Christopher Boggs, a leading insurance consultant, is speaking out about a growing issue in the lending world. Banks are increasingly asking business loan borrowers to add the bank as an "additional insured" on their general liability insurance policies. Boggs firmly believes this demand is incorrect and unfair.
This trend caught attention when insurance agents began asking how to fulfill these bank requests. Boggs questions why banks want this status, since a loan is simply a transaction between two separate, unrelated parties. There’s no contract or partnership that would make the borrower act on behalf of the bank.
Additional insured status is meant for situations where one party could be held liable for the actions of another due to a close or contractual relationship. In a lender-borrower scenario, there is no such link. The bank does not take part in the borrower’s business operations or products, so it shouldn’t be exposed to liability risks tied to those activities.
Boggs highlights that it’s unlikely banks have the expertise or authority to check a borrower’s business methods or guarantee their products’ safety. This responsibility belongs to other experts and regulators. Because the bank’s involvement ends with issuing the loan, there’s no logical reason for them to be added as an insured party.
He challenges anyone who thinks differently to provide solid reasons or legal cases supporting these demands. But he warns that court decisions are usually very specific and shouldn’t be used to justify broad insurance requirements.
Until proof is shown, Boggs stands by his view that requiring borrowers to list banks as additional insured is unnecessary and problematic. He invites discussion but remains clear that bank attorneys and risk managers are making an unreasonable call on this insurance issue.