Personal Liability Update
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Changes to definitions

Are you familiar with the changes to definitions in Personal Liability forms? If not, here's your chance to learn new wording.

Who is an "insured"?
Just who qualifies as an insured? Family auto has its definition, as does homeowners. And then there's umbrella and excess liability--who receives coverage under these? And what about trusts?

As for liability coverage, the following are insureds under Section II:
  • The policyholder, that is, the named insured
  • The named insured's spouse, if the spouse is a resident of the same household
  • Relatives of the named insured, if they are residents of the same household
  • Anyone under the age of 21, if they are in the care of the named insured or resident relative and if they are residents of the same household

    "You", "we", "us", "our"
    In this policy, "you" and "your" refer to the "named insured" shown in the Declarations and the spouse if a resident of the same household. "We", "us", and "our" refer to the company providing this insurance.

    Spouse
    A potential problem is when the spouse is not named in the policy as a Named Insured in the declarations and is NOT residing with the spouse/insured named, that spouse is not protected.

    Possible solutions are to:
  • Name the spouse as a Named Insured.
  • Add the spouse as an Additional Insured using HO 04 41.

    Student away from home
    And what about a child or relative who is a student residing away from home? A student qualifies as an insured under this definition:
    b. A student enrolled in school full time, as defined by the school, who was a resident of your household before moving out to attend school, provided the student is under the age of:
    (1) 24 and your relative; or
    (2) 21 and in your care or the care of a person described in a.(1) above

    Insured in regard to animals or watercraft
    Under Section II:
    (1) With respect to animals or watercraft to which this policy applies, any person or organization legally responsible for these animals or watercraft which are owned by you or any person included in a. or b. above. "Insured" does not mean a person or organization using or having custody of these animals or watercraft in the course of any "business" or without consent of the owner

    Homeowners 3 - Special Form definitions
    The following is some of the new language found in the Homeowners 3 - Special Form.

    Insured in regard to motor vehicles
    (2) With respect to a "motor vehicle" to which this policy applies:
    (a) Persons while engaged in your employ or that of any person included in a. or b. above; or
    (b) Other persons using the vehicle on an "insured location" with your consent.

    "Insured location"
    "Insured location" means:
    a. The "residence premises";
    b. The part of other premises, other structures and grounds used by you as a residence; and
    (1) Which is shown in the Declarations; or
    (2) 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:
    (1) Not owned by an "insured"; and
    (2)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.

    The definition of "residence employee" now includes leased employees and specifically does NOT include temporary workers furnished to the insured to substitute for a permanent "residence employee" or to do seasonal or short-term work. Again, this is a clarification and is not a change in coverages.

    The definition of "residence premises" has been broadened to include three or four family dwellings. The insured still must reside in one of the units, and other structures and grounds at the location are also covered.

    In 1994 an endorsement for these dwellings was introduced, and since it has been approved in most jurisdictions, they have been added to the form and the endorsement (H0 04 44) has been withdrawn.

    It's all about trusts
    Financial advisors are recommending trust ownership to many affluent homeowners. A trust is another legal entity with insurable interest and status in court. There are many different types of trusts. Ask the insured if the advisor or lawyer gave instructions as to insurable interest.

    Concerning trusts, possible solutions for the insured are:
  • Preferably, name the trust and the individual trustees acting on behalf of the trust on the policy as another named insured.
  • Alternatively, name the trust as an additional insured (but take this route only if the insurer insists). See endorsement section.

    "Bodily injury"
    "Bodily injury" has been clarified to include bodily harm, sickness or disease, including required care, loss of services and death that results.

    A problem is that coverage is limited to only the defined term of "Bodily Injury". An insured who, in addition to the residence premises on the HO 00 03, has a rental property that liability coverage has been extended to include, will have coverage gaps in the event of invasion of privacy, wrongful eviction, etc.

    Possible solutions for bodily injury coverage:
  • Add the HO 24 82 Personal Injury Endorsement
  • Provide an umbrella that has an expanded definition of "bodily injury"

    "Aircraft", "hovercraft", "motor vehicle" and "watercraft"
    The definitions of "aircraft", "hovercraft", "motor vehicle" and "watercraft" liability have been added to the definitions section to facilitate the clarification in Section II that ANY liability arising out of these items is NOT covered unless specifically stated. This is a clarification and does not change coverage.

    Hovercrafts are added as excluded vehicles. A "hovercraft" is specifically defined in the policy as a self-propelled motorized ground vehicle and includes flarecraft and air cushion vehicles.

    "Business"
    The definition of "business" has been revised in response to judicial decisions that found that the intent of the policy was not clear. The new language is more specific.
  • Activity involving full time, part-time or the occasional pursuit of a trade profession or occupation is considered business.
  • Any other activity engaged in for monetary or other compensation is also included in the definition.

    They still give back any activity for which the insured receives less that $2000 in the previous year, such as volunteer activities for which no money is received, home day care for which no compensation is received, other than exchange of services, or home day care services for a relative of an insured. ISO does not consider this to be a change in coverage, although, depending on how individual claims were adjusted, some insureds may be affected.

    "Employee"
    A definition for "employee" is added and includes leased workers but NOT temporary employees. It further states that a leased worker who is a residence employee is not considered an employee.

    "Residence employee"
    In forms prior to 2000, the definition of "residence employee" read as follows:
    "Residence employee" means:
    a. An employee of an "insured" whose duties are related to the maintenance or use of the "residence premises," including household or domestic services; or
    b. One who performs similar duties elsewhere not related to the "business" of an "insured."

    In the 2000 form, the definition reads:
    "Residence employee" means:
    a. An employee of an "insured", or an employee leased to an "insured" by a labor leasing firm, under an agreement between an "insured" and the labor leasing firm, whose duties are related to the maintenance or use of the "residence premises", including household or domestic services; or
    b.One who performs similar duties elsewhere not related to the "business" of an "insured".

    A "residence employee" does not include a temporary employee who is furnished to an "insured" to substitute for a permanent "residence employee" on leave or to meet seasonal or short-term workload conditions.

    "Domestic employee" under California statutes
    Any person employed by the owner or occupant of a residential dwelling whose duties are incidental (CA labor code):
  • To the ownership, maintenance or use of dwelling
  • To the care and supervision of children

    To be a domestic employee and covered, both of the following criteria must be met:
  • Personal duties are not in the course of business, trade, profession, or occupation of the owner or occupant
  • Not considered an employee if:
  • Employed less than 52 hrs in 90 days immediately preceding injury, or
  • Earned less than $100

    "Insured"
    The changes in the definition of "insured" are editorial. They have added the word "an" in front of "insured" and defined it as one or more insureds.

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    Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.