Additional Insured or Named Insured

[violet]

Hello all, I am wondering if anyone in the insurance business can help me. I recently started working for an estate planning attorney. When we are funding assets into trusts one of the changes is to transfer their real estate into their trust, before we record the deed for this transfer we request the insurance carrier of their homeowners policy add the trust as additional insured. I cannot get a straight answer from anyone as to what are we expecting to get from this coverage. I used to be an agent in the 80s and 90s and additional insured was a third person liability coverage, so to speak. I do not understand why we would not add the owners as trustees and named insureds. Can someone give me some help on this, I am going round in circles.
Thanks, Violet

 

[djs]

I would ask the attorney why he wants it setup this way. A lot (most?) insurance companies won't write a trust as a named insured, since it has no way to verify loss histories or rating factors, i.e., risk.

Listing a trust as an additional insured protects it against physical loss, but leaves the liability coverage for the person who lives in the house (presumably a trustee). This way, if a dog, who is not part of the trust, but lives in the house, bites a visitor, the 'named insured' is covered. If the trust was the named insured, the dog would not belong to the trust, and therefore, would not be covered. (change the scenario as you see fit).

Realistically, in my view, the trust should have a landlord policy, with the person living in the house carring a renters policy. This would provide the best protection, and appropriately establish the relationship of the tenant to the trust. I've never seen one setup this way though.

Dan

 

[Bhains Insurance Broker]

Here's the definition of additional insured

A person or firm or corporation other than the named insured on a policy or mortgage company named in a mortgagee clause, who is protected against loss by the terms of the policy or mortgage company named in the mortgage clause

 

[Bhains Insurance Broker]

Taken from my commercial insurance manual" (has some relevance)

1. If you are designated in the Declerations as :

a. An individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner.

b. A partnership or joint venture, you are an insured. Your members, your partners, and their spouses are also insureds, but only with respect to the conduct of your business.

c. A limited liability company, you are an insured. Your members are also insureds, but only with respect to the conduct of your business. Your managers are insureds, but only with respect to their duties as your managers.

d. An organization other than a partnership, joint venture or limited liability company, you are an insured. Your "executive officers" and directors are insureds, but only with respect to their duties as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders.

e. A trust, you are an insured. Your trustees are also insureds, but only with respect to their duties as trustees.

 

[NWInsurance]

In addition to the info above it may also depend on the State that you are in.

I am suprised that was not brought up.

What state are you working in, or that the client is in?

 

[djind83]

Concerning what to do when the house and/or the automobile is owned in a trust...two good discussions on topic are Jack Hungelmann's article "Risk Management: Protecting Assets When Home Ownership Is Transferred to a Trust" and Phyllis Van Wyhe's article "The Trust and Personal Insurance."

In Indiana (where I reside) IC 32-38-3-1 states:

Trustee considered insured owner; conditions
Sec. 1. The trustee of a trust is considered to be the insured owner under a policy or commitment that insures or proposes to insure an interest in real property that is tansferred to the trust if:
(1) the transferee of the interest in real property is the trustee of the trust, the trust was establisehd by the named isnured owner, and the transferor is the named insured owner;
(2) the named insured owner reserves the right to amend or revoke the trust during the named insured owner's lifetime;
(3) the named insured owner is a natural person; and
(4) the transfer of the itnerest in real property is made by the named insured owener personally or by:
(A) the named insured owner's attorney in fact:
(B) the named insured owner's guardian or other similar person in a guardianship or protective proceeding in which the named insured owener is an incapacitated or a protected person; or
(C) the personal representative of the deceased named insured owner's estate under the terms and conditions of the named insured owner's last will and testament;
even if the named insured owner transfers the interest in real property to the trustee described in this section after the effective date of the policy or commitment.
As addd by P.L95-2007, SEC.19.

David J. Irwin, CPCU, AU, ARM, AIAF, AIS, APA, ARC, ARM-P, ASLI, AIM, FLMI
574-291-2853
[email protected]