March 12, 2018
Trusts have long been an issue of consternation for underwriters and agents. Insureds put property into a trust for a variety of reasons, but it complicates insurance coverage. Underwriters are wary because a trust is an entity, and not a person, and the homeowners policies are designed for individual people who own property. The trust endorsement that attached to the homeowners policy Residence Held in Trust HO 05 43 10 00 has been withdrawn and replaced with the Trust Endorsement HO 06 15 02 17. The personal umbrella endorsement, Personal Umbrella Liability Policy Trust Endorsement DL 98 08 03 18 has been updated to match the underlying coverages.
Like many endorsements adding coverage, the homeowners trust endorsement begins with a schedule. It requires the name of the trust, the address of the trust, and the names of trustees, their addresses, and the name of the trust they are part of. Information not shown on the endorsement may be listed on the declarations. It is important to know who the trustees are so that the carrier knows who has access to the property. The provisions of the endorsement apply to those listed on the schedule.
DEFINITIONS
A. The following is added to Definition 5. "Insured":
5. "Insured" means:
d. The Trust, if recognized under applicable state law as a legal entity with the capacity to sue or be sued in a court having jurisdiction and if named in Item 3. in the Schedule as an Insured, but only for the following coverages:
(1) Coverage A – Dwelling and Coverage B – Other Structures; and
(2) Coverage E – Personal Liability and Coverage F – Medical Payments To Others, but only with respect to "bodily injury" or "property damage" arising out of the ownership, maintenance or use of an "insured location" as defined under Definitions, Paragraph B.6.a. of this endorsement.
e. The Trustee(s) named in Item 2. in the Schedule as an Insured but only for the following coverages:
(1) Coverage A – Dwelling and Coverage B – Other Structures; and
(2) Coverage E – Personal Liability and Coverage F – Medical Payments To Others, but only with respect to "bodily injury" or "property damage" arising out of the ownership, maintenance or use of an "insured location" as defined under Definitions, Paragraph B.6.a. of this endorsement.
However, this Paragraph A.5.e. applies only with respect to the Trustee's duties as a Trustee of the Trust named in Item 1. In the Schedule.
B. The following definitions are replaced:
3. "Business" means:
a. A trade, profession or occupation engaged in on a full-time, part-time or occasional basis;
b. "Home-sharing host activities"; or
c. Any other activity engaged in for money or other compensation, except the following:
(1) One or more activities, not described in (2) through (5) below, for which no "insured" receives more than $2,000 in total compensation for the 12 months before the beginning of the policy period;
(2) Volunteer activities for which no money is received other than payment for expenses incurred to perform the activity;
(3) Providing home day care services for which no compensation is received, other than the mutual exchange of such services;
(4) The rendering of home day care services to a relative of an "insured"; or
(5) Activities performed as a Trustee in connection with administering the Trust named in Item 1. in the Schedule of this endorsement.
6. "Insured location" means:
a. The following real property but only if legal title to such property is held in trust with respect to the Trust named in Item 1. in the Schedule:
(1) The "residence premises";
(2) The part of other premises, other structures and grounds used by you as a residence; and
(a) Which is shown in the Declarations;
or
(b) Which is acquired during the policy period for your use as a residence;
(3) Any premises used by you in connection with a premises described in (1) and (2) above;
(4) Vacant land, other than farm land;
(5) Land on which a one-, two-, three- or four-family dwelling is being built as a residence for an "insured"; and
(6) Individual or family cemetery plots or burial vaults of an "insured";
b. Any part of a premises:
(1) Not owned by an "insured"; and
(2) Where an "insured" is temporarily residing;
c. Any part of a premises occasionally rented to an "insured" for other than "business" use;
d. Vacant land, other than farm land, rented to an "insured"; and
e. Land rented to an "insured" on which a one-, two-, three- or four-family dwelling is being built as a residence for an "insured".
Analysis
When a trust exists and is added to the homeowners policy by this endorsement, the definition of insured is changed to include the trust, as long as the trust is recognized by state law as a legal entity to sue or be sued in a court having jurisdiction, and the trust is listed in the schedule.
Coverage applies only to Coverage A and B, dwelling and other structures, and coverages E and F, personal liability and medical payments to others. The personal liability and medical payments coverage apples only to bodily injury or property damage that arises out of the ownership, maintenance or use of an "insured location" as defined. The endorsement grants coverage to the trust and trustees only for the property the policy covers. It does not provide coverage for any other property or liability of the listed trust.
Trustees are treated the same way; they are considered insureds for coverages A and B, and E and F, but only as it relates to the property listed under the trust and their duties as trustees under that trust. There is no coverage for a trustee's personal property or liability for their individual property or individual liability not related to the trust.
The definition of "business" is the same as that in the homeowners form except that it list activities of a trustee in connection with administering the Trust as an exception to the definition of "business". Activities of a trustee are not considered business activities.
"Insured location" now indicates that it is the real property but only if legal title is held in the trust with respect to the trust listed in the schedule. The order of the definition is rearranged, but all the elements are present. Vacant land, cemetery plots, and the other types of property listed are the same.
SECTION II – EXCLUSIONS
Exclusion F.6. is replaced by the following:
F. Coverage E – Personal Liability Coverage E does not apply to:
6. "Bodily injury" to you or an "insured" as defined under Definition 5.a., 5.b. or 5.e.
This exclusion also applies to any claim made or suit brought against that "insured" to:
a. Repay; or
b. Share damages with;
another person who may be obligated to pay damages because of "bodily injury" to that "insured".
Analysis
This exclusion does not really have any changes, other than that it refers to 5.e which is not referenced in the policy. The reference to 5.e is for trustees listed in the schedule on the endorsement. Bodily injury that occurs to a trustee listed on the endorsement is not covered since they are considered insureds.
SECTIONS I AND II – CONDITIONS
A. The following is added to the Cancellation provision:
If this Policy is cancelled, notice will also be mailed to the Trustee(s) named in Item 2. in the Schedule.
B. The following is added to the Nonrenewal provision:
If we elect not to renew this Policy, notice will also be mailed to the Trustee(s) named in Item 2. in the Schedule.
The following provisions are added:
Trust Documents
We must be provided, as often as we reasonably request, with copies of the trust documents for the Trust named in Item 1. in the Schedule.
Changes And Notification Requirements
We must be notified promptly of any of the following changes related to the Trust named in Item 1. in the Schedule that occur during the policy period:
A. Changes in:
1. The name and address of the Trust;
2. The Trustee(s) of the Trust, including the addition or removal of a trustee; or
3. The mailing address of any trustee of the Trust.
B. Termination of the Trust.
C. Death or disability of a trustee.
D. The grantor (or settlor) of the Trust discontinues residing at the "residence premises".
Personal Injury Coverage
If the Personal Injury endorsement is attached to this Policy, Exclusion 1.i. is replaced by the following:
This insurance does not apply to:
1. "Personal injury":
i. To you or an "insured" as defined under Definition 5.a., 5.b. or 5.e. This exclusion also applies to any claim made or suit brought against that "insured" to:
(1) Repay; or
(2) Share damages with;
another person who may be obligated to pay damages because of "personal injury" to that "insured".
All other provisions of this Policy apply.
Analysis
This section modifies the general policy conditions so that trustees are included in notifications of cancellation or nonrenewal. The carrier may request copies of the trust documents and they must be provided as often as requested, and the carrier must be notified of any changes related to the trust, such as name and address of the trust, the addition or removal of a trustee, or the mailing address of any trustee in the trust. Termination of the trust, death or disability of a trustee, or if the grantor or settlor of the trust stops living at the "residence premises" the carrier must be advised since this significantly changes the risk. There is no need for a trust endorsement if there is no longer a trust. Personal injury coverage, if added by endorsement, does not apply to trustees as defined in the endorsement.
The Personal Umbrella Policy is designed to provide additional liability coverage above the homeowners limit. The umbrella alone does not address trusts, so an endorsement is needed in order for there to be coverage for the underlying homeowners policy that involves a trust.
Like the homeowners policy, the umbrella trust endorsement begins with a schedule. The name and address of the trust, as well as the names and addresses of trustees associated with the trust are to be listed on the schedule.
Section I – Definitions
A. Paragraph J.4. is replaced by the following:
"Insured" means:
4. The Trust shown in the Schedule or in the Declarations if recognized under applicable state law as a legal entity with the capacity to sue or be sued in a court having jurisdiction and if named in Item 3. in the Schedule or in the Declarations but only with respect to the legal responsibility for acts or omissions of you or any "family member" while you or any "family member" is using an "auto", "recreational motor vehicle" or watercraft covered under this Policy.
However, with respect to the legal responsibility for any act or omission, the Trust is an "insured" only if coverage is provided to that Trust by "underlying insurance" with respect to the legal responsibility for such act or omission.
5. The Trustee(s) named in Item 2. in the Schedule or in the Declarations but only with respect to the legal responsibility for acts or omissions of you or any "family member" while you or any "family member" is using an "auto", "recreational motor vehicle" or watercraft covered under this Policy.
However, with respect to the legal responsibility for any act or omission, the Trustee is an "insured" only:
a. If coverage is provided to that Trustee by "underlying insurance" for such act or omission; and
b. With respect to his or her duties as a Trustee.
B. The following is added to Paragraph J.:
"Insured" means:
6. The Trust shown in the Schedule or in the Declarations if recognized under applicable state law as a legal entity with the capacity to sue or be sued in a court having jurisdiction and if named in Item 3. in the Schedule or in the Declarations but only with respect to:
a. The legal responsibility for acts or omissions of you or any "family member" for "personal injury" to which this insurance applies; or
b. "Bodily injury" or "property damage" arising from the ownership, maintenance or use of:
(1) The residence premises shown in the Declarations but only if legal title to such residence premises is held in trust with respect to the Trust named in Item 1. In the Schedule or in the Declarations; or
(2) Any part of any other premises owned by or rented to the Trust or any other "insured" to the extent that personal liability coverage with respect to such premises is provided by "underlying insurance" at the time of the "occurrence".
However, for any "occurrence" or offense, the Trust is an "insured" only if coverage is provided to that Trust by "underlying insurance" for such "occurrence" or offense.
7. The Trustee(s) named in Item 2. in the Schedule or in the Declarations but only with respect to:
a. The legal responsibility for acts or omissions of you or any "family member" for "personal injury" to which this insurance applies; or
b. "Bodily injury" or "property damage" arising from the ownership, maintenance or use of:
(1) The residence premises shown in the Declarations but only if legal title to such residence premises is held in trust with respect to the Trust named in Item 1. In the Schedule or in the Declarations; or
(2) Any part of any other premises owned by or rented to the Trustee or any other "insured" to the extent that personal liability coverage with respect to such premises is provided by "underlying insurance" at the time of the "occurrence".
However, for any "occurrence" or offense, the Trustee is an "insured" only:
a. If coverage is provided to that Trustee by "underlying insurance" for such "occurrence" or offense; and b. With respect to his or her duties as a Trustee.
C. The definition of "business" is replaced by the following:
G. "Business" means:
1. A trade, profession or occupation engaged in on a full-time, part-time or occasional basis;
2. "Home-sharing host activities"; or
3. Any other activity engaged in for money or other compensation, except the following:
a. One or more activities, not described in b. through e. below, for which no "insured" receives more than $2,000 in total compensation for the 12 months before the beginning of the policy period;
before the beginning of the policyperiod;b. Volunteer activities for which no money is received, other than payment for expenses incurred to perform the activity;
c. Providing home day care services for which no compensation is received, other than the mutual exchange of such services;
d. The rendering of home day care services to a relative of an "insured"; or
e. Activities performed as a Trustee in connection with administering the Trust named in Item 1. in the Schedule of this endorsement.
Analysis
Similar to the homeowners endorsement, the umbrella endorsement modifies the definition of insured to include the trust and trustees as listed in the schedule. The trust must first be covered by underlying insurance before any coverage would be applied under the umbrella. The trust is insured only for acts to which this insurance applies, and injury or damage arising out of the ownership, use or maintenance of the residence premises or any part of other premises owned or rented by the trust as long as the underlying policy provides coverage as well. The goal of the umbrella policy is to provide coverage above the underlying policy, and not to provide coverage that is not covered already to some extent. Most carriers, when issuing an umbrella policy, require certain underlying limits in order to be eligible for coverage. As with the underlying coverage, the trust must be recognized by state law as a legal entity that can be sued in a court, but only as far as the liability under this policy.
The trust and trustees are covered for injury or damage to others that arises out of the ownership, maintenance or use of the property shown in the declarations but only if the premises is held in the trust on the schedule, and the trust is covered by the underlying insurance for such an incident. The same applies to family members again, if it is also covered under the underlying insurance.
The definition of business is modified so that an exception is made for activities performed by a trust as listed in the schedule. Activities must be performed as part of the trust's administration of the property.
Section II – Coverages
The following is added to Paragraph A. Insuring Agreement:
No coverage under this endorsement applies to any resident of the household of the Trustee shown in Item 2. of the Schedule or in the Declarations.
Section III – Exclusions
Exclusion A.14. is replaced by the following:
14. The coverage provided by this endorsement does not apply to "bodily injury" or "personal injury" to:
a. You;
b. Any "family member"; or
c. The Trustee shown in Item 2. in the Schedule or in the Declarations.
This exclusion also applies to any claim made or suit brought:
(1) To repay; or
(2) Share damages with;
another person who may be obligated to pay damages because of "bodily injury" or "personal injury" to you, any "family member" or the Trustee shown in Item 2. in the Schedule or in the Declarations.
Analysis
Section II is modified to not apply coverage to residents of the trustee's households. This endorsement is for the trustee only and his duties to the trust property, not his personal liability or that of his family.
Section III is a brief section that excludes coverage for bodily or personal injury to the insured, family member, or trustee listed in the declaration. This is a standard exclusion, and has been modified to list the trustee as an excluded person.
Section VII – General Provisions
A. The following is added to the Cancellation By Us Provision:
If this Policy is canceled, notice will also be mailed to the Trustee(s) shown in Item 2. of the Schedule or in the Declarations.
B. The following is added to the Nonrenewal Provision:
If we elect to nonrenew this Policy, notice will also be mailed to the Trustee(s) shown in Item 2. of the Schedule or in the Declarations.
The following provisions are added:
Trust Documents
We must be provided, as often as we reasonably request, with copies of the Trust documents for the Trust named in Item 1. in the Schedule or in the Declarations.
Changes And Notification Requirements We must be notified promptly of any of the following changes related to the Trust named in Item 1. in the Schedule or in the Declarations that occur during the policy period:
1. Changes in:
a. The name and address of the Trust;
b. The Trustee(s) of the Trust, including the addition or removal of a Trustee; or
c. The mailing address of any Trustee of the Trust.
2. Termination of the Trust.
3. Death or disability of a Trustee.
4. The grantor (or settlor) of the Trust discontinues residing at the residence premises shown in the Declarations.
Analysis
Cancellation and nonrenewal provisions are modified to include the trustees as parties notified of such actions. Trust documentation must be provided as the carrier requests. The carrier must be notified of any changes in the name or address of the trust, trustees, including additions and removals, termination of the trust or death or disability of a trustee. In addition, if the grantor or settlor of the trust discontinues residing at the premises, the carrier must be notified.