ADJUSTERS INTERNAT IONAL . COM 3 A D J U S T I N G T O D A Y permits insurers, agents and brokers to use definitions and interpretations that are as wide as possible to accommodate the variations of interest that occur between ownership and property owned. Business Factors Definitions and interpretations that are very broad in connecting insurable interest are particularly applicable in providing insurance for corporations for several reasons: 1. By its very nature, a corporation is in business to do business, not to buy insurance. Consequently, business decisions are not normally based on insurability. Operations call for a wide range of activities, some of which change daily, and this depth and diversity can have a dramatic effect on insurable interests. The interest of the corporation in some of the property in its possession will not always be clear and straightforward. 2. The period of insurance — normally 12 months — provides more than enough time for changes to occur between the policy’s inception and expiration dates. New insurable interests will emerge; old ones will disappear; and still others will become hard to distinguish, falling into “gray areas.” 3. Complicating these changes in insurable interests is the matter of communicating them to the insurance agent/broker. Too many of them will confirm that they are usually the last to know of potentially significant changes in a company’s operations. The firm’s attorney will know; so will its financiers (they always know!) along with, it seems, everyone else. Unfortunately, it is too often only after a loss occurs that the agent/broker learns of what he or she should have known previously! What Can Be Done? The claim failure in the case study noted at the beginning of this article was influenced by a combination of the business factors and by the fact that the property insurance policy was not properly constructed. Of course, even the most professional agent/broker cannot predict or hope to deal with all of the possibilities or eventualities that can affect a corporation’s insurable interests. But he or she can prepare to circumvent potential problems, and therefore greatly reduce the client’s exposure to rejection of claims by defining the named insured and describing the property covered in ways that are as broad as the insurer will accept. Broadening the Named Insured The following language is representative and has been seen often as an endorsement in property policies to broaden the named insured. It avoids the problem of having to continually add new entities during the policy period for an active corporation. It would have provided coverage for claims which would have been denied if more precise or specific language (such as an outdated list of entities) had been used. “XYZ Corp. Ltd., and/or Subsidiary Companies and/or Associated Companies and/or Affiliated Companies and/or Directors/Shareholders acting on behalf of the aforementioned for their respective rights and interests.” This definition is particularly useful for corporate groups where there is movement of property by what are essentially bookkeeping entries between the various companies and/ or shareholders; or where a client creates new subsidiaries and divests Unfortunately, it is too often only after a loss occurs that the agent/broker learns what he or she should have known previously! “ ”
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