Sometimes insurance terms are compared to each other when they should not be. The question came up as to what were the differences between an additional insured and evidence of insurance. Let’s see if we can explain the differences here.
An additional insured is a person or entity that has an interest in the item insured. Not only do they have an interest in the item insured but they can potentially be drawn into a lawsuit as a result of the operation or ownership of the insured item. For example, the owner of a rental property rents the space to a tenant. While the tenant is in control, if someone trips, falls or is injured as a result of the tenant’s action, the building owner can be sued along with the tenant.
Because of the deep pocket theory, the building owner is sued because claimants believe the building owner has more financial resources (deeper pockets) than the tenant. Although the building owner was not negligent, by the mere fact of owning the building the owner is at risk.
With so many frivolous law suits, the building owner requires the tenant to add the building owner as an additional insured on the tenant’s policy. Therefore, if the tenant and the building owner are sued, the tenant’s insurance policy must defend the tenant and the building owner. The owner is insured also (additional insured) under the tenant’s policy.
Evidence of Insurance
Once the building owner of it’s listed as an additional insured on the tenant’s policy, the building owner need more than the tenant’s word that the policy has been properly endorsed. The building owner must get evidence of insurance showing them listed as an additional insured.
Evidence of insurance can take the form of a certificate of insurance issued by the insurance broker, a copy of the actual insurance policy or even a copy the endorsement listing the building owner as an additional insured. The best evidence is an actual copy of the policy (which the tenant may not be willing to provide). The next best evidence is a certificate of insurance along with a copy of the additional insured endorsement.
Types of Evidence of Insurance
We discussed evidence of insurance when it comes to a renter’s policy. There are other forms of evidence of insurance. For example, when you purchase an automobile and register it with the Department of Motor Vehicles. The DMV requires evidence of insurance in the form of an auto ID card. The ID card lists the policy number, term, vehicle insured and named insured.
When purchasing a home, the bank or the lending institution requires an insurance binder which is evidence of insurance that the house is adequately insured.
Similarly, an automobile finance company requests evidence of insurance plus a loss payee endorsement showing that the lending institution as a co-loss payee on the policy. In the event of a loss, the lending institution wants confirmation that it will be reimbursed the amount outstanding on the loan.
Mixing and Matching Insurance Terms
As you can see, an additional insured is much different than evidence of insurance. Comparing the two terms are like comparing apples and oranges. Think of it this way, an additional insured can request evidence of insurance (not the other way around).