These types of conveyances are actively promoted in some communities as a means to reduce congestion and air pollution, but municipalities are playing catch-up in their efforts to adapt their traffic infrastructure. There have been numerous reports of serious injuries caused by small vehicles.

(Rental services are generally required to have liability insurance for use of their vehicles, but those limits would be devoted to liability for injury to users as well as third parties; the limits may not be sufficient to cover liability of the person using a rented vehicle.)

Crossing lines

So, what do these disparate exposures have in common? Taken together, they represent how the lifestyles and work patterns of individuals today create liability risk exposures that do not fall into the traditional categories of personal and commercial risk, or vehicle and general liability risk.

Regarding work from home, homeowners policy endorsements are available to provide commercial property and liability coverage for businesses based in insured residences. Homeowners policies are not, however, written and rated with the expectation that liability coverage will be extended to business activities of an insured's employer, a commercial enterprise based outside the home.

To illustrate the implications, suppose an individual invites his or her boss over for dinner as a social occasion, and the boss becomes ill or is injured. Any resulting liability for bodily injury would probably be covered by the individual's homeowners or renters policy. However, if the same injury or ailment befell a client visiting for a business purpose, the carrier could deny liability coverage. Can we reasonably expect consumers to be aware of this distinction?

Hybrid workforces

Random shifts in exposure between residences and workplaces are likely to increase as organizations develop "hybrid" workforces drawn from a fluctuating mix of full-time, part-time, permanent, temporary, on-site and at-home employees and contractors.

Workers themselves, especially those who are highly skilled, will adapt to this new organizational paradigm by simultaneously taking different roles with different organizations. When working as independent contractors on a project basis, they can operate as "home-based businesses." But as temporary full-time or permanent part-time employees, they will work for an enterprise based elsewhere.

Will they understand the difference from the standpoint of liability for premises and operations?

As working arrangements become more fluid, the job of protecting company networks and private information from cyber perils will become more complicated. Insurers that specialize in covering high net worth households are already providing personal lines cyber insurance that includes broad coverage for first- and third-party threats, including ransomware, previously reserved for commercial accounts.

Cyber insurers know that online criminals relentlessly seek out the weakest links in a network chain, making it imperative that cyber security and risk control be rigorously monitored across a diverse and shifting range of platforms. Again, can we expect the average user to know when his or her exposure begins and ends?

Nonauto vehicles

While working from home can create uninsured premises and cyber liability exposures, acquiring a small motorized vehicle can create an uninsured liability exposure away from the insured premises.

The table below illustrates the basic logic for liability coverage provided under most homeowners policies for bodily injury and property damage arising from the use of motor vehicles not designed for public roads or required to be registered as autos.

Typical Homeowners Liability Coverage for Non-Auto Motor Vehicles

The key cell is the second one in the third column. In essence, if an insured under a homeowners policy owns a motorized vehicle that is not an auto, that's effectively considered to be a vehicle exposure requiring separate vehicle coverage. There would typically be no homeowners coverage for any resulting damage or injury occurring away from the insured premises.

This longstanding logic is becoming increasingly problematic for both insurers and policyholders. If the latter are unaware of the gap in coverage when they acquire and use a motorized vehicle, they are at risk of being uninsured for a potentially severe bodily injury claim. How many owners of such vehicles know this?

As for homeowners carriers, the standard extension of liability coverage to off-premises use of non-owned conveyances can create exposure for regular, not incidental, use of rental scooters and electric bicycles in urban centers. As a result, many carriers are probably under-rating for the exposure.

Digital nomads

Trends in mobility and remote work have come together to a support a new "digital nomad" lifestyle, wherein young, often highly skilled professionals essentially live on the road and from hotel rooms, connecting online with employers or contractors while indulging the urge for travel.

Workforce consultants MBO Partners estimate that nearly 11 million Americans can be identified as "people who choose to embrace a location-independent, technology-enabled lifestyle that allows them to travel and work remotely." This lifestyle poses yet another challenge to the structure of personal liability insurance, since this "digital nomads" may not have a fixed residence, or may rarely reside at the address they assert as their residence.

The situation posed by the exposures discussed above is not entirely new.

In recent years, personal lines insurers have developed and implemented endorsements for addressing home-sharing and ride-sharing activities that use homes and personal autos for commercial purposes. These endorsements allow insurers to cover and rate (or exclude) such activities when they are undertaken for compensation through networked services (Uber, Lyft, Airbnb, Vrbo, etc.). The endorsements do not affect coverage for home-sharing or ride-sharing on a purely personal basis.

However, the approach taken toward home-sharing and ride-sharing is predicated on the ability to identify when specific commercial activities begin and end. That approach may not be sufficient to address lifestyles and work patterns that seamlessly integrate residential, commercial, and transit activities with no clear indication when one exposure begins and another ends, or when an exposure is regular or incidental.

Seeking Seamless

Today's situation calls for a far more robust and expansive liability component to homeowners and renters policies, one that greatly reduces the chance that an unsuspecting insured will be caught without protection, or that an insurer will be assuming exposure without corresponding premium.

Getting there from where we are will be no easy task. It would require a profound restructuring of the application and extent of liability coverage to protect people in their dual capacities as residents and workers, and regardless of how they choose to get around.

The small share of homeowners premium currently derived from liability coverage is unlikely to justify, on its own, the immense amount of product development work needed to revise and file policy forms, rating information, and underwriting guidelines.

This challenge was not created by individual insureds. In fact, the core problem is not an increase in risk, but the emergence of gaps in liability coverage, because certain activities are covered in one context but excluded in another.

Thus, the challenge lies within the prevailing structures of liability insurance, which can be changed. Carriers, regulators, and others in the industry must work together to allow the architecture of coverage to reflect the new realities of personal liability.