What is a ‘named insured’ and ‘interested party’

Every industry comes with its own jargon and terminology, but as an insurance professional, you’ll probably agree that ours seem to have a particularly special amount of terms that are not as straightforward as they sound, or that overlap with other, similar sounding definitions.

But insurance contracts are all about precision.

So, we thought we’d spend some time comparing what is a ‘named insured’ and an ‘interested party’ for a contract of general insurance, and explaining how an ‘interested party’ may apply to a range of different types of clients (e.g. landlords, financiers, business owners and principals).

What is a ‘named insured’?

A ‘named insured’:

• is usually a party to the contract of insurance but is not the contracting party or insured;
• will receive and can give insurance notices – such as – expiry/renewal or cancellation notices; and
• can make a claim and enforce the policy directly against the insurer, although the conduct of the contracting party / insured can affect whether a claim is paid – for example – non disclosure.

An example of a named insured is the description of insured in the policy wording or schedule including “subcontractors and consultants engaged by the insured from time to time”.

What is an ‘interested party’?

An ‘interested party’:

• has a direct or indirect interest in the subject matter of the contract of insurance;
• is not a party to the contract of insurance but may be a third party beneficiary (TPB) if they are specified or referred to in the contract by name or otherwise as someone to whom the benefits of the insurance cover extends;
• does not receive any insurance notices such as – expiry/renewal or cancellation notices; and
• if they are a TPB, has the right to recover from the insurer the amount of any loss they suffer in accordance with the contract, although the conduct of the contracting party / insured can affect whether a claim is paid – for example – duty of utmost good faith.

An example of an interested party is a hire agreement may require an event organiser to purchase public liability insurance to cover property damage or personal injury to the public while the event is being carried on at the venue and may require the owner of the event venue to be named as an interested party.

Types of interested parties and what might be covered

We’ve collated some common examples of interested parties in business to business contracts for your reference. We’ve also included some examples of what might be covered, but it should be noted that these are examples only, and the specifics will completely depend on the terms and conditions of any policy.

In each of the following examples, the interested party has a direct or indirect financial interest in the outcome of the insurance policy, and their interests must be considered when determining the terms and conditions of the policy.

• Landlords – a landlord would likely be considered an interested party in a property insurance policy. If a property is damaged, the landlord may have a financial interest in the insurance payout to repair or rebuild the property. Tenants would also likely be interested parties, for example, if their lease agreement contained a clause that stated that their contents would be covered under a policy provided by the landlord.

• Financiers – financiers could also be considered an interested party in a property insurance policy. This scenario might arise if the property being insured is used as collateral for a loan. The financier would have an interest in the insurance payout in the event of damage or loss to the property.

• Principals – In the course of running a business, a principal would have an interest in protection from lawsuits from third parties that might cause financial loss, and would be interested parties in any professional indemnity or third party liability cover.

Key takeaways

If you have clients with more complex needs or have legal and contractual relationships that you believe would benefit from a policy that includes clear (or clearer) provisions for an interested party, we can help.

Our experienced, professional team can help tailor the insurance options you offer to clients to fit their specific needs, and help you provide them the cover they need.

What is the Retroactive Date?

What is the difference between a Letter of Appointment and a Letter of Authority?

What is Run-Off Insurance? Why Do I Need It?