Does an owner that owns 2 seperate business entities expose company assets when combined under 1 insurance policy?

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Does an owner that owns 2 seperate business entities expose company assets when combined under 1 insurance policy?

One owner has a real estate brokerage and a separate commercial property management business. They have separate LLC’s and separate FEIN’s. They want to combine them under one business insurance policy.

Asked on May 31, 2019 under Insurance Law, Arizona

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 1 year ago | Contributor

Combining them under one policy could contribute to exposing the assets of Company 1 to a suit or claim against Company 2. While the overall analysis is more complicated then just whether there is a shared insurance policy, anything that tends to show that the companies are effectively treated as one entity by their owners can lead to "piercing the corporate" veil, or bypasing the liability protection afforded by the LLC structure. For LLCs to be inviolate, they have to each be fully treated as a separate, independent entity, so any comingling erodes that protection. Having one policy is itself not at all fatal, but it is undesirable, and unless you are obtaining very signficant cost savings by one policy over two, you would be better off having separate policies.


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