Will Southern California Wildfire Victims Get Burned Again? The Importance of Adding Your Trust as Additional Insured – By Christina Lewis, Esq

Southern California has been devastated by the recent wildfires.  Yet, wildfires aren’t the only natural disasters that threaten this region – earthquakes, floods, and landslides also serve as stark reminders of the importance of protecting your property and assets.  As Southern California property owners begin the difficult process of assessing their losses and submitting insurance claims, we are now hearing stories of some insurance companies denying claims where the property was transferred into a revocable trust*, but the trust was never added as an additional insured to the policy.  To avoid this from happening, a crucial step that many property owners can take is adding their trust as an “additional insured” or “additional interest” on insurance policies.

Homeowners’ insurance typically covers damage to the home and other structures, loss of use, personal property damage, and liability for injuries to visitors, all within the limits and exclusions outlined in the policy.  Generally speaking, the “primary insured” is the individual homeowner who is listed as the policyholder.  However, when the homeowner transfers the property to a revocable trust, the homeowner’s trust may not automatically be covered under the terms of the policy in the event of a claim.  Therefore, whenever a homeowner transfers the title of their property into a trust, it is prudent to update both the homeowners’ insurance policy and any umbrella policies to include the trust as a named insured or a party with additional interest to avoid potential complications that could lead to delay or denial of any claims.

Adding the trust as an “additional insured” or “additional interest” on the policy explicitly extends the policy’s coverage to the trust, offering the following benefits:

  1. Clear Protection for the Trust’s Assets:  If your trust owns property that is damaged by fire or other disasters, having the trust listed as an “additional insured” or “additional interest” explicitly protects the trust’s financial interests and ensures that the necessary funds are directly available for repair and reconstruction of trust assets.
  2. Clear Liability Coverage:  In the event of damage to neighboring properties or injuries to others, adding the trust as an “additional insured” or “additional interest” explicitly protects the trust estate in the event of claims against the trust as the property owner.
  3. Peace of Mind:  When your trust is listed as an “additional insured” or “additional interest” on your insurance policy, you can rest easy knowing that your trustee – whether that’s you or your appointed successor trustee – is clearly covered and authorized to make claims to safeguard the trust assets.

Adding your trust as an “additional insured” or “additional interest” is not a task that should be left until disaster strikes.  It’s important to proactively check that your policies are current, provide the necessary coverage, and extend coverage to all appropriate parties.  Without adding the trust as an additional insured, there is a risk that the insurance company could delay or deny claims made by the trustee, as property owner.  Or, in the event of the homeowner’s death before a claim is paid out, the insurance company may require a California probate to be opened in order to collect the insurance proceeds.

If you have questions about adding your trust as an “additional insured” or “additional interest,” or if you are having difficulties with a claim because you had not previously listed your trust as an “additional insured” or “additional interest” before suffering a loss, please give our firm a call to see how we can assist you.