Navigating the Named Insured Conundrum

Transcription

1 Navigating the Named Insured Conundrum 1 Various insurance policies are involved in properly insuring a farm or agribusiness. The named insured under the policy is a critical element because the named insured is essentially the owner of the insurance policy and is the party that receives the broadest right under the policy. Yet all policies do not define named insured in the same manner. This session will review how named insured is defined under various policies and how the rights of other insureds such as additional insureds and additional named insureds vary from those of the named insured. The discussion will also include additional insured status and the reasons for requiring additional insured status. Copyright 2016 International Risk Management Institute, Inc. 1

2 Notes This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex. 2

3 Navigating the Named Insured Conundrum 1 Various insurance policies are involved in properly insuring a farm or agribusiness. The named insured under the policy is a critical element because the named insured is essentially the owner of the insurance policy and is the party that receives the broadest right under the policy. Yet all policies do not define named insured in the same manner. This session will review how named insured is defined under various policies and how the rights of other insureds such as additional insureds and additional named insureds vary from those of the named insured. The discussion will also include additional insured status and the reasons for requiring additional insured status. 2 3

4 Learning Objectives Understand how named insured can vary from policy to policy Understand the rights of the named insured versus other insureds Understand best practices for addressing the named insured issue under various policies 3 Understanding Who is a Named Insured? Named Insureds can be Individuals, Corporations, Limited Liability Corporations (LLC), Partnerships, Trusts, etc. Named insureds are the owners of the policy and are protected per the coverages provided. Named insureds will have a financial interest in the property and/or operation insured. A policy could have multiple named insureds and can become complex. Understanding who is to be named is crucial. Carriers may have guidelines on combinability based on shared ownership. 4 4

5 How does the named insured vary from policy to policy? Homeowners Farmowners* Farm Property Policy* Commercial Property Policy Farm Liability Policy* Personal Auto Policy Business Auto Policy* Umbrella Policy* 5 Farmowners Named Insured example Farm Policy Named Insured : Farm Auto Policy Named Insured: Joe and Josephina Murray Joe Jr. and Linda Murray Bruce and Mary Jones DBA: Murray Family Farms Joe and Josephina Murray Joe Jr. and Linda Murray DBA: Murray Family Farms Umbrella Policy Named Insured:? 6 5

6 Understanding Who is a Named Insured? Most insurance coverage forms begin with an explanation of you, your, we, us, etc. Are you and your named insureds? Yes, coverage forms will state you and your as the named insured listed in the declaration. It can also include the spouse* living in the same household. *Definition of who qualifies as a spouse has expanded to recognize common-law marriages, same sex marriages, domestic partners, etc. Refer to state statutes or state amendatory endorsements 7 Rights, Duties, Privileges of the First Named Insured When an insurance policy has multiple Named Insureds, the First Named Insured will act on behalf of all other named insureds and insureds. First named insured is important as they are afforded various rights, duties, and privileges within the policy. Required to pay the premium Receiver of the return premium Policy cancellation rights Receiver of policy notices Request and receive endorsements 8 6

7 What is the difference between Named Insured and Insured? 9 What is the difference between being named insured and additional insured? Remember the Named Insured is the owner of the insurance policy and can request to add a person or organization as an additional insured. When the named insured agrees to assume responsibility for another person s or organization s legal liability. They can add that person or organization to their policy as an additional insured. 10 7

8 What are the rights of an additional insured under the policy? To have the policy respond, on their behalf, in the event of a covered claim including defense. Coverage can be subject to specific exclusion that only applies to additional insureds and not the named insured. Additional insured requests are so common that some carriers have created endorsements that provide automatic additional insured status if required by written contract or written agreement. 11 Why would a party want to be named as additional insured? Coverage Defense costs Protects their loss experience Protects their financial interest 12 8

9 What are the pitfalls of additional insureds? Sharing Liability Limits the policy liability limit will be shared amongst all insured s and additional insureds Exclusions specific policy exclusions could apply to the additional insured Unintended coverage Not cooperating with the defense of a suit 13 What is the difference between being named insured and additional named insured? There is no standard industry definition of additional named insured. Additional Named Insureds can be anything from a separate schedule of Named Insureds to Additional Insureds or somewhere in between. The definition will come from each carrier, if it all. 14 9

10 What is a Broad Form Named Insured Endorsement? An endorsement that may include automatic coverage for all entities the Named Insured owns more than 50% interest No need to list every organization Includes coverage for new entities 15 Best practices for addressing named insured to ensure proper coverage is extended to the appropriate parties Consider Financial Interest in property and/or operations to be insured. Determine legal entity(s) for each Named Insured. Determine eligibility for Named Insured status on the policy. This may require a conversation with the underwriter. Some carriers may place restrictions on shared ownership and who can be included

11 Best practices for addressing named insured to ensure proper coverage is extended to the appropriate parties Review all contracts to which the insured is a party that have insurance agreements Consider how the policy will be constructed Monoline policy vs package What named insureds will need to be included. Will an umbrella policy be involved? 17 Questions?? 18 11

12 Notes This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex. 12