Management Agreement - "Add Agent as Additional Insured???"

[Hunter McNeill]

I run a small management company and we have just a few clients so far but there is one thing on the management agreement I haven't really gotten a grasp on and can't seem to be able to explain it to my client. On standard for 401, there is a section instructing the owner to carry general liability insurance in the amount of $XXX,XXX, but it does instruct them to consult their insurance carrier. 

Then it goes on to instruct the owner to have their insurance carrier to add the "Agent"(me) as an additional insured. I've actually reached out to a few insurance folks and I can't really get a straight answer.

1. Is this required in general?

2. How do you explain this section to your clients?

3. What does it actually mean and what does it protect against?

Been working on figuring this out for a while so I would be very grateful to whoever might be able to answer these questions. Screenshot of that section of the management agreement below.

Thanks so much.

[Danny Gonzalez]

I run a PM company with about 300 doors under management. Here's a breakdown of what this clause is and why it's important:

Additional Insured means your company is listed on the policy by name, and will be defended alongside the property owner in the case of any legal action.

As a property manager, you are an Agent of the property owner. If a personal injury occurs for whatever reason, you (the property manager) are almost always the first target, in place of the owner. If a legal claim takes place, it is highly likely both the property owner and property manager will be named co-defendants. Having the insurance coverage extends to both parties, creates a unified defense with one insurance company defending both parties. This streamlines the defense, reducing legal expenses which the owner (or their insurance company) is ultimately responsible for. 

So 

1. Is this required in general?  It's a good practice, but not required by law (at least not in AL)

2. How do you explain this section to your clients?  "If something were to happen at the proeprty, having the PM added to the insurance will create a unified front and will be more likely that we will be protected".  It's in their best interest as well to have you on their insurance.

3. What does it actually mean and what does it protect against?  See above.  

I haven't been suepr strict about having every owner get that to us prior to starting management, since we all know how challenging PM is, even without the additional paperwork.  But it is something that you should chip away at, especially for the new clients that you onboard.

Hope that helps!