INSURANCE RISK MANAGEMENT FOR TRUSTS AND ESTATES AND FIDUCIARIES
Michael J. Faul, Jr., Esq.
If you are an executor, trustee and/or other fiduciary, you may sense a need to address the often complex subject of insurance coverage to protect assets for which you are responsible. Herold Law uniquely specializes in insurance coverage risk assessment from an unbiased, independent perspective. As a consequence of working closely with executors, trustees, other fiduciaries, and insurance brokers, we have identified scenarios where existing insurance policies should be reviewed as a matter of the exercise of fiduciary duty:
- Title transfers from Individuals to a Trust or corporate entity such as an LLC. Insurance Agent should be contacted and policy should be endorsed to insure the new corporate owner. Some insurers will not insure a Trust. Alternate insurers should be contacted for placement.
- Title is in individual name of the homeowner and homeowner dies. Home is now part of the Estate. Agent should be advised. There may be a vacancy issue and policies insuring a vacant house are very expensive.
- Liability to Third Parties. Homeowner’s policies insure risks for injuries or damages to third parties where the individual homeowner causes injury to a third party. If the individual is also a member of an LLC, the policy should be endorsed to insure the Member’s interest in the LLC for personal liability.
- Auto Policies, Homeowner’s Policies and Excess Policies should be consistent in terms of who is covered for risks.
- Policies should be reviewed at least annually upon renewal to reflect changed circumstances, additional coverages that may be needed, additional terms and conditions that impact on risk, additional exclusions or other limitations that impact the insured’s particular risks.
- Excess or Umbrella Policies insure for limits above the limits set forth in the underlying primary policy. These policies follow form, so if the underlying policy excludes coverage, the excess policies will not typically cover the risk. If the underlying liability policy carries a sublimit (a reduction in policy limits for a particular risk), umbrella/excess coverage for such risk is not in place.
- If an elderly client hires a home health care entity to provide home health care aides, that company should provide evidence of workers’ compensation coverage and liability insurance in the event the elderly client is injured. Evidence of insurance should be on file with the custodian who handles the client’s records and bills.
- When multiple family members have an interest in real estate, all stakeholders having a legal interest in the property should be listed as additional insureds under the general liability policy.
- Complete insurance policies, including declaration pages and endorsements along with correspondence relating to same, should be archived electronically for ease of review and retrieval by the custodian of records. How the claim should be communicated to the insurer, i.e., email, fax or certified/registered mail is expressly set forth in the policy.
- All notices of claims shall be reported immediately to the broker/agent to avoid risking coverage. The terms and conditions of the policy relating to timeliness of claims should be strictly adhered to in order to avoid prejudice and the potential forfeiture of coverage based on late notice.