Let’s say you have an insured with multiple companies, all owning various assets or performing different operations. A classic example is a property owner who deeds each of her properties into a separate LLC. No problem here – simply write a separate General Liability/Package policy for each location with a Designated Premises/Project limitation. This happens all the time, especially in the world of real estate where a designated premises endorsement is sometimes mandatory.
Like a good insurance broker you recommend Hired & Non-Owned Automobile to the insured. For ~$150 to add to a BOP, and slightly more to put it on a Package, it’s a no-brainer upgrade – everyone should have this coverage in place.
But here’s the rub – most Hired & Non-Owned coverage is an endorsement that amends the underlying General Liability… which you’ve limited to Designated Premises or Projects. Meaning your Hired & Non-Owned Auto coverage likely only protects the insured from BI/PD arising out of the ownership, maintenance, use, etc. of the designated premises, or only those operations you specified.
As long as you put Hired & Non-Owned Auto coverage on each policy though, maybe you’re safe? Probably not 100%. Let’s say you have an insured that owns various real estate under the name “Real Estate LLC”. There are 3 properties, each insured with separate carriers for price or coverage reasons and each with a policy that contains a Designated Premises Limitation. You’ve done your job and endorsed Hired & Non-Owned onto to all 3 policies.
Now this client, via their “Real Estate LLC”, is about to purchase a 4th property. They drive over to meet the seller and cause a serious accident. Very arguably the injured party can say your client was driving for/on behalf of “Real Estate LLC” – after all Real Estate LLC was the one making the deal to purchase this property. Clearly this is a Hired/Non-Owned situation – a member of Real Estate LLC was using an auto that Real Estate LLC does not own in its business on its behalf.
Now remember – we have three policies written in the name of “Real Estate, LLC”. But all have a Designated Premises Limitation which says in part:
[We cover liability for] The ownership, maintenance or use of the premises shown in the Schedule and operations necessary or incidental to those premises;
While undefined, simply because an action is being conducted by a common owner doesn’t make that action “necessary or incidental” to any particular owned premises, otherwise this endorsement would be meaningless. So the question is – does looking at a new building, completely unrelated to your others, constitute “necessary or incidental” activities, as it relates to the other properties and their policies, thus triggering the General Liability coverage (and the Hired/Non-Owned endorsed thereto) under one or more? While ultimately a legal question, my answer would be an emphatic, “No.”
There are solutions to this situation – write Hired/Non-Owned on a separate/standalone auto policy; this policy won’t be limited to the “Designated Premises” like the GL would be. Further, since a separate Hired/Non-Owned Auto policy would “follow the insured”, you wouldn’t need to endorse it on every policy that insured has – potentially saving money.
Granted, it can be difficult to find a carrier that will write standalone Hired & Non-Owned coverage, but it’s even more unlikely to be able to change or manuscript your GL coverage.
Granted, this is likely a small crack in coverage but it’s one to be aware of. It’s also more likely to affect “smaller” insureds who don’t have the clout – say a schedule of 50 properties – to be able to convince a carrier to offer exception. At the very least, though, even if you can’t find coverage you need to make your clients aware of the potential gap.