Claim Example
The agent was contacted about insuring a recently purchased boat, bought by a limited liability company owned by the client. The representative for the client indicated that the client had purchased the boat and did not note that this was purchased in his LLC name. However, the agent was provided with a copy of the purchase agreement, which identified the LLC as the purchaser.
The policy was issued with the individual and his spouse as owners rather than the LLC. An accident occurred involving the client, his spouse, and additional family members. The carrier disclaimed based on the household exclusion due to coverage being in the individual name.
We anticipate a six-figure payout by E&O on this claim.
What should you keep in mind regarding named insureds to help avoid similar claims?
- Carefully investigate who should be named insureds on the policy.
- Who owns the risk – an individual, multiple individuals, a corporation/LLC, etc.?
- Is the business entity and the property it conducts business from under different ownership?
- Is there a “does business as” (dba) or “trading as” (t/a) name?
- Review the purchase agreement or other documentation you receive to ensure it matches the application for coverage.
- Be familiar with the definitions in the policies you are selling – named insured, additional insured, subsidiaries, etc.
- Confirm the named insured(s) on renewals are still accurate.
- Always verify the ownership of the entity when you receive a request to add a new entity to coverage. Do not assume the ownership exactly matches the other entities on the policy.
- Be cautious about removing named insureds on claims-made policies, as this may impact their Prior Acts Coverage.
- Review required forms that specify signature by the named insured to ensure the correct person has signed.