Knowledge Knugget, 8/7/2008
Continuing with our issues regarding DBAs of Insureds….
4. Not only can the inclusion of DBAs in the Named Insured imply that those who are not listed would not be covered, there is also the question of operations conducted outside the DBAs, and in the legal entity’s own name. For example, if Acme Corp. does business as Joe’s Business Consulting, and Joe takes a large job as Acme Corp., if the declarations page reads “Acme Corp. dba Joe’s Business Consulting” is Acme Corp covered for consulting done in its own name? Food for thought.
And you can see the even greater difficulty if Joe’s Business Consulting was the Named Insured, Joe performed his services as Acme Corp., and a claim came in against Acme, as we discussed last week.
5. The last issue for this segment is that if the Named Insured is a DBA, there can be all manner of gyrations underneath that level that might never come to your attention, but which can void or compromise coverage. Actual ownership of the underlying entity can change, the entity itself can be bought or sold, but if the DBA is the Named Insured, and it continues its operations and public presentation with no change, the insured(s) may never think to come to you to effect appropriate changes in their policies. If a claim occurs, not only could there be questions raised about continuity and identity of the entity(ies) insured, but policy conditions prohibiting assignment of the policy without carrier consent could come into play to void coverage, and change of control provisions could also have been unwittingly triggered, no tail offered, etc.
There are a few ways to address these issues and pitfalls.
First, make sure you understand how your insured is structured and what their legal names and entities are. Make sure all legal entities are shown on the applications, and on the policies. That will eliminate the situation where the carrier pleads ignorance, never having heard of the underlying entity prior to the claim.
Second, if your insured is concerned about coverage for DBAs, ask them to provide you with a list of all dbas, and refresh that list during your annual account review. Also advise your insured to keep you apprised of any and all changes and additions to DBAs. Take that list, and submit it to your underwriter or wholesaler, and ask them DBAs are handled, and how they want to keep track of them, if they feel they need to. The key question is – does a DBA need to be shown on the policy to trigger coverage if a claim is made against them. (I will survey companies on this matter at some point in the future and share my results.)
Third, if your insured does 100% of their operations under a limited, stable number of DBAs, listing the legal entity and the DBAs on the dec is relatively safe and straightforward, but see concern 4 above.
Carriers are generally more likely to respond to a claim against a DBA if they insure the underlying legal entity, than they are the other way around. So the most important thing to remember is that the underlying legal entity must be named on the policy.
There are more things to discuss regarding names, but we’ll take a bit of a break and return to the subject later.