Combinability of Interest

[bbane]

For the purposes of general liability coverage, must the named insureds listed be legaly combinable, i.e. 51% common ownership? If so, where is that stated?

[Big Dog]

There needs to be some sort of common interest or ownership, either through stock ownership, partnership (General or Limited) or a joint venture.

What is the specific scenario?

[bbane]

There is no specific scenario. It is understood there needs to be some common ownership. I am trying to establish if there is a requirement as to the percentage of ownership. Throughout my career, shared by some of my some colleagues, I understood that 51% ownership was a requirement for combinability. I can only find such documented for WC and auto. We are trying to determine if such requirement applies to GL.

[Big Dog]

As a general rule, the same 51% common ownership would apply to General Liability, with the primary exception being joint ventures.

If MegaCorporation has 51% ownership in LittleCompany B, then both can be written on one GL policy. If they have only 20% ownership interest in LittleCompany C, then most likely a separate policy needs to be written for this.

Common sense needs to prevail. It's not that tough.

[Amur]

Good explanation from Big Dog. Further explanation.

Combinability of LLC's, Corporations, Partnerships and Sole Proprietorships is generally based on one of the officers of the Corporation owning at least 51%, with that same officer (if wanting to combine with another entity), having at least 51% ownership of the entity it is wanting to combine with, if it is a partnership wanting to combine with an LLC, or Corporation, then one of the Partners must also have at least 51% ownership of the partnership as well as at least 51% ownership of the other entity or entities they would like to combine with. If it is a sole proprietorship (100% ownership), the sole proprietor who wants to combine with another entity must have at least 51% ownership of the entity it wants to combine with. With sole proprietorships wanting to combine with other entities it sometimes can be an issue for underwriters for various reasons. But it never hurts to ask!

This applies to general liability, automobile, umbrella's and any other type of liability policy desired.

This is provided by me a person with 13 years commercial underwriting experience. Hope this helps further clarify.

[Santa Rosa Ins Broker]

I want to correct a fallacy that seems to keep getting perpetuated.

Workers Compensation
Combinability for Workers Comp only requires that more than 50% or a majority of the ownership(could be more than one person(s)/entity(entites) or combination of person(s)/entitiy(ies) is common between the 2 entities to be combined). 51% is a fallacy.

This is directly from the California Workers Compensation Experience Rating Plan, Section IV Change in Status or Combination of Entites

2. Combination of Entities
Separate entities shall be combined for experience rating purposes when the same person or
persons own a majority interest in each of the entities.

This is usally accomplished by the carrier putting both entities of the same policy, or by issuing seperate policies that tie together for experience rating. There is no rule that they must be on the same policy. I have had them issued seperately with the same carrier for billing purposes. In general you will not be able to split the two combinable entites between 2 seperate carriers, since one carrier could get stuck with the adverse risk(dynamite mfg vs pillow factory).

[shellilk]

When there is common ownership despite the % in entities that are SPE, and LLC's for single project, they can be combined under one policy - for example an OCIP or project policy. Even a practice policy when the project is going to be over many years and an OCIP cannot be written for 5-6 term to accomodate the various phases and projects.

[wjohnson]

Would husband and wife be considered the same ownership? No written rule to be found in the
Underwriting manual. Scenario: Husband is deceased and business is now in the wife's name.
Would it be necessary to cancel the policy and rewrite to the wife?

[NYagent301]

I know this is an old thread, but have a similar situation to what Santa Rosa says above. If an individual invests and owns two totally different companies example dynamite mfg and a pillow factory that they would be combined to one bureau experience mod and file number? Also I see a problem in having one carrier write both risks since their appetite may differ. Anyone else deal with an individual that owns multiple companies that perform totally different operations?

[ocbroker]

In California, yes they are combined for rating purposes. Splitting the risks is acceptable, but it is done at the discretion of each individual carrier. I believe that the State Fund doesn't allow it, which would limit your ability to place two policies separately, in your example of a pillow mfg/dynamite factory below.