What’s in a Name?  Maybe Insurance Coverage, or Not

Author: Bill McEachern

“What’s in a name?  That which we call a rose by any other name would smell as sweet;”

Mr. Shakespeare said it well, in Romeo and Juliet no less.  There is a lot in a name. Good and bad, just depends.

The same is true for fictitious names. Good and bad, just depends. So, when can a fictitious name be bad?  Well, if the name limits your insurance coverage and the insurance carrier won’t pay you a cent, based on your use of the name, then you probably would view the name as something other than good.  Allow me to explain.

You have a company, maybe it’s a corporation; maybe it’s a limited liability company. Your one company operates several different business lines, so you decide to operate under more than one name – maybe you use the company name for one line of business and you use a fictitious name for the other line of business. Or perhaps you operate under two distinct fictitious names. As an example, you may have a store that sells feed primarily to farmers. It operates as the “Feed & Farm” store.  Then you begin a well drilling business, and while utilizing the same legal entity, you now use another fictitious name, the “Well & Pump” business. Same legal entity, but operating two separate business lines under two separate names.

All is good, until you have a lawsuit filed against your business because of personal injuries suffered as a result of an incident during the well drilling operations. And your insurance carrier notes that the insurance application was submitted solely under the “Feed & Farm” name and the policy states that the insured is the “Feed & Farm” business. And then they argue that the insurance coverage is limited to the feed operations.  If the First District Court of Appeal agrees,  you have no insurance coverage for the well drilling business. So, you get to fight the lawsuit with a lawyer you pay out of your own funds – rather than a lawyer retained and paid by the insurance carrier under its duty to defend under the policy. You also get to settle – if you settle – using your own funds; if you don’t settle and you are found liable, then you pay the judgment from your own funds.

Basically, these were the facts (somewhat simplified here) in Musselwhite v. Florida Farm General Insurance Company, et al., Case No. 1D18-780 (1st DCA May 28, 2019). The appellate court held that because the insurance policy insured only the line of business operating under the name “Feed & Farm”, the other, unrelated line of business – the well drilling business – was not covered by the insurance, even if that line of business was operated by the same legal entity (in this case, the legal entity  was a corporation which operated under two distinct fictitious names).

If you operate only one company, with only one line of business utilizing only one name, then probably this will not present a problem.  But if you use more than one name, for more than one line of business, then be cautious, very cautious, when submitting your insurance application. Have all names used in all your lines of business included as insureds. Allow your business name, or names, to always be profitable and good to you.

 

Bill’s experience includes but is not limited to commercial law transactions and litigation; asset-based lending, asset sales and leasing; business sales; corporate, partnership, and LLC matters; and bank and lender representation.

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