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Chapter 11: who is an insured.

This chapter addresses the status of insureds for businessowners liability coverage. The Who Is An Insured provision addresses who may be granted coverage under the liability portion of the form. The 2002 form expanded insured status by including volunteer workers. The 2006 edition included minor editorial revisions for clarification purposes and the deletion of insured status for operations of mobile equipment that is subject to motor vehicle law. The 2010 edition adds trusts as an insured. Other than that change, the Who Is An Insured section of the 2010 edition is the same as in the businessowners 2006 form.

C. Who Is An Insured

1. If you are designated in the Declarations as:

a. An individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner.

If a business is formed as a sole proprietorship, the individual named in the declarations and his or her spouse are insured, but only with respect to the conduct of a business owned solely by that individual. So, for example, if the sole proprietor business owner owns a second business also as a sole proprietor, coverage will not apply to that other business. A separate policy must be used to cover it.

b. partnership or joint venture, you are an insured. Your members, your partners and their spouses are also insureds, but only with respect to the conduct of your business.

This is similar to a., except it addresses partnerships.

c. limited liability company, you are an insured. Your members are also insureds, but only with respect to the conduct of your business. Your managers are insureds, but only with respect to their duties as your managers.

This category of insured status was introduced in 1997 to reflect the increased usage of the limited liability company structure. Under this approach the individual(s) named in the declarations and members of the limited liability company are considered insureds. Managers of the limited liability company are also insureds.

d. An organization other than a partnership, joint venture or limited liability company, you are an insured. Your "executive officers" and directors are insureds, but only with respect to their duties as your officers or directors, Your stockholders are also insureds, but only with respect to their liability as stockholders.

If the business is an organization other than a partnership, joint venture, or limited liability company--such as a corporation--it is an insured. In addition, executive officers and directors are insureds but only with respect to their duties as officers or directors of the organization. Stockholders are also insureds but only with respect to their liability as stockholders. Clearly the form is meant to provide coverage for liability arising from the insured business and not from nonbusiness activities in which insureds may engage.

e. A trust, you are an insured. Your trustees are also insureds, but only with respect to their duties as trustees.

The 2010 edition introduces a trust as a category of insured status. A trust is an entity created to hold assets for the benefit of persons or entities with trustees managing the trust and often holding title on behalf of the trust. Coverage for trustees extends only to their duties as trustees. This represents a broadening of coverage.

2. Each of the following is also an insured:

a. Your "volunteer workers" only while performing duties related to the conduct of your business, or your "employees", other than either your "executive officers" (if you are an organization other than a partnership, joint venture or limited liability company) or your managers (if you are a limited liability company), but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business. However, none of these "employees" or "volunteer workers" are insureds for:

(1) "Bodily injury" or "personal and advertising injury":

(a) To you, to your partners or members (if you are a partnership or joint venture), to your members (if you are a limited liability company), or to a co-"employee" while in the course of his or her employment or performing duties related to the conduct of your business, or to your other "volunteer workers" while performing duties related to the conduct of your business;

(b) To the spouse, child, parent, brother or sister of that co-"employee" as a consequence of Paragraph (a) above;

(c) For which there is any obligation to share damages with or repay someone else who must pay damages of the injury described in Paragraphs (a) or (b); or

(d) Arising out of his or her providing or failing to provide professional health care services.

The 2002 form introduced the term volunteer workers within the provision of this section. A defined term, volunteer workers are persons who are not employees of the insured, who donate their work, and who act at the direction of the insured without pay or compensation (See exact definition in the definitions section.) The addition of volunteer workers represented a broadening of coverage over the 1997 form.

A business organization's employees are covered for acts within the scope of their employment or while they are performing duties related to the conduct of business. For example, if an employee mops a floor and negligently leaves it wet, which causes a customer to slip and be injured, coverage applies to claims arising out of the employee's negligent act. If, however, the employee were acting outside the scope of his authority (i.e., performing duties for himself or for others), the policy may not consider him an insured for the negligent act, and he may not be covered for a resulting claim filed against him. The business owner, however, could be an insured for this type of claim.

Other specific occurrences that are excluded are bodily injury or property damage caused by an employee to an insured, including a coemployee in the course of employment. This exclusion is extended to the spouse, child, parent, brother, or sister of that coemployee as a consequence of paragraph (1) (a). For example, if an employee becomes irate and physically injures another employee, the business liability portion of the policy will not respond to a claim against the employee who caused the injury. This exclusion typically is referred to as the fellow employee or coemployee exclusion. The named insured business also may not have coverage under the businessowners form for the claim because of the workers compensation and employer's liability exclusions found in section II B., Liability Exclusions.

No coverage is available for employees for bodily injury arising out of their failure to provide professional healthcare services. Professional healthcare services would include services performed by a health professional (e.g., doctor or nurse). For example, if a company nurse negligently provides first aid to an injured employee, no coverage would apply for a claim against the nurse. If however, a worker at the company plant negligently provided first aid to a fellow plant worker, coverage would apply for a claim against the employee who is not a healthcare professional. If the insured business were brought into either of these claims, the form would respond on behalf of the business.

Finally, under the 1997 form, coverage was provided to retail druggists. This was eliminated in the 2002 form and represented a reduction in coverage. The 2006 and the 2010 forms maintain this limitation.

(2) "Property damage" to property:

(a) Owned, occupied or used by,

(b) Rented to, in the care, custody or control of, or over which physical control is being exercised for any purpose by you, any of your "employees", "volunteer workers", any partner or member (if you are a partnership or joint venture), or any member (if you are a limited liability company).

If an employee damages property that is owned, occupied, used, rented to, or in the care, custody, or control of the insured or employees, coverage will not apply for claims against the employee because he is not an insured for the situation.

b. Any person (other than your "employee" or "volunteer worker"), or any organization while acting as your real estate manager.

The business owner's real estate manager who is not an employee is considered an insured and covered under the businessowners liability coverage. For example, if an apartment building owner has a real estate broker managing his apartment building, the real estate manager is considered an insured and covered under the businessowners liability. If, however, the real estate manager were an employee of the apartment building owner, she would need to seek coverage as an employee and not as a real estate manager.

c. Any person or organization having proper temporary custody of your property if you die, but only:

(1) With respect to liability arising out of the maintenance or use of that property; and

(2) Until your legal representative has been appointed.

A person or organization that has temporary custody of a business owner's property attains insured status at the business owner's death. This insured status applies only to liability arising out of the maintenance or use of the business owner's property and ends when a legal representative has been appointed.

d. Your legal representative if you die, but only with respect to duties as such. That representative will have all your rights and duties under this policy.

The business owner's legal representative is an insured when the business owner dies, but only with respect to duties as such. The legal representative will have all of the business owner's rights and duties under the policy.

No person or organization is an insured with respect to the conduct of any current or past partnership, joint venture or limited liability company that is not shown as a Named Insured in the Declarations.

Finally, no person or organization is an insured with respect to the conduct of any current or past partnership, joint venture, or limited liability company not shown as a named insured in the declarations. Organizations such as partnerships and joint ventures must actually be named on the policy in order for liability coverage to extend to claims arising from their operations.

The Who Is An Insured provision limits insured status to the parties set forth in the form. Other individuals and entities may be added as insureds by using any one of the available additional insured endorsements to address the individual needs of the business owner, such as one of these endorsements:

* Additional Insured--Building Owner (BP 12 31)

* Additional Insured--Controlling Interest (BP 04 06)

* Additional Insured--Co-Owner of Insured Premises (BP 04 11)

* Additional Insured--Designated Person or Organization (BP 04 48)

* Additional Insured--Engineers, Architects, or Surveyors (BP 04 13)

* Additional Insured--Engineers, Architects or Surveyors Not Engaged by the Named Insured (BP 04 49)

* Additional Insured--Grantor of Franchise (BP 14 15)

* Additional Insured--Lessor of Leased Equipment (BP 04 16)

* Additional Insured--Managers or Lessors of Premises (BP 04 02)

* Additional Insured--Mortgagee, Assignee or Receiver (BP 04 09)

* Additional Insured--Owners, Lessees or Contractors (BP 04 50)

* Additional Insured--Owners, Lessees or Contractors--With Additional Insured Requirement in Construction Contract (BP 04 51)

* Additional Insured--Owners, Lessees or Contractors--Completed Operations (BP 14 02)

* Additional Insured--Owners or Other Interests from Whom Land Has Been Leased (BP 04 10)

* Additional Insured--State Or Political Subdivisions--Permits (BP 04 52)

* Additional Insured--State or Political Subdivision--Permits Relating to Premises (BP 04 07)

* Additional Insured--Townhouse Associations (BP 04 08)

* Additional Insured--Vendors (BP 04 47)
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Article Details
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Author:Krauss, George E.
Publication:Businessowners Policy Coverage Guide, 4th ed.
Date:Jun 1, 2010
Words:1895
Previous Article:Chapter 10: businessowners liability exclusions.
Next Article:Chapter 12: liability and medical expense limits and general conditions.
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