Coverage Gap #1: Incorrect Named Insured
What Could Possibly Go Wrong?
Who’s On 1st?
Could there possibly be a much more essential component of any commercial insurance policy than the Named Insured wording? Incredibly, many brokers do not appear to feel so based on the fact that so a lot of policies include incorrect or incomplete wording!
Why is the Named Insured section so important? Merely due to the fact if the wording is incorrect then the entire policy could be nullified, making anything that follows (e.g. limits, deductibles, and so on.) moot. If the entire policy is not nullified, then at the very least coverage might be denied for those entities that are not effectively identified on the policy, producing a main coverage gap.
What, me be concerned?
Let me give you an example of what I am speaking about. In the following accurate story only the names have been modified to protect the innocent!
A handful of years ago we reviewed a House & Basic Liability “Package” policy for a medium sized manufacturer of plastic goods who had been in enterprise for about 15 years. The insurance broker who wrote this policy had more than 20 years of encounter, and worked for a large regional insurance brokerage. The Named Insured on the policy read:
“The Plastic Parts Business”
That is it, absolutely nothing a lot more, nothing less. So what is the difficulty? Glad you asked! The problem is that this was an alarmingly incomplete Named Insured, to such an extent, in fact, that it is doubtful the policy would have responded to any significant claim.
It turns out that “The Plastic Components Company” was merely the DBA of an (unnamed) Corporation, the sole owners of the Corporation had been a husband and wife, and their shares were held in a Family members Trust. Here’s how the Named Insured must have been structured:
“The John Doe & Jane Doe Household Trust
Plastic Manufacturing Organization, Inc., A California Corporation
DBA: The Plastic Components Organization
John Doe & Jane Doe Individually As Their Interests Could Appear”
Note that the Named Insured afforded no coverage whatsoever to the Corporation, not to mention the Loved ones Trust. When this error was pointed out the Corporation President’s initial reaction was “Nicely, I am not also worried because I’m positive the insurance business would cover a claim anyway”. Wrong!
By no means count on an insurer’s benevolence. In dealing with insurance firms it really is crucial to remember a couple facts:
Insurance companies are fairly excellent at collecting premium, nonetheless when it comes time to pay a claim, specially a extremely big claim, they are really great at finding approaches to spend back as little as achievable and
Insurance policies are legal contracts amongst the Named Insured and the insurance carrier. For that reason, particularly simply because an insurance carrier’s ultimate obligation is to its shareholders (not to the policyholder), they cautiously adhere to any policy wording that permits them to reduce payments or deny claims outright.
Simply because of this every single element of an insurance policy, beginning with the Named Insured wording, wants to be meticulously examined.
So What’s A Business Owner To Do?:
So how do you assure that the Named Insured on every of your policies is suitable and complete? Simply list every single and each and every entity (e.g. Trust, Corporation, Partnership, Joint Venture, DBA, AKA, Person, etc.) that has an interest in the organization. Make positive that the wording accurately reflects the precise and complete legal names of each and every entity, and the relationships amongst those names. Then, go 1 step additional, and attempt to identify any de facto trade names, DBAs, or AKAs. These should be listed also.
What do we mean by a de facto trade name? Here’s a actual instance, and once more the actual names have been modified. We had been asked to evaluate coverage for a Non-profit Corporation supplying a variety of social solutions to disabled citizens. Starting at square one particular, we examined the Corporate name, which was the only Named Insured on the policy, was accurately identified as “California Disabled Services, Inc.” (again, not the real name). Nonetheless, the insured’s site address, creating signage, and even the way they answered the telephone was “Cal Disabled Center”. Even though “Cal Disabled Center” was not a formally filed DBA, we arranged to have it added to the Named Insured as the Corporation was primarily holding itself out to the public beneath that name.
Right here are some things you can investigate in an attempt to identify if you have some possible de facto trade names:
Internet site urls & e mail addresses
Telephone answering practices
Marketing & promotional material
Invoices, enterprise cards, and other stationary
A deficiency in the Named Insured wording on your policy(s) can completely nullify coverage. This should be the 1st factor you evaluate in reviewing your insurance plan. Very best of all, any deficiencies you locate in your Named Insured wording can be fixed for free.