Should Trade Names be Listed as Named Insureds on the CGL?

Question:

Our agency has encountered a claim scenario that has created an in-house discussion with multiple opinions on the “correct way" to list an insured on the Declarations page of a CGL policy.

Fictitiously, the Named Insured on the policy is John Smith, Inc. DBA John's Bargain Barn and Smith's Wholesale Exchange.

A patron alleges severe injury resulting from a slip and fall accident at an insured location. He sues John Smith, Inc. and John's Bargain Barn and Smith's Wholesale Outlet.

Two years prior to the loss, the named insured, John Smith, Inc., dropped the trade name Smith's Wholesale Exchange and “rebranded" as Smith's Wholesale Outlet.

The agency received a call from the general liability carrier advising that there is a potential “coverage issue" because Smith's Wholesale Outlet is not an insured on the policy, nor is it granted insured status.

Is this denial correct? How are trade names to be listed?

Anwer:

An insurance policy is a contract between the insurance carrier and a real “person." That “person" can be a natural person or a legal person. In the subject claim situation, the only real “person" is a legal person – John Smith, Inc. Trade names do not qualify as persons.

DBAs (and T/As) are not legal persons and have no legal standing. Since they are not persons and have no legal standing, they are unable to sue, be sued, own property or enter into a contract - they are wholly fictitious entities. In fact, these non-person entities can't do any harm to anyone because they are only a figment of the named insured's imagination – and imaginary “figments" can't hurt anyone or be legally liable to anyone. The only entity(ies) that is/are required to be listed on the insurance contract is/are the legal person(s), because that's who the insurance carrier agreed to protect.

A trade name, also called an “assumed name," is the how the business is known to the public, not how it is covered legally.

Let's compare it to an individual. A long-time friend of mine (since about sixth grade) is known to me and everyone else as “Chuck;" but his legal name is William David. None of his friends know him as William David, only the regulators know him as William David (DMV, the IRS, etc.). Let's assume he is involved in an auto accident and the suit papers arrive naming William David and “Chuck" as defendants, will the PAP defend only William David and not “Chuck"? That's stupid because the legal person, William David, is legally liable and the assumed name, “Chuck," is just “along for the ride." In fact, “Chuck" can't drive because he doesn't exist except as a figment of William David's imagination.

It's the same with legal names and trade names. Only one of them legally and actually exists. “Chuck" is not a real person according to the law and neither is a trade name used by any entity. In your example, neither John's Bargain Barn, Smith's Wholesale Exchange nor Smith's Wholesale Outlet actually exist as persons.

Remember, the only name or names required to be listed on the policy is/are the legal name(s) because that's the only living and real “person." I don't know how you could defend or deny defense for someone who doesn't exist. You can't get money from a non-existent entity. The idea that a carrier might try to deny defense because of a missing trade name is ludicrous. Further, no attorney worth his salt (which none really are) would sue a trade name (a non-entity).

The VU did a webinar on the topic of named insureds in the CGL and the BAP:

Are You Insuring ALL the Right People?

Last Updated: July 20, 2018