The recent wildfires in Oklahoma and California and the approaching tornado season have many of us taking stock of our property. Many people on social media have discussed preparing kits or “go bags” in the event of evacuation or taking shelter.

There is, however, another preparation you can make to protect yourself in a natural disaster. When a trust owns real property, including a home, insuring that property becomes more complex. As a trustee, you have a fiduciary duty to protect the trust’s assets, including mitigating potential liabilities – even if you are the trustee of your own trust.

Adding your trust as an additional insured party on your homeowner’s insurance policy is a critical safeguard. Owning a home in Oklahoma exposes you to several risks – tornadoes, earthquakes, and, as we have seen in the past month, wildfires.

Understanding the Trust’s Role and Oklahoma’s Dual Threat

• Oklahoma’s location within “Tornado Alley” means that properties are at a consistently high risk of severe damage from tornadoes.
• Oklahoma’s hot and dry summers and our infamous high winds create ideal wildfire conditions.
• As a legal entity holding property in this environment, a trust requires protection.
• As a trustee, you are responsible for ensuring the security of those assets in the face of unpredictable events. Beyond the fiduciary responsibility, you are vested in ultimately protecting your home.
• Placing a home in a revocable living trust is a common estate-planning strategy. However, it’s crucial to ensure the trust is adequately insured, as standard homeowner’s policies may not automatically extend coverage to the trust.

Why Make the Trust an Additional Insured Party, Particularly in Oklahoma?

• Direct Liability Protection Against Environmental Damage: If a natural disaster damages a trust property, the trust could be the target of lawsuits. Being an additional insured party ensures the policy covers legal defense and settlements for the trust. Ensuring proper policy coverage is vital in a state where high winds and rapidly changing weather patterns can exacerbate damage.
• Protection for the Trustee in a High-Risk State: Trustees can be held liable for breaches of duty. Adding the trust as an insured party strengthens protection and demonstrates responsibility as a caretaker of the asset. This is especially true in areas like Oklahoma, where the risk of unforeseen property damage is elevated.
• Comprehensive Property Damage Coverage: All natural disasters can cause home damage. As residents, we know that tornadoes, wildfires, and earthquakes can render a home unlivable. Adequate coverage protects the trust’s assets from these severe events.
• Clarity and Efficiency After a Disaster: The claims process following a natural disaster can be overwhelming. Naming your trust as an additional insured party streamlines it and ensures swift action.
• Avoiding Claim Denials and Policy Cancellations: Most of us have been frustrated by seemingly minor “technicalities” that have significant consequences. Neglecting to list your trust as an additional insured party can sometimes lead to a claim denial. Insurers often use this ownership discrepancy to refuse payment. If the ownership is unclear or misrepresented, insurers may cancel a policy. Adding the trust as an additional insured party clarifies ownership and avoids potential cancellation.

Example: Imagine a severe storm damages the roof of a house you have titled in the name of your trust. When you, as trustee, file a claim, the insurance company discovers the policy is solely in your name, not the trust’s. The insurer may deny the claim, arguing that the actual owner of the property (the trust) is not a named insured party. This leaves you responsible for the expensive repairs.

How to Add Your Trust as an Additional Insured Party

• Contact Your Insurer: Notify your insurance provider that a trust owns the property.
• Provide Trust Documentation: You’ll likely need to provide documentation establishing the trust’s ownership. Your insurance provider may request the whole trust document or another document, such as a memorandum of trust, for their records.
• Ensure Proper Policy Wording: Confirm that the insurance policy accurately reflects the trust as an additional insured party.
• Keep a Copy: It is always a good idea to keep a copy of the policy with the trust correctly shown as the owner.