When and Where Are the Insured and His Stuff Protected?
By Christopher J. Boggs, CPCU, ARM, ALCM October 23, 2009
Nowhere does the homeowners' policy specifically extend worldwide personal liability protection to any insured. The policy does, however, specifically extend worldwide protection to the insured's personal property. And premises liability is strictly limited to only specifically described locations. One property and two liability protection features provided by the standard homeowners' policy are discussed in the following paragraphs.
Personal property, personal liability and premises liability are highlighted below.
Personal property is simply the insured's "stuff" that does not qualify as part of the dwelling or other real property. There are two types of property insurable under a homeowners' policy: 1) real property; and 2) personal property. Real property is defined as land and everything attached to the land (i.e. the dwelling and other structures). Personal property is everything that does not qualify as real property.
Personal liability and premises liability present two different liability exposures. Personal liability results from the actions or inactions of a person. Premises liability arises from physical hazards associated with a premises rather than the negligence of a person.
There are not many limitations on where the insured's personal property is covered in the event of a covered loss. The policy specifically states, "We cover personal property owned or used by an 'insured' while it is anywhere in the world." "Anywhere" has no limitations. Essentially, the only exclusions related to the insured's stuff are the covered causes of loss (name peril coverage) and the limits available. Remember also that there are a few types of property that are specifically excluded by the form (animals, motor vehicles, property held for rent, etc.).
As stated in the opening paragraph, there is no specific wording in the homeowners' policy extending personal liability protection on a worldwide basis. But neither is there any coverage territory limitation placed on the personal injury protection provided by the homeowners' policy. The only limitations on personal liability relate to specifically excluded causes of injury or damage. Personal liability extended from Coverage "E" applies on a worldwide basis. Premises Liability Unlike coverage for personal liability (the actions of an insured), liability for bodily injury or property damage arising out of the premises exposure IS subject to specific limitations. Premises liability protection is limited to only those locations qualifying as "insured locations." According the Insurance Services Office's (ISO's) homeowners' policy: "Insured location" means: a. The "residence premises"; b. The part of other premises, other structures and grounds used by you as a residence; and Which is shown in the Declarations; or Which is acquired by you during the policy period for your use as a residence; c. Any premises used by you in connection with a premises described in a. and b. above; d. Any part of a premises: Not owned by an "insured"; and Where an "insured" is temporarily residing; e. Vacant land, other than farm land, owned by or rented to an "insured"; f. Land owned by or rented to an "insured" on which a one, two, three or four family dwelling is being built as a residence for an "insured"; g. Individual or family cemetery plots or burial vaults of an "insured"; or h. Any part of a premises occasionally rented to an "insured" for other than "business" use.
Taken individually: The "residence premises" is the location on which the dwelling/residence listed in the policy is located. This includes all the land and any "outbuildings" or structures on the premises. Liability protection can be extended to include a second residence provided it is used by the insured and is named on the policy (or was acquired during the policy period). Storage warehouses and units are considered an insured location since they are "used…in connection with" the residence premises. Hotel rooms, vacation condos or other such temporary residences are extended liability protection in the homeowners' policy. "Vacant" is stringently defined and enforced in the extension of premises liability to include vacant land. As the term suggests, it means NOTHING on the premises. No buildings, no fences, no growing crops (as evidenced by the farmland exclusion), etc.; basically, there is to be no improvement to or on the land at all. If there are improvements on the land, the only way to extend premises liability to the location is by specifically listing in on the policy. A builders risk policy is necessary to extend property protection to a house under construction, but premises liability coverage for the one-to-four family dwelling being constructed at another location is extended from the homeowners' policy — provided the insured is building the house to live in themselves. Nothing in the policy limits this extension of coverage to the state in which the residence premises is located; however, it is advisable to get the underwriter's opinion. The only question regarding cemetery plots and burial vaults is (not trying to be funny), how can a dead person be an "insured?" Evidently, this extends coverage to pre-purchased family burial plots not yet in use. For example, my parents, although still alive, purchased and paid for specific burial plots years ago. If someone is injured on one of these plots, premises liability protection is extended from the homeowners' policy. I have two daughters, one day they will likely get married. For the occasion my wife and I will probably rent a ball room at a hotel or country club for the reception. The final definition of "insured location" extends premises liability protection to this exposure. However, this extension of premises liability protection does not apply if I rent the space for business purposes (for example, Mary Kay directors renting a meeting room are not covered under this extension). Medical payments to others (Coverage "F") is subject to largely the same restrictions placed on premise liability (with a few off-location exceptions). But because medical payments coverage is a no-fault coverage, its provisions are not detailed in this post.
Conclusion Knowing explicitly where the homeowner client is and is not protected can open doors of discussion allowing the agent to uncover exposures not previously considered or known. There are over 110 homeowners' policy endorsements (the number varies by jurisdiction), knowing the policy and asking the right questions may lead the agent to an endorsement not previously considered.
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