Certificates of Insurance, Timeshares and Extra Expenses

The “Primary and Noncontributory” Myth
Agents are often asked to place language on a certificate of insurance that says certain entities have been added to the policy as additional insureds on a “primary and noncontributory” way. These terms are almost never defined in the contract or at the request of the third party, and they are only rarely defined in proprietary insurer AI endorsements.

The bottom line is that, unless an AI endorsement prescribes that coverage is provided on a “primary and noncontributory” basis, it would almost always be inappropriate to include this language on a certificate. One reason is that, assuming ISO CGL policies, it is the additional insured’s CGL policy that controls primacy, not the AI endorsement on the insured’s CGL policy.

In addition, what if the agent is dealing with a government agency or large corporation that self-insures or has a non-ISO CGL policy? If such a policy exists, AI coverage is not “primary and noncontributory” unless the Other Insurance clause of that policy has been reviewed.

For these and other reasons, avoid this language on a certificate of insurance. To read the full article, including links to related information, click here.


HO Coverage for Timeshares
An insured contacts the agency to advise that she has purchased a timeshare and wants to know if she needs to do anything to her current homeowners policy to cover her exposures. Here is some general information using the ISO HO-3 as the basis.

First, up to 10% of Coverage C is extended to property usually at this residence. If that isn’t sufficient, additional coverage can be endorsed. Unfortunately, it is unlikely that there is any Coverage D for loss of use or rental value, nor does ISO provide an endorsement for this.

If the insurer is willing, the unit can be added to the declarations page as an insured location to extend liability coverage. If it is rented, the HO 24 70 is likely to be appropriate. The insured should probably consider both personal injury and loss assessment coverage.

Both personal property and liability coverage are worldwide (with some exclusions) under the HO-3, so coverage may be extended to timeshares in or outside the U.S. To learn more about insuring timeshares, click here.


Extra Expense: What Is “Necessary”?
An apartment building suffers a fire loss and the landlord offers tenants vacant apartments in other buildings. In the meantime, he puts them up in local hotels for two nights. Would the hotel cost be covered under the business income coverage as an extra expense?

This is a question without an absolute answer because it depends on who considers it necessary. Does the business owner determine necessity or does the adjuster? The word “necessary” appears in the ISO CP 00 30 (and BOP) for both business income and extra expense coverage.

Who knows better what is necessary for his or her business than the business owner…right? The adjuster may know very little about the requirements of the business insured. In this particular instance, it might be material if the tenants have the contractual right to terminate the lease, but they would be willing to avoid that if the landlord put them up at a hotel for a few nights.

In hindsight, this contingency should be spelled out in the lease. The lease should require all tenants to carry HO-4 (“renter’s”) insurance with additional living expense coverage, and the landlord should keep a certificate of insurance on file. That way, the tenants will be covered by their own policies.

For other considerations, along with several court case citations that examine what is “necessary” and related issues, click here.


Bill Wilson (bill.wilson@iiaba.net) is director of the Big “I” Virtual University, an online learning center for agents and brokers. Do you have coverage questions? If so, log in to the Virtual University at www.independentagent.com/VU and click on the “Experts” link near the top of the page.