Property/Casualty Insurance And Estate Planning |
furnishings, and other contents of the home; and(iv) the family occupants are closely connected to
the entity—as grantors, trustees, and beneciaries,
in the case of a trust, or as managers, general part-ners, members, or limited partners, in the case of a limited liability company or limited partnership.
The table below identies the insurable interests of each party for this common risk prole and illus
-trates the wide range of coverage needs:
Pa wi cva rqiIa I
Entity (Trust, Dwelling—owned byLLC or LP) the EntityOther Structures—owned bythe EntityPremises Liability—Entity canbe named in a suitFiduciary (Trustee, Premises Liability—
Manager, General) Fiduciary can be named in a
suitOccupants Contents—Owned by occu-pants Additional Living Expenses(loss of use)—occupantswould incur costs to resideelsewhere after a covered lossLiability—Occupants’ neg-ligence may cause them tobe named in a suit; coveragerequired for this location andelsewhere
Unfortunately, many insurance carriers nd it
challenging to understand and underwrite the risksassociated with entity-owned residential propertyand have been reluctant to offer comprehensiveinsurance to entities, particularly liability coverage.
Even in the case of the common risk prole de
-scribed above, most insurance carriers do not of-fer adequate coverage for all parties with insurableinterests. The endorsement most commonly usedby carriers—
Residence Held In Trust HO 05 43
—cov-ers only a residence held in a trust. However, aselect group of carriers that specialize in meeting the residential coverage needs of high-net-worth
clients—AIG Private Client Group, Chubb Group
of Companies, and Fireman’s Fund InsuranceCompanies—offer a range of endorsements which,when properly structured, can provide coverage in virtually any situation.Below is an example of an “additional insured”endorsement that can be used to structure coverageto protect the insurable interests of each of the par-
ties in the common risk prole described above:
Aiia I – ri Pi
Name and address of person or organization:
The denition of insured in this policy includes the person or
organization named above with respect to:
cva daa y Pp
Dwelling and Other Structures; and
cva liaii a mia Pa o
The person or organization named above is covered for Li-ability and Medical Payments to others but only with respectto the residence premises and only where the person or or-ganization is held liable for an act or failure to act by anyinsured.
InsurAnce ProtectIon should notbe An Afterthought •
Attorneys general-ly exercise great care in structuring estate planning transactions to avoid exposing their clients to un-intended tax consequences. However, an informalsurvey of practitioners who routinely recommendestate planning techniques involving the transfer of residential property to entities indicates that manyattorneys are not exercising the same care when itcomes to protecting their clients from exposure toliability for uninsured losses. In many cases, it may
not be sufcient for an attorney to merely advise
the client to have his or her coverage reviewed bythe local insurance agent. Many agents do not have
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