Two unrelated entities as named insured?

[Rob]

I'm usually fairly confident in the conclusions I reach but sometimes I just like to throw it out here to the insurance journal world and see if there is anything I'm missing or simply just to have something to point the client to to say "My peers in the industry confirm what I am saying."

Scenario: Two sole props sharing office space. One is an attorney the other is a lobbyist. They are separate businesses. Lease is in both of their names and the lease even says "Joe Smith, an individual and Tom Jones, an individual". Joe Smith comes to me several years ago and gets a premises liability policy in his name to satisfy the landlord (which they accept for some reason even though its only in his name). Now Joe Smith wants Tom Jones to share the cost but when I point out there is no defense or coverage for Tom Jones because the named insured is Joe Smith, Tom Jones of course won't do this.

I ask the underwriter if it is possible to have a named insured as Joe Smith and Tom Jones (separate entities) and carrier advises no (which I expected) and says that two separate policies are needed. I explain to the insured that due to the legal wording in insurance policies that if the company did this, they would end up having to pay defense costs and potentially damages for two separate individuals as opposed to one entity which is the reason they can't do it.

Now unless I'm missing something, I don't believe there is any way around this. Has anyone ever seen a carrier put two individuals as named insured (unrelated).

[scott]

The two have entered into a joint venture which is included in the ISO CGL under section II, Who is an Insured. Obviously both individuals should be named on the dec page.

Of course, the underwriter might not want to do this. However, the policy language allows for it.

[Temblor]

And if they both get sued for a GL incident related to the office the insurer obviously would include both suits in their defense, i.e. they're not going to appoint separate attorneys and mount separate defenses, particularly if they are listed on the dec as a joint venture.

Sounds like you have an underwriter who doesn't understand the situation or their policy and instead of defining it finds it easier to make up a reason for declining.

[mccluney]

I can't imagine that a preferred company would want to include a lawyer and a lobbyist on what is probably a minium premium office type policy. Even if you could find a reasonable premium situation, it does not appear the Tom Jones would contribute premiums toward a joint policy. If you have not done so, you should review the premises contract to determine if their are any other coverage concerns. Does the insurance carrier you have for the attorney aware of the shared premises. I hope that your E & O insurance is up todate. It seems to me that Tom would be looking to you to cover any claims that might result.

[Rob]

Well if they meet the definition of joint venture, sure. But just sharing an office would qualify as a joint venture? The legal dictionary defined "joint venture" as "an association of two or more individuals or companies engaged in a solitary business enterprise for profit without actual partnership or incorporation". They aren't sharing profit. I suppose if you consider that it is for the mutual benefit, i.e. the sharing of the office space, it may meet the definition.

[Rob]

I can't imagine that a preferred company would want to include a lawyer and a lobbyist on what is probably a minium premium office type policy. Even if you could find a reasonable premium situation, it does not appear the Tom Jones would contribute premiums toward a joint policy. If you have not done so, you should review the premises contract to determine if their are any other coverage concerns. Does the insurance carrier you have for the attorney aware of the shared premises. I hope that your E & O insurance is up todate. It seems to me that Tom would be looking to you to cover any claims that might result.

The carrier is not a preferred carrier as all preferred carriers declined due to being a lobbyist. Yes, the insurance carrier is aware of the shared premises once I was informed. Tom Jones is not my customer. Tom Jones has no relationship with me. Tom Jones has not paid any premium. Joe Smith is fully aware that coverage only applies to Joe Smith and not Tom Jones. Of course my E&O is up to date. Do you think I would operate with E&O? Some things, like non-disclosure of items such as this by the customer, are not within our control.

[pita3333]

Rob:

What catches my attention is "Yes, the insurance carrier is aware of the shared premises once I was informed. "

I can only presume that the following occurred:

1. You never visited the premises
a. If you had, you ignored the presence of the extra person/staff
b. If you had, you did not look at the building directory to see who else was in that unit

2. You did not review a copy of the lease to confirm insurance requirements.

3. You did a quickie BOP or premises policy and ran with the commission.

I apologize in advance if I am being harsh. However these are the lil things that get agents/brokers in trouble...and they can be avoided by doing a proper duty of reviewing all exposures.

[Rob]

Rob:

What catches my attention is "Yes, the insurance carrier is aware of the shared premises once I was informed. "

I can only presume that the following occurred:

1. You never visited the premises
a. If you had, you ignored the presence of the extra person/staff
b. If you had, you did not look at the building directory to see who else was in that unit

2. You did not review a copy of the lease to confirm insurance requirements.

3. You did a quickie BOP or premises policy and ran with the commission.

I apologize in advance if I am being harsh. However these are the lil things that get agents/brokers in trouble...and they can be avoided by doing a proper duty of reviewing all exposures.

The presumptions would be incorrect. An inspection was performed. Sometimes insureds do things after a policy is in place that is different (in some cases a few years later) than what the initial situation showed.

Your only presumption that is correct is that I did a premises policy. This was only because all other BOP carriers declined and the insured's interest was in satisfying the landlord requirements. When recommending other coverages (E&O, property etc) the insured declined, in writing.

[Island Girl Agent]

I have the same problem going on right now...one client is a Pest Control Co., the other is a Plumbing Contractor. No common ownership. They have a new lease with both entities listed and are sharing space. To further complicate the situation, one of office staff works for both entities.

We can, of course, write a GL policy for both entities, but neither carrier would be happy about this scenario because of the gray area of "which company is negligent should there be a slip and fall in the premises" - even if they had drawn an imaginery line down the middle, they most likely share a bathroom. The last thing any of us want is to involve 2 insurance companies for a premises claim, seems like that would only drag out the claim and costs involved for everyone.

so what are your suggestions? Right now I'm thinking of asking the clients to redo the lease so there is a primary and sublease.

I also have to comment on the post about the agent having done a physical inspection of the premise. You're kidding, right? I've been in the business 32 years, cannot imagine trying to visit each and every risk we write, many of them miles and miles out of town, and the cost factor or just plain practicality when you have thousands upon thousands of small accounts. We have to rely on what our clients tell us and ask pointed questions to obtain the best information we can, and even then we all know things get missed, changed later, or just not revealed.

[mica.cooper]

What is funny to me and smacks me right in the face:

One of the individuals is an attorney. Now if this guy doesn't understand that an insurance policy is a contract and how to read it, there is no way in hell I would write a policy for him. Oh, and there is the fact that, ... he's an attorney! Like writing a fire policy for an arsonist!

[Rob]

I have the same problem going on right now...one client is a Pest Control Co., the other is a Plumbing Contractor. No common ownership. They have a new lease with both entities listed and are sharing space. To further complicate the situation, one of office staff works for both entities.

We can, of course, write a GL policy for both entities, but neither carrier would be happy about this scenario because of the gray area of "which company is negligent should there be a slip and fall in the premises" - even if they had drawn an imaginery line down the middle, they most likely share a bathroom. The last thing any of us want is to involve 2 insurance companies for a premises claim, seems like that would only drag out the claim and costs involved for everyone.

so what are your suggestions? Right now I'm thinking of asking the clients to redo the lease so there is a primary and sublease.

I also have to comment on the post about the agent having done a physical inspection of the premise. You're kidding, right? I've been in the business 32 years, cannot imagine trying to visit each and every risk we write, many of them miles and miles out of town, and the cost factor or just plain practicality when you have thousands upon thousands of small accounts. We have to rely on what our clients tell us and ask pointed questions to obtain the best information we can, and even then we all know things get missed, changed later, or just not revealed.

Not to mention that if the carrier is going to order an inspection with one of their contracted inspectors, the question of sharing office space is aksed at that time as well.