Additional Insureds. Is it enough?

We had a situation where one of our insureds sold a fumigation job to a customer. Our insured hired a fumigator (sub-contractor) to do the job. A normal course of doing business that occurs every day. Our insured gets a certificate of insurance (COI) from the fumigation company to verify insurance and also gets listed as an additional insured under the fumigator’s policy.

So everything should be ok should the fumigation company have a claim and our insured be brought into any litigation right? WRONG!

A suit was served on our insured due to damages after a heavy rain that caused the tarp to tear and water getting inside the home. It happens and these types of claims are easily denied if there is a strong contract issued or you can settle for a small percentage of the damages. But that was not the problem.

Our insured sent us the suit papers; we obtained the insurance information where our insured was added as an additional insured as stated above. We contacted the insurance company (claims provider) for the fumigation company immediately to handle the defense for our insured due to the allegations of the suit, the additional insured and overall the proper way to do business right. You would think that would be enough right? Again………..WRONG.

The insurance company (claims provider) for the fumigation company stated that they would not supply a defense for our insured for a couple reasons. One was the way “they read the allegations” it was not clear that the fumigation was liable for this claim. The second was since the insured, and this is what is important, was not listed as a primary additional insured then their insurance was only excess and did not have to supply them a defense. Really? Of course I found out later the background and/or experience of the adjuster handling this matter was not substantial in comparison, but I digress.

So I asked the adjuster what does liability and the suit allegations have to do with the issue of defending our insured due to the actions of the fumigation company? Coverage comes before liability which you learn first day as an adjuster. The response……………crickets!

To make a long story short, we decided to go after the fumigation company due to actions of their insurer and believe it or not…………the insurance company is now defending our insured. Ripleys! Unfortunately this was not before we had to get defense counsel and threaten any and everybody to do their jobs. Now the insured has to pay a deductible but we are still fighting with the other carrier to pay our bills due to their “inaction” at the beginning and save our insured having to pay anything.

The bottom line is this. Any agent can sell pest insurance. Now there are those that are a lot better than others and that is a give. But with just about all pest insurance programs, the claims are handled outside the agent’s office with very few exceptions. LIPCA being one!

The examples of questionable or poor claims handling we have seen over the years with pest control exposures is quite scary surrounding: coverage issues, paying on claims that should be defended or vice versa and other examples. It is amazing what I have seen over the last 20 plus years. Shame really.

Remember the decisions by others on claims can affect your business for a very, very, very long time. Be careful.