Chapter 1 Definitions and Comparisons of Commonly Used Titles

• Library: The Handbook on Additional Insureds (ABA) (2018 Ed.)

CHAPTER 1 Definitions and Comparisons of Commonly Used Titles

Erika Bright

Insurance policies contain two general categories of insureds: named insureds and additional insureds. Named insureds are entities or individuals specifically listed as insureds in the policy (i.e., those to whom the policy is issued). Additional insureds consist of two categories: "automatic insureds" or "additional insureds." Automatic insureds automatically obtain insured status due to a special relationship with the named insured(s). Additional insureds are often added to another's insurance policy in connection with a business relationship.

Aside from named insured and additional insured status, entities or individuals can sometimes obtain coverage due to their status as the named insured's loss payee or mortgagee. Whereas loss payees and mortgagees are not insureds, they have certain protections under the policy and may receive payment after a loss.

This chapter will explain and compare the commonly used titles of "named insured," "additional named insured," "first named insured," "automatic insured," "additional insured," "loss payee," and "mortgagee." It is necessary to know the differences and similarities between these different types of insureds before fully understanding the implications of additional insured status.

I. Named Insureds

Named insureds are those persons or organizations specifically named in the policy.¹Named insureds may be individuals, corporations, partnerships, joint ventures, or limited liability companies (or any other type of legal entity).

Several different types of policy provisions may provide named insured status. The declarations page lists the primary named insured and may include other named insureds. "Named insured" or "additional named insured" endorsements also may add specific entities and/or individuals as named insureds. Finally, some policies include a broad form named insured endorsement. These endorsements do not identify the exact entities or individuals who qualify for named insured status. Instead, they provide coverage for anyone who satisfies certain requirements. Exhibit 1 is an example of a broad form named insured endorsement.

EXHIBIT 1—BROAD FORM NAMED INSURED ENDORSEMENT
It is agreed that:
Throughout this policy the words "you" and "your" refer to the Named Insured shown in the Declarations and any business entity incorporated or organized under the laws of the United States of America (including any State thereof), its territories or possessions of Canada (including any Province thereof) in which the Named Insured shown in the Declarations owns, during the policy period, an interest of more than 50 percent. If other valid and collectible insurance is available to any business entity covered by this policy solely by reason of ownership by the Named Insured shown in the Declarations in excess of 50 percent, this insurance is excess over the other insurance, whether primary, excess, contingent, or on any other basis.

Two types of named insureds exist in post-1986 editions of Commercial General Liability ("CGL") forms: (1) the "first named insured," and (2) "additional named insureds."² The first named insured—also termed primary named insured—is the "individual or entity whose name appears first in the declarations of an insurance policy."³

Additional named insureds (not to be confused with additional insureds) are all the named insureds other than the first named insured. Although some courts define additional named insured as "a person or entity whose name is specifically added to the policy as an insured after the issuance of the original policy,"⁴ multiple definitions are found throughout the insurance industry. This is because CGL policies do not define the term and there is no standard "additional named insured" endorsement.⁵

A. First Named Insured v. Additional Named Insured

Certain policy provisions create responsibilities and privileges that apply only to the first named insured. When more than one named insured exists, the additional named insureds should consider these provisions in order to protect their interests, particularly as regards the premium, cancellation, and amendment provisions discussed in the following sections.

1. Premium Payments

Before 1986, it was unclear whether additional named insureds could be held responsible for payment of premium. However, an ISO form amendment in 1986 resolved this issue. Policies issued after 1986 now specifically hold the first named insured responsible for paying the premium.

2. Policy Cancellation

The standard CGL cancellation provision states that "[t]he first Named Insured shown in the Declarations may cancel this policy by mailing or delivering to us advance written notice of cancellation."⁶ Thus, when the policy has more than one named insured, cancellation is only effective if done by the "first named insured." Because the first named insured can cancel the policy without the additional named insureds' approval, additional named insureds (and additional insureds) may become uninsured without warning.

3. Amendments to the Policy

Only the "first named insured" may agree to policy changes. Additional named insureds must obtain approval from the "primary named insured" (and the insurer) before modifying the policy. Thus, additional named insureds need to be aware that the policy can change without their approval.

a. "You" and "Your"

Certain policy provisions apply only to named insureds. To locate these provisions, it is helpful to remember that CGL policies also use the terms "you" and "your" to refer to named insureds.⁷ When a CGL policy refers to "insured" it is referring to "named insured" and "additional insureds."

II. Additional Insured Status

Additional Insureds consist of two categories: (1) automatic insureds and (2) individuals or entities who obtain insured status by separate contract.

A. Automatic Insureds

Automatic insureds are individuals or entities who have "insured status," but not named insured status. Standard CGL policies and various endorsements grant automatic insured status.⁸ Automatic insureds usually have a special relationship with the named insured(s). For example, if the named insured is a partnership, its members, partners, and their spouses are also automatic insureds, but only with respect to the conduct of its business. Exhibit 2 is an example of the standard "Who Is An Insured Provision" found in CGL policies.

EXHIBIT 2 SECTION II—WHO IS AN INSURED

1. If you are designated in the Declarations as:

a. An individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner.
b. A partnership or joint venture, you are an insured. Your members, your partners, and their spouses are also insureds, but only with respect to the conduct of your business.
c. A limited liability company, you are an insured. Your members are also insureds, but only with respect to the conduct of your business. Your managers are insureds, but only with respect to their duties as your managers.
d. An organization other than a partnership, joint venture or limited liability company, you are an insured. Your "executive officers" and directors are insureds, but only with respect to their duties as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders.
e. A trust, you are an insured. Your trustees are also insureds, but only with respect to their duties as trustees.

2. Each of the following is also an insured:

a. Your "volunteer workers" only while performing duties related to the conduct of your business, or your "employees," other than either your "executive officers" (if you are an organization other than a partnership, joint venture or limited liability company) or your managers (if you are a limited liability company), but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business. However, none of these "employees" or "volunteer workers" is insureds for:

(1) "Bodily injury" or "personal and advertising injury":

(a) To you, to your partners or members (if you are a partnership or joint venture), to your members (if you are a limited liability company), to a co-"employee" while in the course of his or her employment or performing duties related to the conduct of your business, or to your other "volunteer workers" while performing duties related to the conduct of your business;
(b) To the spouse, child, parent, brother or sister of that co-"employee" or "volunteer worker" as a consequence of Paragraph (1)(a) above;
(c) For which there is any obligation to share damages with or repay someone else who must pay damages because of the injury described in Paragraphs (1)(a) or (b) above; or
(d) Arising out of his or her providing or failing to provide professional health care services.

(2) "Property damage" to property:

(a) Owned, occupied or used by,
(b) Rented to, in the care, custody or control of, or over which physical control is being exercised for any purpose by you, any of your "employees," "volunteer workers," any partner or member (if you are a partnership or joint venture), or any member (if you are a limited liability company).

b. Any person (other than your "employee" or "volunteer worker"), or any organization while

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