What significance does the Named Insured have on a commercial insurance policy?
The named insured is basically the owner of the policy. He or she has the broadest protection and broadest indemnity under the policy as well as certain responsibilities. The named insured typically chooses the type of policy and the amount of coverage, receives any premium and cancellation notices, and assumes responsibility for payment of the premium.
The named insured is the person or entity to whom the carrier owes defense and indemnification, so it’s crucial that this information is correct. In a sole proprietorship for example, if John Wright is doing business as John’s Computer Services, it’s John Wright who should be the named insured, not John’s Computer Services. John Wright makes the decisions, pays the premium, and potentially gets sued. “John’s Computer Services” is just an operating name, not a person or entity.
What is a ‘dba’?
The acronym ‘dba’ stands for “Doing Business As” and is sometimes also referred to as the “business name” or “operating name”. We see this commonly with sole proprietorships and partnerships:
John Smith dba John’s Small Engine Repair
Anne Taylor dba Flowers by Anne
Mike Jones and Mitch Ford dba Modern Home Designs
These are individuals operating a business in which they’re sole owners, or partners operating a business in which they share profits and losses. The business name is not a legal entity, only the individuals are.
You might also see it with corporations, LLCs or LLPs:
Smith, Inc. dba Bob’s Coffee Shop
Howard & Sons LLC dba Family Fun & Travel
Cline Brothers LLP dba Cline’s Corners Convenience Store
It’s common for larger companies to have multiple operating entities under one or more corporate entities, however, we typically don’t see that in the small business sector. In this case, the corporation or LLC or LLP is the legal entity that should be the named insured on the policy.
Can you have multiple Named Insureds on a single policy?
Some carriers allow multiple named insureds on a policy. When this happens, it’s important to note the first named insured (the one who is listed first on the policy declarations) has broader rights than other named insureds. Coterie does not currently allow multiple named insureds on one policy.
Common types of Named Insureds
A named insured can be an individual/sole proprietor, a partnership or LLP, a corporation, or an LLC. There are other possible entity types, but we will not typically see those in the small business sector. (See the next section for actual “Who Is An Insured” verbiage from the BOP and PL coverage forms.)
A sole proprietorship is an unincorporated business owned and run by one person where there is no legal distinction between the owner and the business. A business owned and run by an individual together with their spouse is still considered a sole proprietorship. It is not necessary to name both spouses as Coterie’s BOP coverage form states that both the named insured and his/her spouse are considered insureds with respect to the conduct of the insured business. Sole proprietors are personally liable for all debts and activities associated with their business operations. The named insured should be the owner’s name and the business/operating name should be shown under ‘dba’.
A corporation is a LEGAL ENTITY created by individuals for the purpose of operating for a profit. Corporations can do things that people do, enter into contracts, sue others or be sued, own assets, pay taxes, and borrow money. The status as a corporation protects its owners from being held personally liable in the event of a lawsuit or claim. A corporation is owned by its officers/members, shareholders, and/or stockholders. The board of directors manages the daily operations of the corporation and has a duty to act in the best interest of its shareholders. Only list the corporation as the named insured, do not list the officers or directors.
An LLC, or limited liability company, is a business structure that combines aspects of both partnerships and corporations. It allows for flexibility of organization and control while still limiting the personal liability of investors. Only list the LLC as the named insured, not the members.
What’s the difference between a named insured and an additional insured?
The Named Insured is the person(s) or business(es) actually named on the policy declarations page.
Additional Insureds are usually persons or entities added to the policy by endorsem*nt. The endorsem*nt states what sort of rights are granted to the Additional Insured. Some AI endorsem*nts cover the persons or entities named on them only for claims arising out of acts or omissions of the named insured, while some limit coverage to claims arising from premises owned by the AI and leased to the insured.
Learn more about how Coterie simplifies additional insureds with our blanket additional insured bundle!
