Hedging Your Risk
How the Additional Insured Endorsement Works for Lawn Care Businesses

From time to time, customers will want your lawn care business to do something outside your expertise. When that happens, you may hire a subcontractor for the job. And when you do, you'll need to make sure the subcontractor can cover your business as an "additional insured."

What's an additional insured? Your company has small business insurance, right? Well, so does your subcontractor. Say the subcontractor drives over the customer's lawn and the customer decides to sue for property damage. Whose insurance covers the lawsuit — yours or your subcontractor's?

If you're sued, you'd rather have your subcontractor's coverage pay for the lawsuit. After all, it's their work that caused the lawsuit. That's where the additional insured comes in. By adding you as an additional insured, your subcontractor agrees to cover your legal bills under their insurance policy.

Why Your Insurer May Require You to Be an Additional Insured

Landscaping companies make subcontractors include them as an additional insured because…

  • The subcontractor's policy covers your legal costs in a lawsuit.
  • Your own insurance provider requires you do this.

That's right; your insurance coverage may require you to ensure your subcontractors cover you as an additional insured. If you don't, your insurance provider may refuse to cover lawsuits or revoke your General Liability Insurance coverage.

As you would suspect, your insurance provider doesn't want to pay for lawsuits over your subcontractor's work or accidents they've caused. To avoid that headache, your provider mandates that your subcontractors use an additional insured endorsement to cover you.

Why Getting Additional Insured Coverage Can Save Your Business

You might be wondering, why do I need to be covered by my subcontractor? Wouldn't my customer just sue them and not me?

Say you've hired a subcontractor to install a fountain in your client's backyard. When the customer's child slips on the fountain's wet stone and breaks her arm, the family sues. The client's lawyers decide to take a scattershot approach and sue everyone "in the room," filing lawsuits against you and the subcontractor.

Lawyers often take this approach because it increases their payout and increases the odds they win at least one lawsuit. Unfortunately, this approach means you could find yourself at the wrong end of a lawsuit, being sued for work you didn't even do.

How to Know a Subcontractor Has Added You as an Additional Insured

So you've hired a subcontractor and they've said they'll add you to their coverage, but how do you check that they've actually done it? Simple: request to see a Certificate of Liability Insurance.

When a subcontractor adds you to their coverage, your name will show up on their proof-of-insurance.

Before they sign a contract with your business…

  • Require your subcontractor to attach a copy of their insurance certificate to the agreement.
  • Keep their insurance information on record. That way, you can pass the information along to your insurance provider if they require it.

Check out "6 Items to Include in Your Landscaping Subcontractor Contract" for more tips on using contracts with your subcontractors.

Understanding Additional Insured Policies and Risk Management Strategy

Maybe this all seems like too much hassle just to hire a subcontractor. What are the odds a customer actually sues you? Risk management isn't about what's likely to happen; it's about what could happen.

Businesses need to be prepared for the sudden costs and legal expenses. A lawsuit may be unlikely and you may have known your subcontractor for years, but that doesn't mean you shouldn't have a plan in place to account for this risk.

For more tips and strategies to help you avoid risk, read "A Lawn Care Business Owner's Guide to Subcontractors, Part 1" and Part 2.

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