unit; they simply have an interest in the unit owner having insurance.
The misuse of Additional Insured vs Additional Interest in the insurance industry is sadly much too common. Insureds, agents, and companies often don't understand the differences, don't clarify ownership of items, or don't ask enough questions to confirm that who/what they're adding to an insurance policy will be properly protected.
For instance, one insured can't sue another insured on the same policy so incorrectly adding a party as an Additional Insured could make suing a responsible party impossible.
This example illustrates. A homeowner hires a contractor for a major renovation project and the contractor asks to be listed as an Additional Insured on the homeowner’s policy. The homeowner contacts the agent who sends a request to the insurance company to add the contractor. No one asks any other questions and the change is processed.
The contractor loosely installs a railing on an elevated deck. A friend who's visiting the home leans on the railing, it gives way, and the friend falls and is injured. The homeowner’s insurance carrier covers the injuries under the home liability but then tries to recover appropriate damages from the contractor’s insurance since they were responsible for the loose railing. The contractor, however, can't be sued for damages because of being listed as an Additional Insured on the policy even though the contractor didn't have any ownership in the home and had no right to be an Additional Insured. Instead, the contractor should have been listed as an Additional INTEREST on the policy because the contractor only had an INTEREST in the homeowner carrying insurance.
So anytime someone asks that others be added to a policy, ask questions about who has ownership and why a party should be listed. This will ensure accurate insurance coverage.
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