Understanding General Liability Coverage for Newly Acquired or Formed Organizations
As a business owner, you know the importance of protecting your company from potential risks and liabilities. When your organization acquires or forms new entities, it's essential to take into consideration how General Liability (GL) insurance can safeguard your interests during this transitional period. However, there are some critical nuances to be aware of, especially when dealing with Limited Liability Companies (LLCs) and Joint Ventures.
Let’s explore the ins and outs of GL coverage for newly acquired or formed organizations, shedding light on the exceptions, limitations, and potential solutions to ensure comprehensive protection for your business.
The 90-Day Coverage Rule
In standard insurance practices, GL coverage is often extended to newly acquired or formed organizations for a limited period of 90 days. This grace period allows businesses to integrate the new entities into their insurance policies seamlessly. During these 90 days, the new organization benefits from the same coverage and protection as the existing one, reducing potential vulnerabilities during the transition.
Exceptions for LLCs and Joint Ventures
While the 90-day coverage may apply to many types of organizations, it's crucial to note that this rule comes with some exceptions, particularly for LLCs and Joint Ventures. Unlike other newly acquired or formed entities, LLCs and Joint Ventures might not automatically receive the 90-day GL coverage. This exclusion can expose your business to risks if not addressed promptly.
No Coverage for Past Partnerships, Joint Ventures, or LLCs
As a business owner, it is vital to understand that your existing GL policy may not cover past partnerships, joint ventures, or LLCs unless explicitly listed as named insured. This means that if any legal entity your business was previously associated with is not specified in your current policy, there will be no protection extended to it.
Seeking Protection Through Manuscript Endorsements
To address the coverage gaps for past LLCs and joint ventures, business owners have an option - the manuscript endorsement. This endorsement, also known as a custom endorsement, allows you to modify your existing GL policy to add coverage for specific entities on an excess basis. By doing so, you can protect your business from potential claims arising from past dealings with these entities.
The Importance of Reviewing Insurance Policies
General Liability coverage is a vital component of protecting your business from unforeseen risks and liabilities. However, when it comes to newly acquired or formed organizations, there are exceptions and limitations, particularly concerning LLCs and Joint Ventures.
Given the complexities and variations in GL coverage for newly acquired or formed organizations, it's essential for business owners to meticulously review their insurance policies. During mergers, acquisitions, or when forming new entities, consulting with an experienced insurance agent can help ensure that your business is adequately protected. This proactive approach can save you from potentially costly liabilities in the future.
Give Our Team A Call
As a responsible business owner, taking the time to review and understand your insurance policies can provide you with peace of mind, knowing that your organization is adequately protected throughout all phases of growth and expansion. Stay informed, seek professional guidance, and prioritize your business's insurance needs to navigate the complexities of GL coverage for newly acquired or formed organizations successfully. To safeguard your business comprehensively, call our team to discuss your needs.