Requests for additional insureds.

As insurance buyers have become more knowledgeable about coverage provided by public liability insurance, insurance agents and insurance companies have seen a proliferation of requests for additional insureds on camp liability insurance policies.

Camps purchase liability insurance to transfer the risks of financial losses that are unpredictable or that they cannot handle alone. Insurance companies issue these liability policies, which list the legal name of the camp or organization on the first page of the policy. This page is called the declarations page. The camp or organization buying the policy is listed on the declarations page as the "named insured." The named insured has a special status and certain obligations. The named insured has responsibility for paying insurance premiums, for communicating certain changes in the camp operations to the insurance company, and for reporting claims.

What additional insured means

It is very common for the named insured camp to enter into a variety of relationships involving the use of a third party's property or equipment. Frequently the third party asks to be added to the camp's liability policy as an additional insured. For example, a camp that leases horses for the summer may be asked to add the owner of the horses to the camp's liability policy as an additional insured.

When a camp asks its insurance company to add a third party as an additional insured, the insurance coverage provided by the camp's liability policy is extended to the third party. The third party is granted some rights under the policy the camp has purchased.

Let us use an example to illustrate this point. There are some local business people who maintain a string of horses that they lease to camps in the summer. Your camp has been doing business with this group for many years. As is your custom, you take charge of the horses several weeks before camp starts so your staff can get a sense of the horses' temperaments and the ways the horses interact. At this point you request, in writing, an additional insured endorsement for the owners of the horses. When you add an additional insured to your policy, you and your insurance company assume the risk of the ownership, maintenance, care, and use of those horses for the agreed upon time period. If one of the horses injures a camper or another member of the public while it is leased to your camp, the additional insured endorsement will provide the group that owns the horses with several financial benefits. First, if the group is named as a codefendant in a lawsuit, the endorsement will provide the group with a defense lawyer. Second, if the facts surrounding the injury reveal negligent behavior, your camp liability policy may have to pay damages for the negligence of the group that owns the horses, as well as that of your camp.

Adding an additional insured

An insurance policy is a legal contract between the named insured (the camp) and the insurance company. Changing the contract requires an endorsement from the insurance company. In the absence of this endorsement, no coverage is provided to the third party. Your request to add third parties to your camp's liability insurance should be made in writing to your agent. Make sure you have the correct address of the third party; a copy of the endorsement will be mailed to them.

Often, the third party requesting additional insured status asks for a certificate of insurance as evidence that coverage has been provided. However, the certificate of insurance cannot ensure that this has happened. The only document that can legally change the contract and extend coverage to the third party is the endorsement of the insurance company.

While the endorsement is evidence that the contract has been properly changed, it gives the third party minimal information. This information typically includes the name of the insurance company, the limits of liability, and the effective and expiration dates of the coverage. It does not provide details of the coverage, such as exclusions, deductibles, or conditions. The only document that defines these details is the policy itself. For this reason, when you are receiving an additional insured endorsement from another business' policy, you should not rely on it entirely.

Things to watch for

Problems can develop when adding additional insureds. If the circumstances of an accident involve serious injury and large potential claims, you may not have sufficient liability limits to pay a judgement entered against both your camp and the third party. Because of this, camps should be careful when entering into this type of arrangement. Consult with your agent about the appropriateness of adding additional insureds.

Your camp should maintain a list of the third parties who have been granted additional insured status under your policy. Your agent may be able to assist you with this task. Review the list of additional insureds on your policy annually. If your list is extensive, consider buying higher limits of liability by purchasing an "umbrella liability policy." Ask your agent to remove the third parties with whom you no longer do business. Aggressively managing this list of additional insureds is vital to keeping your liability policy limits available for your own needs.

Maintain control of your coverage and risk transfers by buying the protection you need and thoroughly documenting the coverage granted when your camp is added as a third party additional insured to another business' policy.

Knowledge about your insurance coverage and your responsibilities as an insured are critical to your camp's continuing success.

Ed Schirick is senior vice president of the Markel Insurance Company camp and youth recreation division. He is a charted property casualty underwriter and a certified insurance counselor. Send your risk management inquiries to: Ed Schirick, c/o Markel Insurance Company, 4600 Cox Road, Glen Allen, VA 23060.