Insuring a Joint Venture – Putting the Pieces Together

Joint ventures are a legal entity and thus they need insurance protection just like the normal Corporation would need. Sometimes joint ventures are formed for a specific project, to take advantage of a special relationship, or to create equity shares of an ongoing activity.

Ventures can be corporations, limited partnerships, limited liability corporations, or a partnership. The legal status of the venture plays an integral part in the drafting an insurance portfolio program for the joint association.

The purpose of the joint venture is the first key factor that must be addressed in order to design the appropriate insurance program. If the agreement is for a short period of time, a limited period of time, or an ongoing period of time that will all determine the design of the general liability insurance program.

Clearly the purpose of the joint venture and the length of time that the partnership is to be in existence will have a great impact on the insurance coverages and limits.

There are normally four different avenues of providing insurance for the venture.

1. One option is for each individual member of the venture to cover their own exposure within the joint venture with their own insurance program.

2. The second option would be for the managing partner of the joint agreement to procure insurance in its totality for the partnership as a whole.

3. The third option is for the venture to have the commercial general liability insurance, workers compensation insurance, umbrella insurance, etc., all in the name of the joint venture in the design of the insurance program.

4. The fourth option which is not recommended very often is for one member to extend his or her insurance program to cover the joint venture and to extend the coverage for all the members within the one member’s personal insurance program.

Knowing which insurance strategy to use of these four options can mean the difference between success and failure in designing the appropriate commercial general liability insurance program.

By Robert    Watson

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