Limited Liability Company Status as the Insured

A new insured is a limited liability company. The insured has the following risk exposures: commercial property; general liability; business auto; and workers compensation. How do the various coverage forms treat a limited liability company when it comes to the status of an insured? In other words, is the company treated as a corporation or as a partnership or as some other type of business entity?

Georgia Subscriber

A limited liability company is something like a cross between a corporation and a partnership. That is, it is similar to a partnership in that income goes to the members of the limited liability company who are then taxed individually instead of the company being taxed as a corporation; and, similar to a corporation in that the limited liability company's assets and not the individual member's personal assets are at risk from a lawsuit or claim against the company. And, a limited liability company may be treated differently from a corporation or a partnership or any other business entity when it comes to an individual state's business and tax laws; for example, laws setting up the limited liability company speak about managers, agents, persons, and members—not executive officers, directors, and shareholders.. However, the insurance coverage forms your insured needs have no problems with a limited liability company as a named insured, and they treat the limited liability company like any other named insured business.

The commercial property form, CP 00 10, does not have a “who is an insured” clause like the CGL form, but it does state that the words “you” and “your” refer to the named insured shown in the declarations. The declarations page simply has a line for the named insured to be listed, whether the named insured be a corporation, a partnership, or a limited liability company. So, if your insured is listed as ABC Company, a Limited Liability Company (or LLC), this would mean that the limited liability company—ABC—as the named insured has the same coverages and duties as would a named insured listed as ABC Corporation, or ABC, a partnership.

The declarations page of the CGL form allows the named insured to describe itself as a limited liability company. And the “who is an insured” clause has a specific paragraph applying to the limited liability company, with the named insured considered as an insured (also considered as insureds are members of the limited liability company and managers of the company). However, the CGL form treats the limited liability company as the named insured and its status as a limited liability company does not affect this treatment.

The business auto policy also allows the named insured to describe itself as a limited liability company on the declarations page. And again, if a limited liability company is the named insured, it has the same coverages and duties as would any other named insured, regardless of its type of business. The “who is an insured” clause on the auto policy does curb coverage (to a degree) for a limited liability insured, in that a member of the limited liability company is not an insured for autos owned by him or a member of his household. The named insured limited liability company is an insured under this circumstance, but the individual member is not.

As for the workers compensation policy, the insured is the employer named in the information page, and if the employer is a limited liability company, the WC insurance applies just as if the employer was a corporation or a partnership. The WC policy does mention a partnership, allowing partners to be considered as insureds; it does not mention the members of a limited liability company as being insureds, so that is something to be considered.

In sum, if your named insured is a limited liability company, there is no need to be concerned that the various insurance coverage forms will respond in a way that would be different if the named insured was some other type of business entity.

 

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