How are an insured, an additional insured and a named insured different?
A named insured has full access to a policy’s coverage and limits. An insured may be covered under the policy, but only to a certain extent.
The named insured can be an individual or a legal entity. If the entity is an individual, then that individual is covered, along with that individual’s spouse. If the named insured is a partnership or joint venture, the partners are included, along with spouses, but only to the extent of performing duties related to the insured’s business. If the named insured is a limited liability corporation, the members of the LLC and the manager of the LLC are included, but only to the extent of the insured’s business. If the named insured is any other organization, the executive officers, directors and officers are included to the extent of the insured’s operations. Stockholders are also included, but only to the extent of their liability as stockholders.
Lastly, if the named insured is a trust, trustees are included, but only to the extent of liability as trustees.
Some entities are just ‘insureds’ under the policy, and their coverage is limited. Under the definition of who is an insured is the entity acting as the named insured’s real estate manager.
How can employers ensure that they have properly identified the named insured?
First, understand which type of legal entity you are considered: an individual, corporation, joint venture, or LLC. Understand what entities make up that organization and their relationship to each other.
Review your organizational chart and named insured schedule with your broker to ensure proper understanding of the organization and named insureds and/or additional insureds and insureds and their relationships to each other to ensure the proper exposure is covered for each insured.
Whenever you have a multiple listing of named insureds, the insurance company wants to know who and what these entities are and their relationship to each other and the organization and its operations and exposure. They want this information so they have knowledge of and understand the exposure they are insuring.
A proper and thorough review of the various named insureds and their operations and relationships will allow your broker and the insurance company underwriters to have a better understanding of your operations and risk. Better understanding by the underwriters usually lends itself to better coverage (product) and better pricing.
Phil Coyne is a vice president with ECBM Insurance Brokers and Consultants. Reach him at (610) 668-7100 or [email protected].
