Dwelling Fire for rental owned by LLC

[Rob]

LLC consisting of one member develops land he owns by building one home on it. Upon completion, he does not sell it rather he keeps it and rents it out. Is this a personal or commercial risk? I say commercial but insured says "well I am the LLC and its just me, so can't we just write the policy in my name" and I say "no, the named insured must be the LLC". Do you agree?

[mccluney]

Need to check with the personal lines company, but you should be able to name the individual as the named insured and the LLC as an additonal insured. Make sure the end apply both to property and liability.

[tburmingham]

The policy should list the owner of the house as named insured - period. Adding the LLC as additional insured will not offer the same coveage as being a NAMED insured. Some PL carriers will write a PL policy in the name of an LLC. If you are not appointed to one of them, then the policy should be written on a commercial policy.

Why is the insured opposed to a commercial policy?

[Rob]

The policy should list the owner of the house as named insured - period. Adding the LLC as additional insured will not offer the same coveage as being a NAMED insured. Some PL carriers will write a PL policy in the name of an LLC. If you are not appointed to one of them, then the policy should be written on a commercial policy.

Why is the insured opposed to a commercial policy?

Not really opposed, it's just that his personal home is insured with a carrier that he would like to write the other home with as well. I'm going to check and see if they will do it, I'm appointed with them.

[gregcw]

I see a problem that the attorney's and the CPA's, usually the CPA's, that advise an insured to set up an LLC often don't see or consider. I agree with tburmingham that the named insured should be the LLC. That is the legal entity that owns the property. This is a personal lines risk regardless of the entity that owns the property. I realize that some underwriters may need to be convinced of this.

The additional NAMED insured, a commercial lines endorsement, may not be available with all personal lines carriers. The additional insured would then have defense only if the attorney named both parties.

The problems that this situation presents are; that the attorney filing suit may not have research the ownership of the property and filed the suit only on the individual and not the LLC or visa-versa; depending on the lenders requirements the policy generally needs to be issued with the legal owner (the LLC) listed as the named insured; convincing the insured that they need to purchase the additional necessary coverages. after all they did do this to save money on taxes and protect assets if or when they get sued.

I did discuss this with a Personl Lines Claims Adjuster and his solution was to first check the individuals homeowners insurance Personal Liability to see if that policy's liability could be extended to the property, owned by him, through the LLC. This would entail convincing the underwriter that the insured is the only member of the LLC. This would give the insured primary coverage regardless of who was named in the suit. If their homeowner policy cannnot be endosrsed the insured should obtain a Commercial General Liabilty policy in their name.

[jimmyr1978]

LLC consisting of one member develops land he owns by building one home on it. Upon completion, he does not sell it rather he keeps it and rents it out. Is this a personal or commercial risk? I say commercial but insured says "well I am the LLC and its just me, so can't we just write the policy in my name" and I say "no, the named insured must be the LLC". Do you agree?

If it's a personal lines policy, it creates doubts on how a claim will be adjusted if only the LLC is named in a suit.

If it's a commercial policy, there will be no doubt.

Do the right thing, write a commercial policy. Also, most commercial policies offer much better GL coverage anyway.

[InsuranceGirl]

I see this situation often and have been told to write a personal lines property policy (DP3) excluding liability and then write a separate commercial lines liabiity policy.(lessor's risk) This seems to be the only way the companies will allow us to write the property w/ an LLC or an "entity" as Named Insured.
If the LLC is the owner of the property, then the policy needs to be in that name, period.

I do have one personal lines company that will allow me to list an entity as NI and include the liability ONLY if the entity is owned by family ONLY. (all officers must be related)

[TheInsKid]

We have used this very successful in both personal and commercial risks when dealing with LLC’s

+++++++++++++++++++++++++++++++++++++++++++++++++++++
SAMPLE
This Endorsement Changes the Policy. Please Read It Carefully.
Residence Held In Trust Or By Legal Entity
(Trustee as Named Insured)
Named Insured:
Policy Number:
Name of Each Resident:
Name(s)
For an additional premium, you and we agree the policy is amended as follows:
The definition of you and your is deleted and replaced by the following:
You and your mean the Named Insured shown in this endorsement and on the Declarations.
The definition of insured is deleted and replaced by:
Insured means:
a. you and residents named in this endorsement along with members of their household who are:
(1) Their spouse;
(2) Their relatives;
(3) Their domestic partner; a domestic partner is defined as an individual who:
(a) is financially interdependent with one of the residents named in this endorsement and shares
joint responsibility with that resident for each other’s common welfare;
(b) intends to remain in a committed relationship;
(c) shares the same living quarter and permanent address;
(d) is not so closely related by blood that legal marriage would otherwise be prohibited;
(e) is at least age 18 and like that resident, not legally married to another person;
(f) has not been in a different domestic partner relationship within the last 12 months; and
(g) is in the current domestic partner relationship which has been in effect for at least 12 months;
or
(4) Any person under the age of 25 in the care of a person described above.
b. If the spouse or domestic partner stops being a resident of the household during the policy period or prior
to the inception of this policy, they will be considered an insured under this policy until the earlier of:
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(1) the end of 90 days following their change of residency;
(2) the effective date of another policy listing him/her as a Named Insured; or
(3) the end of the policy period.
c. Under LIABILITY AND MEDICAL PAYMENTSTO OTHERCOVERAGES,insured also means:
(1) with respect to animals or watercraft to which this policy applies, any person or organization legally
responsible for these animals or watercraft which are owned by you or any person included in a.(1),
a.(2), a.(3) or a.(4) above. A person or organization using or having custody of these animals or
watercraft in the course of any business or without consent of the owner is not an insured;
(2) with respect to any vehicle to which this policy applies:
(i) persons while engaged in your employment or that of any person included in a.(1), a.(2), a.(3)
or a.(4) above.
(ii) other people using a vehicle or watercraft covered by this policy with an insured’s consent.
Items b. and c. in the Definition of Insured Location are deleted and replaced by the following:
b. other premises, structures and grounds used by you or a resident named on this endorsement as a residence;
c. a premises used by you or a resident named on this endorsement in connection with a residence identified
in a. and b. above;
The following is added to coverage provided under Coverage For Liability And Medical Payments To Others:
Coverage provided for you under Personal Liability and Medical Payments To Others apply only with respect
to bodily injury, property damage, or personal injury arising out of the ownership, maintenance or use of an
Insured Location owned by the entity identified under the Named Insured.
All other provisions of this policy apply.