LIMITED LIABILITY COMPANIES, PARTNERSHIPS, ETC.
Certain coverage amendments are necessary as respects both
Directors & Officers Liability and Comprehensive General Liability
coverage for limited liability companies, limited liability
partnerships, professional service liability companies, registered
limited liability partnerships, etc.
A typical Directors & Officers (D&O) Liability policy form
may not be appropriate for a limited liability company (LLC)
or any other similar entity such as those listed above. In
all likelihood, a carefully worded endorsement to clarify
full coverage intent for this exposure must be added. A Limited
Partnership Liability policy is necessary to provide D&O coverage
to a limited liability partnership.
As respects Comprehensive General Liability (CGL) coverage,
it is essential that the aforementioned business entities
be listed and specifically designated as to type in the policy
declarations. This requirement is indicated in the last paragraph
of the "Who Is An Insured" provision, which reads:
No person or organization is an insured with respect
to the conduct of current or past partnership or joint venture
that is not shown as a Named Insured in the Declaration.
All current and past limited partnerships, joint ventures, etc.,
must be named in the policy.
CGL coverage for a LLC is a problem. The coverage part as
it exists now extends coverage to shareholders, officers,
and directors. Those positions do not exist in a LLC, which
has members and managers instead.
We believe that (but have not yet seen) an ISO endorsment
has recently been made available that amends the "Who Is An
Insured" provision to the following wording:
1. If you are designated in the Declarations as:
c. a limited liability company you are insured. Your members
are insured but only with respect to the conduct of your business.
Your managers are insured but only with respect to
their duties as your managers.
In effect, as respects both D&O and CGL coverage for limited
partnerships or limited liability companies, the verbiage
of the policy must correspond to the nomenclature of the business
entity in question.
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