Company owning property?

[insurancequestion]

I have a customer that has a couple of personal investment properties that he rents. One of the properties he has his business owning, and on his declaration page it list him and his wife and then "additionally insured" his company. On his other property which is also owned by his company..it doesn't have the company listed as "additional insured" .
My question is..does it make a difference to have a company, LLC or whatever own property? If it does make sense why? Then lastly...if it make sense should it be listed as "additionally insured". I believe insurance carriers won't allow a company to be the primary owner of the policy.
Thanks

 

[Markthebroker]

My question is..does it make a difference to have a company, LLC or whatever own property?

Of course it does. Those are different entities. If you have the insurance written improperly, then the claim likely won't pay out properly, and you could get sued and/or have an e&o claim. The policy should be written in the name of the entity that owns it.

My question is..does it make a difference to have a company, LLC or whatever own property? If it does make sense why?

If you are asking about business structure, and the advantages and disadvantages, you shouldn't be touching that with a 10ft pole unless you are an attorney.

Then lastly...if it make sense should it be listed as "additionally insured".

Talk to the carrier about the correct way to list them. Different carriers allow different things, and put their policies together in different ways.

I believe insurance carriers won't allow a company to be the primary owner of the policy.

Yes and no. Personal lines carriers may or may not write policies owned by business entities. I do however write properties on commercial paper where both the property and policy is owned by sometimes individuals and others where it is owned by the businesses. I do it all the time.

 

[adjusterjack]

I have a customer that has a couple of personal investment properties that he rents. One of the properties he has his business owning, and on his declaration page it list him and his wife and then "additionally insured" his company. On his other property which is also owned by his company..it doesn't have the company listed as "additional insured" .

Here's a simple rule that can keep you out of E&O trouble.

The owner on the deed is the Named Insured. Anybody else can be Additional Insureds.

And you don't need to rely on what your client tells you. A quick check of the county assessor website will tell you who the owner is.

Underwriting might not catch the discrepancy but a claim rep will, especially if the ownership was misrepresented (even unintentionally) to get a more favorable policy.

My question is..does it make a difference to have a company, LLC or whatever own property? If it does make sense why? Then lastly...if it make sense should it be listed as "additionally insured".

With a one person corporation or LLC, or one person and wife, where the one person is the face of his properties, there isn't as much protection as a lot of people think there is.

The following is paraphrased from an attorney on another site, just for educational purposes, as I agree you shouldn't be getting involved in the legal aspects of your client's business.

The LLC form of business, like the corporation, protects the owners of the business from personal liability for the debts of the business. For example, if the LLC enters into a contract with a third party and breaches it, the LLC is liable for that, but the LLC members are not unless they personally guaranteed the contract, which is something that lenders and astute business people often insist upon.

The LLC member is always responsible for his own debts and wrongs, including liability for the negligent acts he performs for the business (and for which the LLC might also be liable). There is also the possibility of "piercing the corporate veil" (google it) which is an even bigger risk for single member LLCs.

The LLC form of business does not protect the LLC from being sued. What it does, when the LLC is operated properly, is prevent the owners from being liable for the LLCs debts simply because they are owners. Owners of sole proprietorship and general partnership businesses are personally liable for all debts of the business just because they own the business. Owners of LLCs, LLPs, and corporations are not liable just because they own the business.

But the LLC does not protect owners of the business from everything. For example, an owner of a LLC will be personally liable for any loans/credit of the LLC that the owner personally guarantees.

Most lenders/businesses that extend credit to small business will routinely demand those personal guarantees.

You are also always liable for your negligence. So if you are negligent while doing work for the LLC and someone is injured, both you and the LLC are liable for that. You protect against that possibility with a good insurance policy. Also, the law makes owners of businesses personally liable for a few specific obligations of the LLC, like certain tax obligations for example. So where does the LLC protect you? You will not be personally liable for contracts that the LLC enters into that you do not personally guarantee. You will also not be personally liable for the debt that arises from the negligence of other employees/owners of the LLC.

Again, this assumes you run the LLC properly so that a creditor cannot successfully pierce the corporate veil to go after you personally.