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Trust Issues in Business Insurance: Avoiding Pitfalls with Your Coverage
When businesses and property owners invest in insurance, they expect their policies to provide financial protection in times of crisis. However, trust issues often arise when insurers delay claims, deny valid coverage, or fail to account for legal ownership structures—such as when property is held in a trust.
Understanding these challenges can help business owners take proactive steps to ensure they receive fair treatment from their insurance providers.
Why Do Businesses and Property Owners Face Insurance Trust Issues?
Many policyholders experience disputes when filing claims due to the following:
- Delays in Claim Processing: Insurers may stall payouts, hoping policyholders will accept a lower settlement.
- Denials Based on Ownership Structure: If a property is held in a Revocable Trust, but the trust is not named as an insured party on the policy, the insurer may reject the claim, arguing that the policyholder lacks an “insurable interest.”
- Underpayment of Claims: Even when claims are approved, insurers may undervalue the damages, leaving policyholders with insufficient funds for repairs or rebuilding.
These issues are particularly concerning after disasters such as fires, storms, or business interruptions. The recent LA wildfires highlighted problems homeowners faced because their insurance policies failed to name their trust properly, leading to denied claims.
How to Protect Your Business and Property from Insurance Gaps?
To avoid unnecessary disputes, business and property owners should take the following steps:
- List Your Trust as an Additional Insured: If your business or property is held in a Revocable Trust, ensure the trust is listed on your insurance policy to prevent claim denials.
- Verify Insurance Coverage After Property Transfers: Whenever you transfer real estate into a trust, immediately contact your insurer to update your policy.
- Document All Changes in Writing: Request written confirmation from your insurance company or broker that the trust has been added as an additional insured.
- Ensure the Trust Name Matches Legal Documents: The trust’s name on your insurance policy should exactly match its legal title to avoid disputes.
- Consult an Insurance Expert or Attorney: If your claim is denied due to an ownership issue, seek legal guidance to fight back against bad faith insurance practices.
Why Adding a Trust to Your Insurance Policy Matters?
Properly listing a trust in your insurance policies offers key benefits, including:
- Protecting Both Personal and Trust Interests: Ensures that claims are paid to the appropriate entity.
- Maintaining the Integrity of Your Estate Plan: Avoids unnecessary legal disputes.
- Preventing Claim Denials: Reduces the risk of insurers refusing payouts due to technicalities.
- Avoiding Probate Issues: Insurance proceeds go directly to the appropriate parties without delays.
Whether you own a business or have property held in a trust, taking proactive steps to ensure your policy accurately reflects ownership can prevent costly claim denials. Reviewing your policy, updating it when necessary, and obtaining written confirmation of changes can protect your financial interests and avoid unnecessary disputes with insurers.
New Jersey Insurance Attorneys at Herold Law, P.A. Will Help You with Disputes
If you have encountered insurance challenges related to business coverage or property held in a trust, contact the New Jersey insurance Attorneys at Herold Law, P.A. Call 908-679-5011 or complete our online form. Located in Warren, New Jersey, we serve clients in Morristown, Somerville, and across the state.
