Streetsmart insurance Blog
If you enter into a contract with another company, they may ask you to add their business to your insurance policy. If either of you are sued by a third party, they can pay for the claim through your policy and you can avoid a financial loss. But if your contract fails and your business partner files a claim against you, how will you protect yourself if they are an additional insured?
Cross suits liability comes into play when one person or business files a claim against another insured party. Because they are insured under the same policy, their insurance company can decide whether they will be treated as separate entities or as the same entity under the current policy.
This situation is common in commercial general liability (CGL) insurance, when two companies enter into a contractual agreement and one party is added to the other party’s insurance policy. If their partnership ends badly, one of the companies could liable for their joint financial losses.
To address this problem, all commercial general liability policies include cross suits liability coverage. This language treats both parties as separate entities if one party files a claim. Both parties are still subject to the aggregate limit, which allows each company to access their policy without dividing their benefits.
For example, assume that Havana Hotel hired Erik the Contractor to install a new roof on their building. As part of their contract, Erick the Contractor added Havana Hotel to his commercial general liability insurance policy. If a tile falls and hits a customer on the head, that customer could file a claim again Havana Hotel and Erik the Contractor. Havana Hotel could also file a claim against Erik the Contractor because they are an additional insured on Erik’s commercial general liability insurance policy.
Fortunately, Erik’s policy features cross suits liability coverage which allows both parties to be treated as separate entities. As long as they stay within the aggregate limit, each party will have their claims examined and addressed by their insurance company.
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Whether you are looking for your first commercial general liability insurance policy or you are shopping for a better price, our agents are ready to help.