Updated September 13th, 2023
In the ever-evolving landscape of healthcare liability insurance, insurance agents representing healthcare providers and facilities often encounter a common conundrum surrounding two seemingly similar terms: "additional named insured" (ANI) and "additional insured" (AI). While these terms might share a resemblance, it's essential for insurance agents to delve into their nuances and grasp their distinctive implications within policies. By mastering the differences between ANIs and AIs, insurance agents can provide accurate guidance to effectively serve their clients' needs in the complex realm of healthcare liability coverage.
For the sake of easy reference, we’ll refer to an additional insured as an “AI,” which is also a commonly used acronym. I haven’t seen a similar acronym for an additional named insured, but in the interest of consistency, we’ll refer to it here as an “ANI.” It’s not hard to comprehend that both terms infer the existence of a related insured entity relationship, but the exact nature of the insurable relationship between those entities is where things can get confusing.
Before we get into the meat and potatoes of this stuff, let me explain one potential wrinkle: ANIs and AIs are sometimes synonymous in the context of other areas of insurance, such as property insurance. In other words, there are certain insurance segments where ANI and AI can mean the exact same thing.
However, when dealing with liability insurance, these two terms imply very different relationships between the insured entities.
When dealing with healthcare professional liability insurance (“med-mal”), a policy often needs to cover more than one person or entity. A policy’s wording may cover some of these additional people or entities automatically, like when a hospital’s med-mal policy lists its director, officers and volunteers as part of the definition of the “insured.” Some policies will even use the term “first named insured” to designate that the first listed name on the policy is the primary person or entity that bears the greatest amount of responsibility in managing the responsibilities of the policy. When there is more than one person or entity not automatically covered, then underwriters usually require listing these additional names onto the policy. Enter now our ANI term! An Additional Named Insured is just what it sounds like … it’s another insured person or entity who needs to be added or listed on the policy by name in order to receive the benefits of coverage under that policy. But, an ANI is not the first named insured.
So far so good?
Okay, here’s where I often see the confusion setting in. It’s common to see medical businesses entering into business relationships with other businesses to refer or supply a needed service. We’ll use one type of arrangement to help illustrate.
Imagine that ABC Hospital, Inc. enters into a service contract to refer patients to XYZ Homecare, LLC, a local home healthcare service. ABC Hospital agrees to refer its patients to XYZ Homecare when certain patients need ongoing care at home following surgery.
Let’s also assume this contract uses “hold harmless” language. That means that neither party in the contract wants to be held responsible for an injury or liability caused to a patient by the actions of the other party. So, another fancy legal term called “indemnification” or “mutual indemnification” might also be found in the contract. This is where both parties agree to have their liability insurance policies cover or indemnify the other party if the first party causes the liability or injury. [For additional insights on indemnification, read The Dreaded Indemnification Clause].
So, let’s say XYZ accepts ABC’s patient, Mr. Smith, for service after Smith has surgery at ABC. While recuperating at home and under the daily care of XYZ’s visiting nurse, Smith takes an incorrect dosage of medicine administered by the nurse and subsequently dies. Morbid story, I know. But stay with me. It becomes evident in this case that the nurse clearly erred in providing Smith with an incorrect dosage, so XYZ’s insurance policy would step up to cover the nurse’s mistake and liability. However, Smith’s family not only sues XYZ Homecare, but ABC Hospital too. As the new claim develops, it’s clear that it was strictly XYZ’s nurse who erred and had nothing to do with the surgery done at the hospital, so all of the liability should fall onto XYZ’s policy. Since the contract between ABC and XYZ contained such indemnification wording, then XYZ already agreed that if the hospital wasn’t at all responsible for Smith’s death, then XYZ’s insurance policy would also step up to cover and defend ABC. This becomes a benefit to ABC because its own policy isn’t charged with the cost of providing the hospital’s attorney and defense costs.
This is where the AI comes into play. When these types of agreements are made, the related insurance policies need to clearly reflect these details. As such, it’s common practice for the agents and brokers for each party to ask each carrier to add the other party as an AI onto the policy. It’s understood that the AI is only a related business through the existence of this contract and is only a benefactor under the policy if the Named Insured causes liability that also affects the AI entity.
In summary, it should be clear that Additional Insureds only receive coverage under very specific circumstances, whereas Additional Named Insureds receive full benefits of coverage at all times. Understanding these distinctions empowers you to provide informed counsel. By mastering the fundamentals of each term, you will be able to expertly guide clients through complex situations with confidence.