Update named insured when property deeded to trusts, life estates, others Our agency has become aware of a looming E&O exposure as more and more property is being deeded into trusts, life estates, and/or deeded directly to children. Most important, agents are not being notified.
A liability loss due to a trip and fall exposure was reported to our office recently. The dwelling was insured by our client in his name as owner. After the loss, it was determined the property had been deeded to a trust, not named on the policy, voiding defense and protection for the trust.
We drafted a letter and mailed it to our insureds regarding ownership being properly identified on insurance policies. A copy of most of that letter appears below. The response from our clients is approximately 10%, and we are shocked at the number of trusts that have been created and deeds transferred without any notification to us, the agent. We have had calls from clients who have quitclaimed their property to children or others but continue to insure the property in their names. Many of our insureds are confused by the issue. Some do not know the name of the trust, estate, or actual owner of the property. My concern is that only 10% have called in. I estimate another 5% or 10% are affected by ownership change but are not calling.
I am sure this problem exists on a nationwide basis and will become a growing E&O exposure to agents who are not notified of property ownership change.
The consumer is often unaware of how important the named insured portion of a policy is and how it can affect a claim settlement.
We have an important message to share with our customers. It has come to our attention that some residences, rental dwellings, or other types of property are placed in a trust, estate, corporation, or other entity. It is extremely important that your insurance policy name the legal or registered owners) of any property.
If you insure property that is deeded or registered in a name other than your personal name, or have questions related to your insurance coverage, please contact us right away. We do not want a claim denied because your insurance policy does not name the legal owner or owners.
Coordinating liability between owner’s, contractor’s policies
In your “Quest-ions & Answers” column on page 10 of the April 2000 issue I think you missed the point in your answer to the question pertaining to “primary and noncontributory” language that is being requested by some certificate holders. The owner/certificate holder is trying to avoid having his own CGL policy contribute to a loss that could be paid for in full by the contractor’s policy.
Assume that a contractor causes a premises-operations loss on an owner’s work site. The owner’s liability insurance contributes to the loss because of its Other Insurance condition. With the proper wordings in both CGL policies, the contractor’s policy pays toward the loss until it is exhausted and then the owner’s insurance applies on an excess basis. The benefits to the owner are obvious.
What the certificate holder is asking for is to have the contractor’s agent modify the Other Insurance condition of the contractor’s CGL form so that the contractor’s policy will be “primary and noncontributory” as to any loss that would also be covered by the owner’s liability insurance.
If the contractors insurance agent gets his company to modify the form, then it is up to the owner’s insurance agent to also tinker with owner’s policy’s Other Insurance condition. The owner’s CGL would need to be endorsed because the unendorsed CGL calls for it to be primary and contributory whenever it is triggered by a loss.
The contractor’s agent needs to be very cautious about certifying to this change. The language on both endorsements must be carefully coordinated, and in most states, any change would need to be filed and approved by the department of insurance.
Kim Holtorff, CPCU
Insurance Planning Associates, LLP
Importance of DIC
Don Malecki’s Risk Management column in the June 2000 issue of Rough Notes (“Flood, DIC and Agents E&O”) raises raises many interesting points. Although agents may be able to protect themselves by documenting their files with offers of coverage or by relying on form letters sent by insurers, wouldn’t it be much better to provide coverage for insureds?
A DIC covering flood and earthquake should be incorporated into every commercial client’s portfolio. Providing the coverage is a win-win proposition. The client gets the protection and the agent demonstrates concern for the client and protects the account against competition-the commission involved is often too small to be a major incentive.
Incidentally, for property not located in flood zones A or V or an active earthquake area, it is usually possible to write the DIC coverage excess over a $25,000 deductible rather than excess over the maximum insurance available from the National Flood Insurance Program. I insisted that that be done for the small homeowners association where I live (37 homes). Last September, Hurricane Floyd turned a gentle stream into a raging torrent and caused $500,000 in damage and we’re nowhere near any flood zone! -Jerry Trupin, CPCU, CLU, ChFC
Scarborough, New York
Copyright Rough Notes Co., Inc. Sep 2000
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