When it comes to insuring your property as a landlord or condo association, having a comprehensive insurance policy is vital. While a standard insurance policy provides essential coverages, enhancing your insurance policy with various additional interest endorsements can work to make the policy more cohesive and add additional protection for parties that have a financial interest in your risk. In this article, we will explore the significance of incorporating an additional named insured and/or adding specific additional interests such as:
- Additional Named Insured
- Additional Insured (Mortageholder, Property Manager, and Governmental Agency)
- Mortgage holder
- Loss Payee
Additional Named Insured:
Adding an additional named insured extends coverage to individuals or entities who have a financial interest in the property or operation. This could include co-owners, partners, or other parties involved in the business’s management or operations. By including them as an additional named insured under your policy, you provide them with essentially the same coverage as the first named insured, and you protect their interests in the case of liability claims or other covered events related to the business.
As this is a very liberal means of awarding insurance coverage under a policy, there is usually a charge associated with awarding additional named insured status. Additional insured status, on the other hand, awards insured status under certain situations.
Difference Between Additional Insured and Additional Named Insured
Additional insured status is usually requested by a person or entity when the insured has contractually agreed to indemnify the additional insured. This coverage awarded is different than additional named insured coverage because the coverage awarded to an additional insured is limited to the respective coverage as outlined in the specific additional insured endorsement.
Including the mortgage holder as an additional interest on an insurance policy ensures that the lending institution’s financial interest in the property is protected. In the event of a covered loss, insurance proceeds are distributed to both the insured and mortgage holder in a check made out to both parties. This works to address mortgage obligations effectively and safeguard the lender’s financial investment. Listing a mortgage holder could provide coverage to the lender even if the insured violates the insurance contract subject to the conditions of the insurance policy.
A loss payee is a similar endorsement to a mortgage holder clause, however, it typically pertains to insured-owned or leased personal property. With that said, it is becoming more common for a mortgage holder to request to be listed as both a mortgagee and loss payee on a borrower’s insurance policy. A loss payee is typically the lender or lessor that has a financial interest in the property insured. By adding the loss payee, you work to ensure that in the event of a covered property loss, insurance proceeds are payable to both the insured as well as the lender.
This offers protection for both parties and helps fulfill your contractual obligations. It is important to note that under a standard loss payee endorsement (form CP 12 18 10 12), there is no obligation to make a payment to a loss payee if the insured has been denied coverage. Meaning, under a typical loss payee endorsement, the loss payee’s rights are the same as the insured’s rights, no better. Adding a mortgagee as a loss payee in isolation, as opposed to adding them as both a mortgagee and a loss payee could provide inferior coverage to the lender under certain circumstances.
Mortgage holder as Additional Insured
Sometimes, in addition to including a mortgage holder as an additional interest, a mortgage holder may request that they are added as an additional insured for commercial general liability under your policy. This can be accomplished via form CG 20 18 12 19 Additional Insured - Mortgagee, Assignee of Receiver. This adds an additional layer of protection for the lender in insuring that they are considered an insured under the “Who Is An Insured” section of your policy with respect to their liability as mortgagee and arising out of the ownership, maintenance or use of the premises by you.
The coverage afforded to the lender under this situation only applies to the extent permitted by law, and if the status is required by contract or agreement, the insurance afforded will not be any broader that which you are required to provide by the contract or agreement.
Property Manager as Additional Insured
It is good to know that at Honeycomb Insurance, the property manager is already an insured via the “Who Is An Insured” section of the commercial general liability coverage form (form CG 00 01 04 13)! Coverage awarded under the “Who Is An Insured’ section grants insured status based upon their relationship as the property manager of the named insured. Adding a property manager as an additional insured would therefore not be needed and would be considered redundant.
When a property manager is either an insured as defined under the “Who is an Insured” section of the commercial general liability coverage form or listed as an additional insured (form CG 20 11 12 19), coverage is extended to protect the property manager against liability claims arising from their management activities at your property on your behalf. This additional insured status provides peace of mind to both you as the insured and the property manager, ensuring that potential risks and liabilities are adequately covered.
Governmental Agency as Additional Insured
Depending on the nature of your rental property, you may need to consider including a governmental agency as an additional insured on your landlord insurance policy via form (CG 20 13 12 19). If a Landlord has awnings that extend out onto a public sidewalk or street area, or if there is a common interest for easement of an alley, a governmental agency may require that they are named as an additional insured on your policy to protect them from your potential negligence. Including the governmental agency as an additional insured provides the necessary coverage for compliance.
Having the right insurance coverage is crucial to protect your and other’s financial interests. While standard commercial insurance policies provide fundamental protection, correct application and utilization of additional interests can enhance coverage and provide more comprehensive protection.
Consult with an insurance professional to assess your specific needs and determine the most appropriate additional interests to include in your insurance policy. By being proactive and taking steps to enhance your coverage, you can ensure greater peace of mind and effectively safeguard against potential risks and liabilities.