By Rabih Hamawi, CPCU®, CIC, CRM, LIC, MSF
Copyright © 2024 Rabih Hamawi
This topic may sound simple, but like many insurance topics, it has a few wrinkles. Naturally, the question begins with what “insured” means in a policy, and why is it important.
The first step in the analysis is to review the Declarations Page (or formally known as the Common Policy Declarations) to determine who is the Named Insured.¹ The Common Policy Declarations usually contains the following information:
1. Named Insured;
2. Mailing Address;
3. Policy Period;
4. Description of Premises;
5. Premium for Coverage Parts; and
6. Forms Applicable.
Named Insured. It is the person or entity who owns or holds the policy. Generally, the policy will usually speak in terms of the “Named Insured” shown or named in the
Declarations. So, it is important to correctly identify and list the Named Insured. The policy may also include an introductory paragraph or a definition section, which may include additional persons or entities as Named Insureds by definition, meaning automatically.
When a policy lists multiple Named Insureds, the first Named Insured enjoys additional rights and owes additional obligations. For example, the first Named Insured is the only person or entity who is authorized to cancel the policy and to receive notice of cancellation. This means that when multiple insureds are named on the Declarations, only the first Named Insured will be authorized to cancel the policy or receive notice of cancellation.
Likewise, the first Named Insured is the only person who is authorized to request changes to the terms of the policy. Of course, all change requests are subject to the insurer’s consent.
The first Named Insured is also responsible for the payment of all premiums and is also the only person or entity who can receive return premiums.
Described Insured. What is a “described insured”? It is not a legally recognized term. Although some insurance agents, adjusters, or even attorneys may use it, you won’t find it in any treatises or cases. “Named Insured” is a term of art, with a definite meaning. The term “Described insured” shouldn’t be used; but for our purposes, when used, it is merely a way of explaining that the category of Named Insured can include several persons who are not named in the Declarations. Somewhere in the policy there will be a section with a title like “Who Is An Insured,” which will include a list of persons or entities who are considered insureds on a par with the Named Insured.
The list is usually a long one, but for the most part, it is a matter of common sense and focuses on the relationship between the Named Insured and those handling its affairs. For instance, if the Named Insured is a person, the spouse will also be considered an insured. If the Named Insured is a partnership, then each partner is also an insured, if the claim relates to the partnership’s business. If the Named Insured is a limited liability company, then the members are insureds. If the Named Insured is a corporation, then the executive officers and directors are insureds; and the stockholders as well with respect to any liability they may incur as stockholders. The list goes on to include employees for acts within the scope of their duties for the Named Insured.
Additional Insured. This is a term of art, like Named Insured. It connotes someone who is made an insured by virtue of an endorsement, which is an amendment to an existing insurance policy that changes its terms. Some may erroneously think it can happen by means of a certificate of insurance, but that is a topic for another day. For now, let’s accept that only an endorsement can make someone an Additional Insured. A common endorsement is “Blanket Additional Insured Endorsement,” or some other endorsement depending on the nature of the relationship between the first Named Insured and the Additional Insured. Regardless, the important point here is that the Additional Insured status comes with three main limitations that don’t apply to first Named Insureds.
First, generally, in a commercial general liability policy, the Additional Insured is an insured only with respect to work that the Named Insured does for the additional insured or work done for the additional insured by someone acting on behalf of the Named Insured. The common formulation is:
That person or organization is only an additional insured with respect to liability arising out of “your work” for that additional insured by or for you.
Remember, generally, “you” means the person or entity named in the Declarations.
This is a significant limitation. For example, if the Named Insured is a subcontractor and the additional insured is the general contractor, then the general contractor can be an additional insured if it incurs liability because of something the subcontractor did. Those last two words, “for you,” would embrace something the Named Insured-subcontractor might have contracted out to a sub-subcontractor. In other words, the additional insured has no coverage for its own actions.
The second limitation is in the amount of coverage. If the additional insured is covered because a contract between the Named Insured and the additional insured requires it, then the coverage amount will usually be the lesser of what the policy provides or what the underlying contract required.
The third limitation falls into the category of “other insurance.” In our hypothetical, the additional insured is the general contractor, and usually, it has its own policy. If both policies apply or provide coverage for a claim, then how do they apply, and what is the mathematical formula for their respective shares? Well, it depends on the language in the “other insurance” clause.²
Additional Named Insured. Returning to the theme of this article, this last group is not a real one at all. In terms of how many rights the insured has under the policy, there are really only two categories: named insureds (which includes the “described insureds”), and additional insureds. Calling any person an “additional named insured” is not helpful, and undoubtedly confusing, because it doesn’t have any discrete meaning, and leaves the question open as to whether the person or entity is a named insured or an additional insured, the only two real categories.
There are named insured endorsements, which essentially states that “John Smith is added as a named insured under the policy.” In that case, John is a named insured. It doesn’t matter whether he got there by way of the Declarations or an endorsement. Calling him an “additional named insured” will only confuse his status.
About the Author
Rabih Hamawi is the immediate past chairperson of the Insurance and Indemnity Law Section. He is a principal at the Law Office of Rabih Hamawi, P.C. and focuses on representing policyholders in fire, property damage, and insurance-coverage disputes with insurers and in errors-and-omissions cases against insurance agents. He has extensive expertise in insurance coverage and is a licensed property and casualty, life, accident, and health insurance producer and counselor (LIC). He earned the Chartered Property and Casualty Underwriter (CPCU), Certified Insurance Counselor (CIC), and Certified Risk Manager (CRM) designations. He is a frequent author on insurance and indemnity topics. His email address is rh@hamawilaw.com
Endnotes
1. This article discusses the Insurance Services Office, Inc’s (ISO) forms. Some insurers may use their own policy forms, which may differ from ISO’s forms.
2. Check my Other Insurance Clause article, published in The Journal of Insurance and Indemnity Law State Bar of Michigan Volume 10 Number 2 April 2017. https://www.hamawilaw.com/post/other-insurance-clauses-in-property-and-liability-insurance-policies
If your insurance company has denied, delayed, or underpaid your insurance claim, contact Law Office of Rabih Hamawi for a case evaluation at (248) 905-1133 or www.hamawilaw.com.
Who is Rabih Hamawi?
Attorney & Counselor
Rabih Hamawi is a principal at the Law Office of Rabih Hamawi, P.C. and focuses his practice on representing policyholders in fire, property damage, and insurance-coverage disputes against insurance companies and in errors-and-omissions cases against insurance agents. He may be reached at (248) 905-1133.