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If your business decides to create a new LLC, corporation or partnership, everything may seem the same—the people involved, the equipment used, the building occupied, the nature of the work done, etc. But you shouldn't assume that the new entity is covered by your current entity's liability insurance.


yellow puzzle piece   RELATED: Read Get the Right Liability Policies   yellow puzzle piece


For example, say an incorporated contractor decides to form an LLC for a specific project. The contractor negotiates the bids and accepts money on behalf of the LLC and may even hire other contractors to serve the LLC. The contractor's commercial general liability (CGL) insurance policy, written in the name of the corporation, will not extend coverage to claims filed against the LLC.

There are two ways for the contractor to address this issue. One way is to request that the LLC be added to the CGL that already exists for the corporation. The other way is to secure a separate CGL written in the name of the LLC. Failure to take one of these steps could lead to an uncovered loss and result in significant financial consequences for the new entity and those responsible for it.


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If you have any changes to your business, whether forming a different entity as described above, or even signing a new lease or making business purchase, you should verify with your agent you have the appropriate and adequate coverages.  Contact your agent for a policy review at any time to potentially avoid any coverage gaps.




SOURCE - Mines Press - COPYRIGHT ©2018. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is understood that the publishers are not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert advice is required, the services of a competent professional should be sought. 2/18.

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