Insurance Coverage For Joint Ventures
A joint venture is an entity formed by two or more businesses that want to pursue a specific purpose for a specified period of time. While some states require a legal filing of the venture, other states recognize any entity that meets the definition.
A joint venture can consist of sole proprietors, corporations, partnerships or any combination of these entities. Insurance policies generally do not cover a joint venture unless the venture’s name is shown on the policy as a “named insured.”
The standard liability policy also contains an exception to coverage for past entities and unnamed partnerships or joint ventures. It is always prudent to remove any “past entity exclusion” when coverage for a previous entity is sought.
A sample “persons insured” provision of a Commercial General Liability policy states:
If you are designated in the Declarations as:
* * *
(b) a partnership or joint venture, you are insured. Your members, your partners and their spouses also are insureds, but only with respect to the conduct of your business.
The “separation of insureds” provisions of the 1990-1993 policies state:
Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in this Coverage Part to the first Named Insured, this insurance applies:
(a) as if each Named Insured were the only Named Insured; and
(b) separately to each insured against whom claim is made or “suit” is brought.
An example of how this policy comes into play is discussed herein. Company “X” was alleged to be, and in fact was, a member of the Company “Y” joint venture, and was alleged to have committed acts of unfair competition in its capacity as a member of the “Y” joint venture.
Some policy forms may include coverage for joint ventures as defined insured, thereby extending the defense obligation directly to co-defendants in a pending lawsuit.
The acts of which “X” was accused were, in part, independent of the acts of which “Y” was accused. Consequently, when these factual allegations are analyzed with the above provisions in mind, as well as the “separation of insureds” provisions, two conclusions result.
First, “Y”’s and “X”’s respective coverage claims (and the respective contract rights on which those claims are based), are independent. Insurer independently owed both “X” and “Y” a defense.
Second, and as a consequence of the first conclusion, a release by “Y” of its coverage claims against insurer arising from the underlying action (as opposed to a policy release), would not constitute a release of “X”’s coverage claims.
A joint venture can consist of sole proprietors, corporations, partnerships or any combination of these entities. Insurance policies generally do not cover a joint venture unless the venture’s name is shown on the policy as a “named insured.”
The standard liability policy also contains an exception to coverage for past entities and unnamed partnerships or joint ventures. It is always prudent to remove any “past entity exclusion” when coverage for a previous entity is sought.
A sample “persons insured” provision of a Commercial General Liability policy states:
If you are designated in the Declarations as:
* * *
(b) a partnership or joint venture, you are insured. Your members, your partners and their spouses also are insureds, but only with respect to the conduct of your business.
The “separation of insureds” provisions of the 1990-1993 policies state:
Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in this Coverage Part to the first Named Insured, this insurance applies:
(a) as if each Named Insured were the only Named Insured; and
(b) separately to each insured against whom claim is made or “suit” is brought.
An example of how this policy comes into play is discussed herein. Company “X” was alleged to be, and in fact was, a member of the Company “Y” joint venture, and was alleged to have committed acts of unfair competition in its capacity as a member of the “Y” joint venture.
Some policy forms may include coverage for joint ventures as defined insured, thereby extending the defense obligation directly to co-defendants in a pending lawsuit.
The acts of which “X” was accused were, in part, independent of the acts of which “Y” was accused. Consequently, when these factual allegations are analyzed with the above provisions in mind, as well as the “separation of insureds” provisions, two conclusions result.
First, “Y”’s and “X”’s respective coverage claims (and the respective contract rights on which those claims are based), are independent. Insurer independently owed both “X” and “Y” a defense.
Second, and as a consequence of the first conclusion, a release by “Y” of its coverage claims against insurer arising from the underlying action (as opposed to a policy release), would not constitute a release of “X”’s coverage claims.
