Additional Insureds are specifically designated parties that have the same benefits afforded by the insurance coverage that you have as a named insured. This means that you will have to share your policy limits with any Additional Insured to your location.
The most alarming trend is the request for a non-insured to be added to your policy and given the full rights under the policy. In doing so, you forfeit the opportunity to sue this “Additional Insured” for their actions, which may have well been the only reason why a claim occurred. A classic example of this type of scenario would be:
The sorority chapter is hosting an event at the local park where you have contracted with a caterer to provide the food and alcohol for the event. The caterer is requiring evidence of your insurance coverage and wants to be added to your insurance policy as an Additional Insured.
For example, let’s say that the caterer was not practicing good risk management and over-served someone who became intoxicated and then assaulted another attendee at the function. Your insurance policy would be obligated to defend this caterer and potentially pay for any judgment against them. We prefer to have each party to a contract rely on their own insurance coverage and then rely on the “courts” to determine where negligence lies and ultimately where the liability rests for paying for injury or damages.