By Chris Richmond
Originally Submitted to WorkBoat Magazine / December 2020
This is about when what seems like a small thing can be a very big thing: Who actually owns the yard, building, ship, truck, tool box or other thing that needs insurance?
We’re talking about something called “insurable interest.” In basic terms, this means the named owner. The real owner is identified as the named insured on an insurance policy. We have seen times when there is an owner in the name of one company but another company (an operations company) actually runs the business.
Very often, the owner of both entities is one and the same. Also very often, that same business owner doesn’t think to identify all of the entities he or she has set up. This will be a serious problem when a claim arises. If the actual legal owner of the property is other than what’s shown on an insurance policy, the policy may not respond because there is no “insurable interest” for the person or entity on the policy. In cases like these, it is most likely the claim will be denied.
In other words, if a company or entity is not named on an insurance policy, it is highly likely there is no coverage.
There was a claim at a local yard where the named insured on the insurance policy was the operating company but not the actual owner of the property. The bank holding the mortgage had accepted proof of insurance that showed the wrong name as the property owner.
There was a devastating fire. When the insurance company’s claims adjuster arrived, he asked who the owner was. When the company owner named the actual company that owned the property, the claims adjuster explained that he didn’t see that entity named anywhere on the insurance policy. Technically, both the owner and the bank were out of luck. After some very heavy negotiations, which included pointing out that the owners of both entities were one and the same, the insurer relented and agreed to pay the claim. This case is an exception to the rule.
When doing an insurance review, the first topic we discuss is the named insured – and we ask if there are any other entities operating that are not listed. As always, the time to have this discussion is before there is a claim as afterwards it is often too late.
The same goes for vessels. Many vessel owners have each vessel in a separate company. Send the vessel’s certificate of documentation to your insurance agent to make sure the actual owner of the vessel is listed correctly on the insurance policy.