Business Use in an Other Structure

April 18, 2011

This question is in regards to Coverage B – Other Structures and specifically exclusion 2.c. Other structures from which any business is conducted. Up for debate is what constitutes "conducted". We have an insured that is a consultant and has an office on the second level of his detached garage. He has two computers and a fax machine and does work out of this office (as far as checking emails, faxing, etc). He does not ever meet with clients at this location, however. He does travel and always meets with his clients at their location. He does not have a separate business address or any other location to which he reports. His family also uses this office for personal use of the computer and fax machine. In your opinion would the exclusion apply in this scenario?

 Illinois Subscriber

You have to look at how the policy defines business. Business is any trade, profession, or occupation engaged in on a full-time, part-time or occasional basis. The policy also states that more than $2,000 must be made in the 12 months prior to the policy for the activity to be considered a business. Whether the insured brings clients in or not has nothing to do with it. If the insured is bringing in more than $2,000 a year through his consulting business, the room and therefore the building is used for business, even if the family also occasionally uses the room as well.

In general, when a policy doesn't define a term courts default to a standard desk reference. Merriam Webster Online defines conduct as: to direct or take part in the operation or management of; the insured is certainly taking part in or managing a business.