Insurance

7 Replies

I understand that if the deed lists an LLC then the insurance needs to list that LLC. What if the deed lists the LLC and the insurance lists the owners by name and the LLC as additional insured? Is this sufficient protection?

Thanks!

@Mark M. It depends on the scenario. Short answer is, listing as an additional insured, will be including the LLC under the insurance coverage therefore offering coverage. But, the details of why an owner as opposed to the LLC owns the property...etc will determine if the structure is in place properly.

Thanks for your reply. 

I think I'd feel better having the insured match the deed even if I have to change companies, pay more, or change to a commercial policy. 

From your description it sounds like you ha a homeowners policy and have listed the LLC as an additional insured on that policy. If this is the case there are two potential issues you should consider:

1. The business pursuits exclusion in the liability section of a home owners policy specifies that there is no coverage for a loss arising out of a business pursuit. A rental property would absolutely be considered a business pursuit and your claim would likely be denied even if the LLC is listed as an additional insured.

2. The named insured must have an "insurable interest" in the property in order for coverage to be provided. Technically the LLC has an insurable interest in the property and not you which could be grounds to deny the claim.

A dwelling fire policy can be added to your personal insurance for a limited number of small investment properties. However, I would recommend looking into a commercial insurance policy which will provide better coverage, is more flexible and can grow with your real-estate portfolio.

From your description it sounds like you ha a homeowners policy and have listed the LLC as an additional insured on that policy. If this is the case there are two potential issues you should consider:

1. The business pursuits exclusion in the liability section of a home owners policy specifies that there is no coverage for a loss arising out of a business pursuit. A rental property would absolutely be considered a business pursuit and your claim would likely be denied even if the LLC is listed as an additional insured.

2. The named insured must have an "insurable interest" in the property in order for coverage to be provided. Technically the LLC has an insurable interest in the property and not you which could be grounds to deny the claim.

A dwelling fire policy can be added to your personal insurance for a limited number of small investment properties. However, I would recommend looking into a commercial insurance policy which will provide better coverage, is more flexible and can grow with your real-estate portfolio.

I'll back Mike up here. I am a CPCU and as such I have expert witnessed in 3 trials exactly as this goes. The agent advised to insure the LLC owned property on a policy with a personal name listing the LLC as additional interest.

Mike has two excellent reasons that coverage was denied. The third is this:  the additional interest endorsement is added onto the policy and gives no extra rights to the additional insured. 

What do I mean?  Just by adding an additional insured you did not change or invalidate those two exclusions previously enumerated. 

So how did the trials go?  

Well I was expert for the insurer (co defendant with the agent). Trial court decided to release the insurer on the claim as they or their policy never stated an LLC owned property with an individual named insured and LLC as additional insured was covered. Now the agent did in an email. The agent ended up paying the claim in settlement. I have no idea how much as it was a confidential settlement.

That was 2 of the cases. The third the client requested a policy in their individual name, LLC additional insured. Never did the insurer or their agent grant coverage. The case was dismissed due to lack of duty breached. In fact he claimed to read the advice online not from the agent or insurer.

I have one house, owned by an LLC that my brothers and I (all owners) created. We have a commercial insurance policy on the house. Other than adjusting the policy amount, is there any other policy needed? Is a commercial policy the correct thing to have?

Also, I have an Airbnb rental attached to my home. It was an in-law suite apartment that wasn't being used. Do I need a separate policy for that from my regular homeowners policy?

Thanks in advance.