WHO PAYS THE PREMIUMS?

ARE ALL NAMED INSURED LIABLE?

An area of specialization for Teller, Levit & Silvertrust, P.C. is the collection of audit premiums for insurance companies. When we receive a claim it is often captioned against a particular business entity. If we examine the information page, now known as the declaration sheet, we generally find that the captioned debtor is the entity listed first. A closer examination of the declaration sheet, however, will often reveal that there are endorsements naming additional insureds.

The question that we must answer is whether these named insureds are responsible for payment of the premiums along with the named insured. Most policies contain the following clause under the conditions section: If the earned premium is more than the advance premium paid, the named insured shall pay the excess to the company; Furthermore, in another section of the policy "named insured" is defined as: ,„any subsidiary of the named insured and any other entity coming under the named insured's control over which it assumes active management.

Reviewing these provisions we can see that the insurance company may have provided us with many more targets for liability of the premium than just the trade style under which the claim may have been submitted. We may be able to sue all entities listed as named insureds on the declaration sheet and endorsements, and in addition, subsidiary companies controlled by the actual named insureds in the policy. Before we commence any suit on an audit premium we always try to review the declaration sheet and the actual application for coverage submitted by the producer.

Even if an entity listed as a named insured claims that it did not have knowledge of or authorize the purchase of the coverage, if that entity received the benefits of the coverage that entity could still be made a party and held liable for part of the premium. Our research has turned up only a few cases dealing with the issue of the liability of a named insureds who disclaimed liability. One such case is Hartford Indemnity v. L & T, Inc. 455 So.2d 1074. 1984. This was a decision of the Florida appellate court in which the court stated:

The [additional named insured] contend that since Lane Lines [the named insured) alone obtained the insurance policies from Hartford, it was solely responsible for payment of the premiums, and they argue that they were never primarily liable to pay the premiums, even though included as named insureds under the policies. As a general rule, a party who accepts the benefits of a contract cannot escape its burdens, so that a named insured included on a policy at the request of another named insured becomes obligated to pay the premiums by accepting coverage under the policy. Therefore, there was at least a- prima facie legal obligation on the part of [the additional insureds] to pay the premiums.....

Although insurance companies generally have the well documented claims. unless one reviews those documents carefully certain rights of the company can be lost.

The material contained herein is not to be relied upon as a substitute for consultation with your attorney.