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Can 18 Restaurant LLCs Be Combined into One Policy?

How can we simplify the renewal process each year for an account with so many locations under different LLCs?
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can 18 restaurant llcs be combined into one policy?

A commercial client has 18 restaurants, all under different names, limited liability corporations, and policies with varying expiration dates. Other agencies have approached him and asked to wrap all this up on one policy with the same expiration date, excluding the workers compensation coverage. 

Q: We have thought about writing one policy—or a few policies—to include all the entities, but that would include many exposures for one liability limit. How can we simplify the renewal process each year for an account with so many locations under different LLCs?

Response 1: At a bare minimum, you can get the policies to share a common renewal date. If all the entities are owned by one master company, you could write the insurance with the master company name on a package—but if you think about it, having separate policies probably makes more sense since you can tailor limits and coverages appropriately to each risk.

You can "conglomerate bill" it if you're using an agency billing system or address direct bills as convenient for the client. Trying to manage it on one big policy sounds far more difficult, complex, and prone to oversight and confusion.

Do you want to simplify the renewal process for the client or for yourself? If it's the latter, suck it up. This sounds like a very good account. If it is the insured's convenience that is being considered, ask if a common effective date would help and work with the carrier or carriers to accommodate that. 

Response 2: The biggest issue is the dilution of limits. That can be overcome with a larger excess liability limit. Using that format, you can—with discussion and underwriting—seek to have the limits per location or claim. 

The next issue is: Does your client control at least 67% ownership in each LLC entity?

Work with your carrier to seek that extra panache of client services. Attend their industry trade shows to learn about other aspects of the restaurant business.

Response 3: If the client is the main member of all the LLCs, it is possible to write one policy with the main client and list the 18 LLCs as named insureds. However, you would have to watch out for a cross liability suits exclusion. Also, if more than one entity were involved in a suit, they would have to share the limit and defense. You would also need to be aware of any newly acquired or formed LLCs because there is no automatic coverage, at least in ISO forms. 

Response 4: If your client is controlling all of the LLCs, why not wrap them up in one master property and liability program with per location liability limits and with a high limits umbrella? Crime insurance, employment practices liability insurance, cyber and other lines could be on a master policy. That would be my first approach unless there's a special reason not to.

As to the workers comp, that's dependent on the states and members of each LLC. It might be combinable if the same persons or entities own the majority interest. For example, in California the Workers Compensation Insurance Rating Bureau of California (WCIRB) does not look at the actual ownership of the LLC but instead determines ownership of an LLC as though each member owns an equal share of the LLC. Thus, LLCs often are combinable for a workers comp policy. Other states might have a similar rule. 

Response 5: It's probably a good idea to email your carriers to see who will place all entities on one policy. Have a planning discussion with all parties and their attorneys to advise with rates and plans and let them decide after they know the facts.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

This article is intended for general informational purposes only, and any opinions expressed are solely those of the author(s). The article is provided “as is" with no warranties or representations of any kind, and any liability is disclaimed that is in any way connected to reliance on or use of the information contained therein. The article is not intended to constitute and should not be considered legal or other professional advice, nor shall it serve as a substitute for obtaining such advice. If specific expert advice is required or desired, the services of an appropriate, competent professional, such as an attorney or accountant, should be sought.

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Friday, October 29, 2021
Restaurants/Bars