Have you been inundated lately, as an executive officer, with requests for “Additional insured status,” since Canada’s Anti-Spam Legislation (CASL) was announced? I have, and so I looked up what additional insured status actually means.
Here is what it doesn’t mean: you don’t have more insurance though you are paying more. What you have is insurance to cover your customer(s) making the request. A growing number of companies believe this is one of the impacts from the new CASL legislation, where large corporations rather err on caution than leave anything to chance. Since ITWC sometimes sends emails on our client’s behalf, clients want insurance protecting them against the monetary penalties that could result from potential commercial fines or civil lawsuits.
Here in lies the problem with these requests. You can push the responsibility to someone else some of the time, but sooner or later the monkey will land on your back and you’ll have to take on the liability for doing business with a customer.
“Additional Insured status does not mean the additional insured does not need insurance,” according to author Gregory Boop from Business Insurance. But now your company is on the hook multiple times with multiple requests.
As a mid-size Canadian enterprise owner I understand the sudden rush to ensure your AAA suppliers have all its “I’s” and T’s” crossed for this new legislation, given thelevy of possible hefty fines back to the corporation claiming the right to touch a specific individual in a specific place of work. But at the end of the day the decision to take on all your clients’ liabilities makes no sense, no matter how well you’ve set up for the legislation. Decisions now become very important on the amount of liability for others you are prepared to commit.
Ensure you review with legal a copy of the additional insured endorsement that becomes part of your contract with your client.
- Understand what your additional insured coverage status covers and look at your liability policy. Before the relationship begins fix gaps in coverage.
- Read the contract requirements carefully ensuring your business is not jeopardizing its own coverage in agreeing to add additional insureds.
- Once you agree to add additional insured on your policy understand your liability. Similarly understand your business asks for that status from another business on their business insurance policy.
If there is but one request, full compliance is not a difficult decision. However, when you have three, four, five, six, or 10 clients all asking for the same ‘additional insured’ status on your one policy, this is not only becoming very expensive, but in some cases will not be allowed by your present holder.
This could mean jeopardizing your relationships with some of your largest clients, which a small to mid-size company cannot afford. Before committing to such requests, make sure the individual contracts you wish to proceed upon are sealed and delivered before calling your agent, over and over again. This sounds like a simple exercise of a phone call, a flexible insurance agency or broker and an executive signature. It is not so simple, yet it can really impact your bottom line if you are not able to comply.
PricewaterhouseCoopers purports that companies that effectively address such issues as stated above will have a competitive advantage over their peers; companies that do not are likely to struggle.
With a more stringent Canadian regulatory environment, such as with CASL, the running of your bottom line will change. We are only beginning to see some of the unexpected requests due to this changing landscape. Your executive team must have strategies to deal with unusual requests for additional liabilities coverage.
I personally would have never thought that a great insurance supplier is now my edge in this new world of CASL compliance.