Additional Insured , Additional Interest , and Private Events of Members by Michael Berg , President , Berg Insurance Company
We are asked quite often if an association should require a member to provide proof of personal liability insurance when using the clubhouse for a private event . Our answer is , not only should that proof be provided , but the member should also name the association as an additional insured . The argument is that the association already has liability insurance for the space and the member pays assessments , a portion of which were used to purchase the association insurance . Of course , legal counsel should always be contacted , but in our opinion , it is best to protect the entire association from liability when common area is in the control of a single member .
The requirement for an additional insured endorsement can cause problems sometimes , because some personal lines carriers ( i . e . those who handle homeowners , condominium unit owners or renters insurance ) will not offer this endorsement . Most will offer to add the association as an additional interest , but this is not the same thing and doesn ’ t provide the liability protection that the additional insured endorsement does . To understand the difference in the two concepts , it might help if you take out the word “ additional ” and put in the word “ also .”
Additional [ Also ] Insured The additional insured is a party or entity added to an insurance policy and receiving benefit from the liability insurance that the policy provides . The named party is “ also ” an insured . In our industry , the most common use of the endorsement is a contractor naming an association as an additional insured . The association receives the liability protection of the contractor ’ s policy if the contractor does something and the association is brought into the suit . For example , an association hires a painting contractor , who names the association as an additional insured . During the job , paint over-spray damages a nearby car . The owner of the car demands damages paid by the contractor and the association . The association receives a defense from the contractor ’ s carrier , as an additional insured , and the contractor ’ s carrier would pay damages to the vehicle owner .
to maintain a personal insurance policy and the association has a responsibility to police those policies ( something we would not advise , but that ’ s a different discussion ). Using the example above involving a painter , if an association were added as an additional interest , the association would need to use its own liability insurance for defense of the allegation .
It is not uncommon for a personal lines insurance carrier to deny the addition of an additional insured . The carrier is worried that by accepting the request it is opening up the potential to receive liability claims that have nothing to do with its insured . The claims wouldn ’ t go far , but the carrier would have to spend money to close the matter and it is money they don ’ t want to be required to spend .
For the association members that have trouble obtaining the endorsement through their personal insurance carrier , there are a number of on-line resources for the purchase of single-day or short-term liability insurance . We have routinely pointed members to www . privateeventinsurance . com and www . kandkinsurance . com . These policies can be purchased Online , will name the association as additional insured and will provide host liquor liability coverage for a wide range of events – where a fee is not charged for alcohol . From a quick test quote for a wedding event , it would cost $ 175 to purchase the policy from Private Event Insurance , and $ 165 from K and K .
An additional insured endorsement may not be the easiest thing to obtain , but it is in the best interest of the association to require the protection when releasing control of common area to a single member .
Contributed by Michael Berg , President / CEO Berg Insurance Agency 949.830.4590 x216 • Michael @ berginsurance . com or visit them at www . berginsurance . com
Additional [ Also ] Interest An additional interest is a party or entity that will be notified of policy expiration or lapse , but grants no liability protection to the interest . It ’ s like saying , “ We are interested in knowing that this policy stays in force .” This is typically used in HOAs where the CC & R ’ s require owners
4 | The HOA Board Quarterly | Issue # 18 | Summer 2017