Naming your client as an additional insured

Toll Free (866)262-7542

PROGRAMS

ACCOUNTANTS

INVESTMENT ADVISOR

BOOKKEEPERS/TAX PREPARERS

DIRECTORS & OFFICERS LIABILITY

CLIENT RESOURCES

Testimonials

NAPLIA is a tireless advocate for our firm. They are very responsive to phone calls and inquiries about policy coverage. So I never have to wait in the dark. Overall, NAPLIA makes this a surprisingly enjoyable process and I look forward to my periodic phone conversations.

Naming Your Client as an Additional Insured

You may have clients that request you include them as an additional named insured on your professional liability policy. They believe that being included as a named insured or additional insured, provides them further protection should a claim arise.

This may be true for some forms of insurance, but it can be exactly the opposite for professional liability polices.

Common Contractual Insurance Requests:

Naming your client as an additional named insured
Requiring that you carry high limits of liability
Requesting that you take on contractual risk, or indemnification beyond the scope of your exposure

Unlike other types of insurance, your Professional Liability policy does not make payments to the insured (you). Instead, the Professional Liability policy pays on behalf of the insured in the event that insured's negligence in rendering professional services results in damages. Your client, in most cases, is not rendering professional services, and therefore, does not assume the risks that your professional liability policy is designed to cover.

Further, by naming your client as an additional insured, you are actually eliminating their ability to file a suit against you for any errors or omissions. Professional liability policies tend to have an exclusion prohibiting an insured filing a suit against itself to recover damages.

Should you have a client that requires you to name them as an additional insured on your professional liability policy, this may be a carry-over from their standard contract wording that is really intended for commercial general liability policies. You should go back to them and discuss the provisions based on the above information. This approach will provide a better service to you and your client.

Other contractual provisions you should review include;

Requiring extremely high limits of liability - Again, sometimes your client will hand you a "boilerplate" contract that requires you to carry a very high limit of liability. A prudent underwriter will be reluctant to provide you with a limit of liability that is not inline with your true exposure (consider if you requested to insure your $20,000 car for $50,000). Discuss this limit with your Naplia representative to see if it is in line with industry standards. In most cases, we see clients being flexible when you go back to discuss these terms.

Requiring coverage for contractual risks - Your professional liability policy will generally exclude exposure that you take on contractually that you would under normal practices not be liable for. Be aware of contractual liability contract provisions and again, be proactive in discussing these with a client.

Requesting indemnification - Another form of contractual liability may be a broad indemnity provision that goes beyond the coverage of your professional liability policy. Read contract provisions to ensure that you are not indemnifying clients, or contractors from their professional negligence, or that you are not vicariously taking on the coverage of sub-contractors not within your control.