An additional insured endorsement is an amendment to the named insured’s policy, usually the general liability policy, that extends coverage under the terms of the policy to another entity.

“This is usually required in a contract where company A needs to provide insurance coverage to company B, so company B enjoys protection from a new risk that arises out of company A’s conduct or operations,” says Shantih M. Charlton, CIC, CISR, senior account executive at Momentous Insurance Brokerage, Inc.

Smart Business spoke with Charlton about why you need additional insured endorsements from the companies you work with, and why you may need to provide them.

What are some examples of when an additional insured endorsement is needed?

A building owner/landlord may require a tenant to name the owner/landlord as an additional insured on the tenant’s insurance policies. If there is an accident or loss on the rented premises, such as a slip, trip or fall, the tenant’s insurance coverage can respond to the claim.

Another example would be a general contractor requiring subcontractors to name it and the owner as additional insureds on the subcontractor’s policies. Then, the subcontractor’s insurance protects the general contractor and owner if someone sues based on an accident arising from the work of the subcontractor.

Also, product manufacturers may cover its sellers as additional insureds. In these cases, the retailers are better protected from claims arising from products they sell.

How is additional insured status provided?

A certificate and endorsement are both required to provide additional insured status. The carrier needs to issue the endorsement, which is part of the policy. If you receive a certificate stating that additional insured status applies but there is no endorsement attached, request a copy of the actual endorsement or policy wording.

What is the cost to add this endorsement?

It might already be included in the policy premium, or it could cost $100 to $500 extra. The cost of adding an additional insured to a liability insurance policy is generally low, as compared to the costs of the original premium.

If you get a certificate from someone with the additional insured endorsement, do you still need your own insurance?

Yes. Additional insured status doesn’t mean you don’t need insurance. It only means the company receiving the additional insured status has insurance for the other company’s negligence. So if company A is an additional insured on company B’s policy, it is covered if company B’s negligence causes a claim and company A is named in a resulting lawsuit. If that same claim was actually due to company A’s negligence, or if company B’s insurance limits were not adequate, company A would need its own policy to protect its interests.

Is an additional insured endorsement the same thing as a named insured?

No. A named insured is the person designated in the policy as the insured. Additional insured status does not give the same rights under the policy terms as a ‘named insured’ or ‘insured.’

What should you keep in mind when entering into an agreement with another business?

Whenever your business enters into an agreement with another business, follow these general principals:

•  Never assume the other business has liability coverage. Obtain a certificate of insurance or copy of their policy.

•  Review both the contract and endorsement with legal and insurance representatives. Each situation presents unique risks, and contract wording and policy forms can vary greatly.

•  Understand what your additional insured coverage status covers. Consult with your insurance adviser to better understand how this affects your business.

Shantih M. Charlton, CIC, CISR, is a senior account executive at Momentous Insurance Brokerage, Inc. Reach her at (818) 933-9860 or scharlton@mmibi.com.

Blog: Get more information on this and other important insurance topics at the Momentous Insurance blog.

Insights Business Insurance is brought to you by Momentous Insurance Brokerage, Inc.

Published in Los Angeles

In this day and age, insurance is a very important line item for businesses. And you don’t want a broker who is unable to deliver results.

Managing Director David Toth, of Momentous Insurance Brokerage, Inc., says it’s critical for your insurance agent or broker to be familiar with your specific industry. If you make widgets, the broker should have experience with manufacturers. If you’re running a hospital, the broker needs experience in the health care industry.

“Experience and past performance of underwriting the business successfully is key,” he says. “You don’t want to be a guinea pig.”

Smart Business spoke with Toth about how to vet and ensure good service from your insurance broker.

What should you be looking for and asking about when vetting a new agent?

Use the vetting process to make sure you have a broker who understands your business, is responsive and shows flexibility. For example, in the entertainment field, you need special insurance enhancements and carefully crafted policy language to ensure the broadest coverage possible. You also need a broker who is capable of adhering to your wishes — it’s not how the broker wants it, it’s how the client wants it.

Ask for referrals, which most brokers are more than willing to share, rather than depending solely on a firm’s website. Also take time to meet the key people in the firm.

Inquire thoroughly about what insurance markets are available, because the more competition the broker can foster for your insurance, the better your program. In addition, inquire whether people from the brokerage sit on any of the governing boards of the carriers they represent, as this means they have influence on policy decisions and/or claims procedures.

One more point of qualification to ask a new broker is: What limit of errors and omissions insurance do you carry? If the brokerage only carries $1 million, is this enough if a broker’s mistake results in a loss to your business? Keep in mind this is the limit they carry for all clients in the firm.

Are there ways to tell if an agent provides good service?

It depends on whom you ask. Some clients might place responsiveness at the top of the list, while others need to be kept abreast of changes in the industry, including trends with insurance prices. So, for example, is the agent sharing the upcoming changes with the Patient Protection and Affordable Care Act? Has the brokerage advised you that if you’re in California your workers’ compensation rates might increase because of changes with the insurance code? Do you already know that with insurance carriers exiting the California management liability market, those lines could increase dramatically?

Other service concerns are:

•  How does the agent keep you up to date on the claims process? Does he or she regularly follow up?

•  What does the broker do in terms of your premium rates? Is he or she doing all he or she can to obtain the best rates for you?

•  Is the agent delivering the renewal two weeks prior to renewal, or waiting until the last minute? Do you feel as if you are part of the process and have control?

• How available is the agent? If it’s important to you on a Saturday, it should be important to the broker on a Saturday.

How do you know whether to stay with your current broker or to move on?

Loyalty is a great thing, but it doesn’t hurt to have another set of eyes. Ask an independent insurance broker to review your insurance program — usually at no cost — and make sure you don’t have duplicate coverage or coverage gaps, while double-checking for extra benefits and/or cost savings. And if someone else can’t improve upon your insurance policies significantly, it confirms that your current broker is doing a good job.

David Toth is managing director at Momentous Insurance Brokerage, Inc. Reach him at (818) 933-2721 or dtoth@mmibi.com.

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Insights Business Insurance is brought to you by Momentous Insurance Brokerage, Inc.

Published in Los Angeles

General liability policies specifically exclude claims arising from professional services, so any business engaged in such services should consider a professional liability policy to properly protect their business. However, business owners may not realize that not all errors and omissions (E&O) policy forms are created equal and there is no such thing as a “standard” policy. The coverage is highly specialized and it is important to work with a broker who understands your industry and how to tailor such policies to suit your needs.

Smart Business spoke with Steve Rivera, an assistant vice president at Momentous Insurance Brokerage, Inc., who shared some insider tips to help businesses evaluate whether their E&O coverage is protecting them correctly.

What is E&O insurance?

E&O insurance, more commonly referred to as professional liability or malpractice insurance, covers your company, or you individually, in the event that a client holds you responsible for an error or omission in the service you provided, or failed to provide. In addition, E&O insurance can also protect your business from allegations of libel and slander.

Who needs this protection?

Anyone providing a professional service, for example doctors, lawyers, real estate and insurance agents, accountants, software designers, educators, architects, engineers, contractors and consultants.

What is important to look out for?

Making sure that the services you render are covered by the policy. If you are like most businesses, you are constantly evolving and finding new ways to service your existing client base or attract new clients. Have you recently rolled out a new service offering? If so, have you contacted your insurance broker to notify them and asked how it may impact your E&O policy? If not, you are running the risk of operating with a gap in coverage on your E&O policy and could experience unforeseen expenses because of an uncovered claim, which can severely hinder your business or even worse, put you out of business.

How are E&O policies responding to website and social media activities?

If your company has a website or a social media presence, it is important to speak with your broker about adding coverage on your E&O policy for these exposures. Many policies exclude Web-related activities, leaving you unprotected against claims. If your company transacts sales over your company website, you are liable for client information, such as credit card numbers, in the event your website is hacked and personal information is accessed.

Why is it important to know if your defense costs are inside your limit of coverage?

Most E&O policies include coverage for defense costs, which pays for legal and administrative expenses associated with defending a claim, regardless if the suits are baseless or contain merit. The defense costs can be staggering and can erode your policy limit, which may mean that if limits aren’t sufficient, you pay out of pocket. Let’s say, for example, that the total losses to be paid as a result of a covered claim are $1 million in damages and $300,000 defense costs, for a total claim of $1.3 million. If you have a $1 million dollar policy limit, and defense is inside that limit, then $1 million is the most the insurer will pay and anything above that limit is your responsibility. It is advantageous to the policyholder to seek defense costs coverage outside the policy limit, whenever available.

How can you tell if E&O limits are adequate for a business operation?

There are a few ways to do so, including evaluating the company’s revenues and benchmarking against peer institutions. Unfortunately, there is no magic formula and there is no way to predict just how big an E&O claim can be, so the best thing a business owner can do is to work with a broker that specializes in this type of coverage.

Does E&O cover international operations?

More and more businesses are able to service clients all over the world, and it is imperative that their policy’s coverage territory is defined as worldwide. Not all policies will come standard with worldwide coverage.

Steve Rivera, CLCS, is assistant vice president at Momentous Insurance Brokerage, Inc. Reach him at (818) 574-0894 or srivera@mmibi.com.

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Published in Los Angeles