How to Add an Acquired Company to Your Policies

Ask your broker to add the acquired company as a named insured on every policy that should protect it, effective on the closing date, and get the endorsements in writing before you rely on them. Some policies cover a newly acquired company automatically, but only briefly. Under the standard general liability form, that coverage ends on the 90th day or when your policy ends, whichever comes first. It does not apply to limited liability companies (LLCs), partnerships or joint ventures, and does not apply if other similar insurance is available to the company. This guide is for holding company owners and search fund CEOs doing add-on acquisitions who already have an insurance program and need to bring the new company into it without a gap.

The short answer

Automatic coverage for a newly acquired company is a stopgap, not a plan. It differs by policy, and under the standard general liability form it does not apply to LLCs, which many add-ons are.
Under the standard form the window ends on the 90th day or when your policy period ends, whichever comes first, so an acquisition close to renewal gets far less than 90 days.
Automatic provisions do not reach injuries or offenses that happened before the acquisition. Those stay with the acquired company's own historical policies.
Several events need prompt notice: the acquisition itself, new vehicles and locations, the workers' comp ownership change, and size thresholds on directors and officers policies.
The clean answer is to send your broker the add-on's details 30 to 45 days before closing and have endorsements bound effective at closing.

Is the add-on covered automatically the day you close?

Sometimes, briefly, and only on some policies. The best-known provision is in the standard Insurance Services Office (ISO) commercial general liability form. It makes a newly acquired or newly formed organization a named insured automatically if three conditions are met:

The organization is not a partnership, joint venture or limited liability company.
Your named insured owns it or holds a majority interest in it.
No other similar insurance is available to it.

Even when it applies, the coverage runs only until the 90th day after the acquisition or the end of your policy period, whichever comes first. It does not cover bodily injury or property damage that happened before you acquired the company, or personal and advertising injury from an offense committed before then. The same form also says no one is insured for the conduct of a partnership, joint venture or LLC that is not shown as a named insured in the declarations.

That last rule matters to many acquirers, because many small companies, and many acquisition vehicles, are LLCs. If the add-on is an LLC, the standard form gives it nothing automatically; it has to be added as a named insured by endorsement. In a stock purchase where the add-on keeps its own general liability policy, the provision's "no other similar insurance" requirement generally means the add-on does not qualify automatically, and its own policy responds instead.

Carriers can and do change this wording. Some forms use 30, 60, 90 or 180 days, some run to the end of the policy period, some extend to LLCs, and some end the moment separate coverage is bought. Read your own policy's Who Is An Insured section, or ask your broker to quote it back to you.

How do automatic provisions differ from policy to policy?

Each line handles acquisitions its own way. Use this table to see what to report and what is never automatic. Your forms may differ, so treat it as a checklist of questions rather than an answer.

Newly acquired company provisions by policy
Policy	Automatic coverage in many forms	What to report and when	Not automatic
General liability	Standard form: up to 90 days; not LLCs, partnerships or joint ventures	Report the acquisition before closing; the carrier adds the entity by endorsement	LLCs and anything before the acquisition date
Business owner's policy (BOP)	In the ISO program, a similar grant comes from the Newly Acquired Organizations endorsement; carrier BOPs vary	Check the forms schedule for it or similar wording; report before closing	Same carve-outs; many add-ons will not fit BOP eligibility anyway
Commercial auto	None in standard form; broad named insured endorsements common	Report new entities and vehicles; with specifically described autos, newly acquired autos can require notice within 30 days	Vehicles titled to another entity unless that entity is insured
Umbrella or excess	Varies; some follow the scheduled underlying policies	Confirm the add-on is on every underlying policy first	A company missing from the underlying policies
Directors and officers (D&O)	Acquired subsidiary clauses often cover smaller deals, up to a size threshold	Larger acquisitions must be reported within the policy's window and may cost extra premium	Often, acts before the acquisition
Employment practices liability insurance (EPLI), cyber, professional	Wording varies widely; usually claims-made	Read each acquisition clause; check retroactive dates	Claims about pre-closing acts, unless negotiated
Property and crime	Short, limited extensions in many forms	Schedule new locations and values; report added employees under crime terms	Full limits at a location that was never scheduled
Workers' compensation	A separate entity generally needs an endorsement or its own policy; varies by state	Report ownership changes within the policy's 90-day requirement	States not listed on the policy. Ohio, Washington, North Dakota and Wyoming use state funds only, and those policies do not include employers liability, so ask about stop gap coverage

For how all of this fits a multi-company structure, see insurance for holding companies and roll-ups.

What do you have to tell your carriers, and when?

Think of notice in two layers: the acquisition itself, and the specific exposures it brings.

The acquisition. Tell every carrier on your program before closing. Even where coverage is automatic, the carrier will want to underwrite the company and may charge additional premium for the rest of the term.
Ownership change for workers' comp. Under the National Council on Compensation Insurance (NCCI) rules and the parallel rules in several independent bureau states, the employer must report an ownership change to its insurer within 90 days. The acquired company's claims history generally follows it, and companies with more than 50 percent common ownership are generally combined into one experience mod. See how to check your experience mod for errors.
New vehicles and drivers. Depending on how your auto policy describes covered autos, newly acquired vehicles may be covered automatically or only if reported within a short window.
New locations and property values. Schedule them with replacement cost values, not purchase price allocations.
Size thresholds. Directors and officers and other management liability policies often require notice, and sometimes premium, once an acquisition passes a percentage of your total assets.
The target's own claims-made policies. In a stock deal, the add-on's existing policies may have change in control terms that end coverage for new acts or require a tail. See prior acts and tail coverage after an acquisition.

Your loan agreement may also require notice to the lender and updated evidence of insurance after each acquisition. Check it.

Does the deal structure change how you add the company?

Yes. In a stock or membership interest purchase, the add-on stays the same legal entity, and its own policies generally stay in force subject to their terms, including any change in control provisions. You have a choice: keep its policies until they expire and then fold it into your program, or move it at closing. Folding in at expiration avoids short-rate cancellation charges on some policies, but means running two programs for a while.

In an asset purchase into a new LLC, the new company has no policies of its own on day one. The seller's policies do not transfer to you without the insurer's consent, and the standard automatic provision does not apply to an LLC. The new company needs to be named on your policies, or have its own, effective at closing. Claims about pre-closing work generally look to the seller's policies, although successor liability rules in some states can reach a buyer, so ask deal counsel; see stock deal vs asset deal: whose insurance responds to old claims.

Whether the add-on should share your program or keep separate policies is a strategy question, covered in one insurance program vs separate policies per company.

What are the steps to add the company properly?

30 to 45 days before closing: send your broker the add-on's legal name, entity type, ownership, operations, locations, revenue, payroll by state and job type, vehicles and drivers, property values, five years of loss runs, its current policies and any contracts with insurance requirements.
Decide line by line: which policies the add-on joins, and which it keeps for now.
Underwriting: carriers review the new exposures. Expect questions, possible additional premium and, for some operations, a decision that the add-on needs a different carrier.
Bind effective at closing: get written confirmation that the endorsements adding the company are bound as of the closing date. A quote, an application or an email request is not coverage until the carrier binds it.
Workers' comp: make sure every state where the add-on has employees is listed on the policy, wherever that state requires coverage or you choose to carry it (rules differ by state), and report the ownership change within the policy's notice period.
Certificates and lenders: reissue certificates in the right entity's name and send your lender updated evidence. See set up certificate tracking in your first month.
Within 30 days after closing: check the issued endorsements against what was bound: entity names, locations, vehicles, class codes and limits.

Morrow can review a target's policies before closing, flag gaps and request quotes to add it to your program; any terms depend on carrier underwriting.

What can go wrong if you rely on the automatic window?

A hypothetical example. A holding company owns a commercial cleaning business and buys a small window-cleaning company in an asset deal through a new LLC. Its general liability policy renews in 40 days, and the CEO assumes the add-on has 90 days of automatic coverage. It has none: the add-on is an LLC, so the standard provision does not apply, and even if it had applied, the window would have closed at renewal in 40 days, not 90. Three weeks after closing, a window cleaner's squeegee falls and damages a car at a client site. The claim is against the new LLC, which is not a named insured on anything. Had the broker endorsed the new LLC onto the general liability, auto and umbrella policies effective at closing, the claim would have gone to the carrier like any other, subject to the policy terms. The fix would have cost some additional premium for the rest of the term and about a week of paperwork before closing.

Other common failures:

The add-on is added to general liability, but the umbrella's own named insured wording does not pick it up, so the umbrella may not sit over it.
Its vehicles stay titled to the seller.
Its employees work in a state your workers' comp policy does not list.

See wrong named insured after an acquisition for how to fix entity errors.

How does adding a company change your premium and limits?

Adding a company adds exposure, so premium usually goes up for the rest of the term. Many general liability and workers' comp policies are rated on revenue or payroll, so the next audit picks up the add-on's numbers too. Plan for both in your deal model.

Sharing one program also means sharing aggregate limits and loss history, which can affect every company's renewal; see insurance for holding companies and roll-ups and consolidating insurance across add-on acquisitions.

Keep reading

Frequently asked questions

Does my general liability policy cover a company I just acquired?

Possibly for a short time, but do not count on it. Under the standard form the window is short and does not reach LLCs, and many carrier forms differ. Have the company added by endorsement effective at closing.

My add-on is an LLC. Is it covered automatically?

Not under the standard general liability form, which carves out LLCs, partnerships and joint ventures and says no one is insured for an LLC that is not shown as a named insured. Some carrier forms are broader, so check your wording, but the safe step is to have the LLC named on each policy.

Does the automatic coverage include claims from before I bought the company?

No. The standard provision excludes bodily injury and property damage that happened before the acquisition, and offenses committed before it. Those claims generally look to the acquired company's own historical policies, or the seller's in an asset deal, although successor liability rules in some states can reach a buyer.

Do I have to tell my workers' comp insurer about an acquisition?

Yes. Under the NCCI rules and similar rules in several independent bureau states, ownership changes must be reported to the insurer within 90 days. The add-on also needs coverage in each state where it has employees and that state requires it (Texas, for example, lets most private employers choose not to carry workers' comp). Ohio, Washington, North Dakota and Wyoming require state fund coverage, which does not include employers liability, so ask your broker about stop gap coverage.

Should the add-on keep its own policies after a stock purchase?

It can, at least until they expire, but check each policy's change in control terms first. Folding it into your program at expiration avoids some cancellation charges, while moving it at closing simplifies administration. Your broker can compare both.

References

Just bought a business? Get your insurance reviewed.

Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.

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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.

Adding a Newly Acquired Company to Your Existing Policies