Summary: In addition to the liability and medical payments coverages, the Insurance Services Office (ISO) homeowners policy section II—liability coverages contains four additional coverages. Payments made under the additional coverages are in addition to the applicable limits of liability. This discussion takes up the coverage agreements, along with the exclusions applying to them.
Topics covered:
Four additional liability coverages are included in the ISO homeowners forms. The coverages are “additional,” in that they are not included within the insured's section II limit of liability. These are claims expenses, first aid expenses, damage to property of others, and loss assessment.
A.Claim Expenses
We pay:
1.Expenses we incur and costs taxed against an “insured” in any suit we defend;
2.Premiums on bonds required in a suit we defend, but not for bond amounts more than the Coverage E limit of liability. We need not apply for or furnish any bond;
3.Reasonable expenses incurred by an “insured” at our request, including actual loss of earnings (but not loss of other income) up to $250 per day, for assisting us in the investigation or defense of a claim or suit; and
4.Interest on the entire judgment which accrues after entry of the judgment and before we pay or tender, or deposit in court that part of the judgment which does not exceed the limit of liability that applies.
Analysis
Payment under this additional coverage is tied to the second item of the liability coverage, i.e., the provision requiring the insurer to provide a defense for liability claims covered by the policy. The liability insuring agreement also exempts the insurer from further responsibility for defense once the limit of liability has been exhausted by payment of claims. When this occurs the coverage under additional coverage 1. also ends, as all of the expenses payable under this item are related to claims or suits that the insurer must defend.
The amount paid for loss of earnings and reasonable expenses incurred by an insured is $250 per day. The expenses must have been incurred by an insured while in the course of assisting the insurer in the investigation or defense of a claim or suit. Actual loss of earnings is covered, not potential loss of earnings. An insured cannot argue she would have made a killing on Wall Street if only she had been at work, and expect to be reimbursed.
B.First Aid Expenses
We will pay expenses for first aid to others incurred by an “insured” for “bodily injury” covered under this policy. We will not pay for first aid to an “insured”.
Analysis
The insurer agrees to pay the expenses incurred by any insured for the first aid rendered to others for any bodily injury covered under the policy. This is entirely apart from the medical payments coverage of the policy. It is payable without limit, other than the practical limits on the cost of first aid treatment. Medical payments to others coverage, on the other hand, is subject to the limit of liability shown on the declarations page. There is no coverage for first aid payments to any insured under the policy.
C.Damage to Property of Others
1.We will pay, at replacement cost, up to $1,000 per “occurrence” for “property damage” to property of others caused by an “insured.”
2.We will not pay for “property damage”:
a.To the extent of any amount recoverable under Section I of this policy;
b.Caused intentionally by an “insured” who is 13 years of age or older;
c.To property owned by an “insured”;
d.To property owned by or rented to a tenant of an “insured” or a resident in your household; or
e.Arising out of:
(1)A “business” engaged in by an “insured”;
(2)Any act or omission in connection with a premises owned, rented or controlled by an “insured,” other than the “insured location”; or
(3)The ownership, maintenance, occupancy, operation, use, loading or unloading of aircraft, hovercraft, watercraft or “motor vehicles”.
This exclusion e.(3) does not apply to a “motor vehicle” that:
(a)Is designed for recreational use off public roads,
(b)Is not owned by an “insured”; and
(c)At the time of an “occurrence”, is not required by law, or regulation issued by a government agency, to have been registered for it to be used on public roads or property.
Analysis
The insurer agrees to pay up to $1,000 per “occurrence” for “property damage” (as defined in the policy) to property of others caused by any insured. This is, in effect, “good neighbor” coverage, as it allows payment of minor property damage claims without a need to prove the insured's negligence other than that the loss was “caused by” an insured. The coverage is on a replacement cost basis.
Coverage under this additional coverage does not apply to the extent that there is recovery under section I of the policy. The section I coverage applies to property owned or used by an insured and also extends, at the request of the insured, to include property of others on the insured's residence premises and property of guests and resident employees in any residence occupied by any insured. Therefore, the section I coverage will more often be involved in paying for loss to personal property in the insured's care, custody, or control than will the damage to property of others coverage. But losses below the section I deductible, or by perils other than those provided for under section I are covered, if “caused by an insured.” The policy makes the damage to property of others coverage excess over any section I coverage, making the coverage available in addition to any section I coverage on property of others.
Coverage for damage caused intentionally by any insured 13 years of age or older is excluded. Payment for claims of damage by young children—a neighbor's broken window, perhaps—is one of the more useful aspects of this coverage.
There is no coverage for damage to property owned by any insured (but coverage applies to property rented to the named insured). No coverage applies to property owned by or rented to residents of the named insured's household, or to property owned by or rented to an insured's tenant. This provision is somewhat unclear, because a “resident in your household” could refer either to an insured, or to a resident who is not an insured. In theory, then, the safest approach may be that if there is a need to rent, say, power equipment such as a log splitter, the named insured be the one to do it.
Losses arising out of the following areas of exposure can be covered by insurance other than the homeowners policy, and are thus excluded from the section II additional coverage: a “business” engaged in by the insured, a premises other than an “insured location,” watercraft, aircraft, hovercraft, or motorized vehicles. The forms give back coverage to a “motorized land conveyance designed for recreational use off public roads, not subject to motor vehicle registration and not owned by an 'insured'” and adds that the vehicle for which property damage coverage is sought cannot be subject to a law or requirement that it be registered for use on public roads or property. Say, for example, an insured borrows a friend's snowmobile and the snowmobile is damaged within a public park and local regulations require registration for this use. There is no coverage.
D.Loss Assessment
1.We will pay up to $1000 for your share of loss assessment charged against you, as owner or tenant of the residence premises”, during the policy period by a corporation or association of property owners, when the assessment is made as a result of:
a.”Bodily injury” or “property damage” not excluded from coverage under Section II—Exclusions; or
b.Liability for an act of a director, officer or trustee provided such person:
(1)Is elected by the members of a corporation or association of property owners; and
(2)Serves without deriving any income from the exercise of duties which are solely on behalf of a corporation or association of property owners.
2.Paragraph I. Policy Period under Section II—Conditions does not apply to this Loss Assessment Coverage.
3.Regardless of the number of assessments, the limit of $1,000 is the most we will pay for loss arising out of:
a.One accident, including continuous or repeated exposure to substantially the same general harmful condition; or
b.A covered act of a director, officer or trustee. An act involving more than one director, officer or trustee is considered to be a single act.
4.We do not cover assessments charged against you or a corporation or association of property owners by any governmental body.
Analysis
This additional coverage item, in conjunction with a similar section I additional coverage, provides loss assessment coverage under the homeowners program. Loss assessment coverage under section II provides $1,000 of coverage (which can be increased by attaching endorsement HO 04 35 05 11) on the insured's share of loss assessment charged against the insured as owner or tenant of the “residence premises” by a corporation or association of property owners. Coverage applies to assessments made during the policy term, but the event causing the assessment may occur before the insured's policy takes effect.
Coverage applies when the assessment is made as a result of “bodily injury” or “property damage” not excluded under section II of the policy, or liability for an act of an elected, unpaid director, officer, or trustee of the property owners' corporation or association who is acting in his official capacity. The scope of the individual homeowner's section II coverage determines whether the assessment is covered. For example, if there is an assessment that arises from a liability claim because of invasion of privacy (not arising out of an act of directors or officers), the additional coverage will not respond unless the insured has added the personal injury endorsement to the policy.
On the other hand, in as much as the insured is an owner in common of the common premises, the basic Section II liability insurance will respond to liability claims that fall within the section II coverage—as excess over the association's primary liability insurance—leaving the assessment liability coverage to apply only when both the association's general liability and all the individual members' homeowners liability coverages have been exhausted, necessitating an assessment.
The $1,000 of coverage is applied to each loss, not each assessment. A covered loss is considered to arise from one accident, including continuous or repeated exposure to substantially the same general harmful conditions (i.e., an “occurrence”), or from a covered act of a director, officer, or trustee. The covered act may be perpetuated by any number of directors, officers, or trustees; it is still considered a single act.
Loss assessment coverage does not apply to assessments charged against the insured or the corporation or association by any governmental body.