Recently I was contacted by an agent whose insured was participating in a festival. The contract required a certificate of insurance evidencing that the following were additional insureds under the insured’s CGL policy:

  • Tradeshow Company LLC and their direct and indirect parents and subsidiaries, any of their affiliated entities, successors and assigns and any current or future director, officer, employee, partner, member or agent of any of them.
  • Large Metropolitan City and their direct and indirect parents and subsidiaries, any of their affiliated entities, successors and assigns and any current or future director, officer, employee, partner, member or agent of any of them.
  • Giant Holding Company, LLC and their direct and indirect parents and subsidiaries, any of their affiliated entities, successors and assigns and any current or future director, officer, employee, partner, member or agent of any of them.

This reminded me of a COI/AI request I saw several years ago:

“XYZ Catering, Inc. (d/b/a XYZ Creations), ABC Sports & Entertainment LLC, ABC Holdings LP, the DEF Center, their respective principals, members, officials, officers, directors, shareholders, employees, and agents, their respective parent and affiliate companies and their respective Successors or Assigns as now or hereafter may be constituted and the Centennial Authority, the City of Raleigh, North Carolina, the State of North Carolina and their departments, divisions, commissions, and boards and their respective principals, members, officials, officers, directors, shareholders, employees, and agents have been named as additionally insured’s [sic] under said policy with respect to any legal liability arising out of the Licensee’s performance hereunder.”

The insured in the latter instance was a guy with a hot dog cart. They wanted him to name the organizer and essentially everyone else in the state of North Carolina as additional insureds. Talk about dilution of limits and dramatically increasing the potential for getting the carrier involved in a lawsuit against one of essentially hundreds of thousands of AIs.

Yes, this is not uncommon. It’s a ridiculous request, but there is no downside to the immediate upstream party for making the request and, no doubt, their contract requires it. While most AI endorsements today require some liability on the part of the named insured, all that’s required to trigger a defense of potentially countless entities is a lawsuit alleging such liability on the part of the named insured.

In addition, from the standpoint of contractual liability under most CGL policies, the existence of this contract can also trigger coverage for claims involving the contractual assumption of liability where defense is within limits, thus rapidly exhausting policy limits for the named insured.

Of course, it could be worse, like the request to name as an additional insured “The United States of America.”

It’s unfortunate that someone can’t sell hot dogs without giving away insurance coverage.

 

Photo by Tony Fischer Photography

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Bill Wilson

Founder at InsuranceCommentary.com
One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information

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