Case law makes a distinction……
….which means that we insurance nerds should too.
1. The Named Insured. This common bird pays for the policy and it is issued in his name. He is the policyholder. When the policy uses the words “you” or “your,” it is referring only to him. When the policy uses the word “Insured” with a capital “I” it is also referring only to him. He usually is afforded the broadest coverage – as opposed to coverage for other birds described below. If there is a self-insured retention or deductible using a standard ISO form, generally the policy will state that the Named Insured must satisfy this as a condition precedent to payment. The use of the capital “I” means that only this bird, the Named Insured, is responsible for this payment.
2. The Automatic Insured. A common yet recessive bird, more content to stay in the background until called out, this bird is typically found hiding in CGL policy language. These birds become Automatic Insureds because they are included by reference within the policy definition of “WHO is an Insured.” They generally can be distinguished from other insureds by their close relationship to the Named Insured. For example, many standard CGL policy forms state that “WHO is an Insured” includes newly formed partnerships and “your volunteer workers but only while performing work for you.” “You” and “your” meaning the Named Insured of course. The purpose of creating this unique type of bird is to close coverage gaps in certain situations, and to automatically add coverage for these birds without reissuing the policy each time. Endorsements can also give birth to an Automatic Insured bird by so stating.
3. The Additional Insured. We have been witness to more and more recent sightings of this bird due to risk shifting clauses in underlying business contracts. An Additional Insured is usually added by specific endorsement to the policy. His coverage is derivative of the Named Insured. He can acquire no greater rights than the policyholder. The Additional Insured’s coverage is tied to the Named Insured’s work, product or lease – which gives rise to a claim. In other words, the Additional Insured coverage is not intended to be comprehensive and to stand alone – absent some act or omission of the Named Insured. They are not a Big “I” Insured like the Named Insured. They are a little “i” insured, meaning that they do not possess full policy rights. Nonetheless case law has been very generous to this classification of bird and has been awarding large coverage verdicts – absent more specific limitations stated in the additional insured endorsements.
Each insured bird has his own classification in the policy language. These birds are not the same – although they do have similar characteristics and exist in the overall genus of insureds. Each has specific and limiting coverage under a standard ISO form making their markings distinct from each other. Classifying and knowing your insured birds will assist you in outlining the coverage you should buy and then later receive in case of a loss.