LLC as Additional Insured - Does this pierce the veil?

[Nathan Williams]

Hi All,

I've read some previous posts on this same scenario but I am still not understanding the right way to structure/approach this.

I did a quit claim deed on my properties to an LLC. I own them outright.

I want to switch the insurance policies over as well. My agent is recommending that we can add the LLC as an additional insured as opposed to canceling and rewriting the policies as the Name Insured.

Something doesn't feel right about this. I've been very diligent about setting this up to not co-mingle funds or my name whatsoever. Would this pierce the veil? What do you recommend?

Thanks!

Nathan

[Frank Chin]

Originally posted by @Nathan Williams:

Hi @Account Closed - I had my carrier cancel all policies and rewrite them in the name of the LLC. It was overkill according to them but something I felt more comfortable with. Hope this helps and good luck!

Nathan, I had an LLC, but not for real estate, bought liability insurance, and the agent had me to also add an endorsement to cover me as an additional insured.

I had spoken to attorneys here in NY about this issue, and I was advised by lawyers as well as my insurance agent that litigants normally sue the LLC as well as the owner by default. Asked about the issue of corporate veil and told the owners are sued normally for personal negligence, hardly ever for piercing the veil.

Reason for my interest and concern is I bought a business that I placed in the LLC from an owner who had it in his S Corp, and was sued for $3 million. His S Corp and he himself were each sued. Unfortunately, his S Corp only had $1 million coverage, and he's on the hook personally for $2 million. The S Corp insurance did not have him as additional insured. His insurance company had to hire lawyers and was told he himself had to get his own lawyers separately. Was told if he was additional insured, his insurance company would have covered both.

Have spoken to the owner and he complained no one told him. But at the end, plaintiffs settled for $1 million, because he moved to FL, put all his money into his home, and the homestead laws protected him.

I have not placed my properties into LLC's, and if I did, buy insurance, will have me as additional insured. As to corporate veil, was told owners are normally sued for negligence anyway. LLC's and corporate veil does not get into the picture. But if you are an absentee owner, use a PM, make sure your PM has adequate E&O insurance to cover. The most common case is slip and falls after a snowstorm for failure to remove snow. They come after YOU also for failure to shovel, not the LLC.