Misunderstood Personal Lines Issues (Part 2)
Page 2 of 7




Business in the home

The questions
  • What am I covered for in the policy?
  • What do the endorsements really do?
  • Do I need another policy for business in the home?
  • What about Internet businesses?

    Let's look at the policy...

    Coverage B - Other Structures
    We cover other structures on the "residence premises" set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection.

    This coverage does not apply to land, including land on which the other structures are located.

    We do not cover other structures:
    1. Used in whole or in part for "business"; or
    2. Rented or held for rental to any person not a tenant of the dwelling, unless used solely as a private garage.

    Special Limits
    8. $2500 on property, on the "residence premises" used at any time or in any manner for any "business" purpose.
    9. $250 on property, away from the "residence premises" used at any time or in any manner for any "business" purpose. However, this limit does not apply to loss to adaptable electronic apparatus as described in Special Limits 10. and 11.

    Liability Section
    1. Coverage E - Personal Liability and Coverage F - Medical Payments to Others do not apply to "bodily injury" or "property damage":
    b. Arising out of or in connection with a "business" engaged in by an "insured." This exclusion applies but is not limited to an act or omission, regardless of its nature or circumstance, involving a service or duty rendered, promised, owed, or implied to be provided because of the nature of the "business";

    The answers
    What am I covered for in the policy?
    The policy gives some coverage for business personal property on and off premises. For liability, there is no coverage for injury to a third party on or off premises. The only consistency in the courts on this issue is that there is none.

    What do the endorsements really do?
    There are several endorsements that provide some coverage for the insured and the business personal property:
  • HO 04 42 Incidental Occupancy Residence Premise
  • HO 04 71 Business Pursuits

    Endorsement HO 04 42 does several things:
  • Allows the insured to occupy the "other structure" for business purposes.
  • Allows the insured to increase certain types of business personal property.
  • Provides liability coverage for the "incidental" use of the residence premises for business purposes.

    Endorsement HO 04 42 does not:
  • Provide coverage for the insured's stock/inventory.
  • Expand perils for computer coverage.
  • Provide loss of business income coverage.
  • Provide products and completed operations coverage.
  • Provide off premises liability coverage.

    Concerning HO 04 71, this endorsement is a liability endorsement only and provides coverage for the incidental use of the premises for business purposes.

    HO 04 71 does not:
  • Cover the insured who owns or financially controls the business or a partner of a partnership.
  • Give any property coverages.
  • Provide products and completed operations coverage.

    Do I need another policy?
    As a result of the areas seen on the previous pages the answer is "yes". Many companies have endorsements to their homeowner's policies or ancillary policies to cover the exposures of a business operating out of the home.

    What about Internet businesses?
    As seen before, the endorsements available to the insured for an in-home business are limited in nature and do not cover the exposures created by an Internet site.

    Some Internet business exposures might be:
  • Territory: Worldwide buying and selling
  • Web sites: Intellectual property exposures such as copyright infringement
  • Loss of income due to virus, sabotage, etc.
  • Privacy issue as relates to credit card sales

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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.