DWELLING POLICY PROGRAM PERSONAL LIABILITY SUPPLEMENT COVERAGE FORM ANALYSIS

(January 2021)

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ISO's Personal Liability Supplement may be written with a Dwelling Policy as a "package" or separately as a "monoline" form.

In order to build a dwelling "package" policy, do the following:

· Select a Dwelling Policy Form (DP 00 01, DP 00 02, or DP 00 03)

· Attach DL 24 01–Personal Liability

· Attach DL 24 03–Personal Liability Schedule

In order to build a dwelling "monoline" policy, do the following:

· Select DL 24 01–Personal Liability

· Attach DL 24 02–Personal Liability Additional Policy Conditions

· Attach a company Declarations page

DL 24 01–Personal Liability consists of an agreement, definitions, liability coverages, exclusions, additional coverages, and conditions.

ANALYSIS

The focus of this analysis is on the DL 24 01–Personal Liability Form. An analysis of each section is detailed and, where possible, examples and relevant court cases will be referenced.

Note: This analysis is of the 07 14 edition of this form. Any differences between it and the previous edition (12 02) appear in bold.

Dwelling Property 3 - Special Form Coverage Analysis

Dwelling Property 2 - Broad Form Coverage Analysis

Dwelling Property 1 - Basic Form Coverage Analysis

Agreement

The supplement agrees to provide the insurance protection described in the policy as long as the premium is paid and the insured follows the policy’s various provisions.

Definitions

A. The supplement uses the terms “you” and “your” when discussing the “named insured” shown in the declarations and the named insured’s spouse (if he or she lives in the same household).

The terms “our,” “us,” and “we” are used as a reference to the company writing the liability coverage.

B. There are a number of other words of particular importance that are also defined in the liability supplement and are liberally referenced in this and related program forms. The defined terms include the following:

1. “Aircraft Liability,” “Hovercraft Liability,” “Motor Vehicle Liability” and “Watercraft Liability”

“Aircraft Liability,” “Hovercraft Liability,” “Motor Vehicle Liability” and “Watercraft Liability” refer to legal liability for “bodily injury” or “property damage” that is related to the use or ownership of these items. Such liability would also encompass loss involving the following:

Unloading or loading a vehicle or craft	Vehicle or craft operation	Maintaining (including repairing) a vehicle or craft
Vehicles or crafts that belong to any person defined as an insured	An insured's negligent supervision related to vehicle/craft	An insured permitting another party to use a vehicle/ craft (entrustment)
An insured's vicarious liability related to vehicle/craft

The vehicle and craft definitions go further, describing the following:

Aircraft refers to devices that are used or designed for flight. It does not include model or hobby aircraft that is not intended (designed) to carry people or cargo.

Note: Unmanned Air Vehicles, aka drones, could fit under the aircraft definition as model or hobby aircraft with some ambiguity regarding carrying cargo.

Example: Millie is sued by a person who was severely injured by Millie’s drone. While using it to take overhead photos of her home, it malfunctioned, fell, and struck the neighbor who, after getting out of the hospital, filed a lawsuit. Millie’s insurer denies the claim, alleging that the drone’s detachable camera made it ineligible for coverage. Millie files a separate suit against her insurer.

Hovercraft refers to vehicles that are powered by force of cushioned air; naturally, such devices have motors. They must also be designed to travel over the ground, at ground level. This means a self-propelled motorized ground effect vehicle and includes, but is not limited to, flarecraft (brand of air-cushion device) and other air-cushion vehicles.

Watercraft refers to devices that operate on or in water. Movement can be powered by wind, motors, or engines.

Motor Vehicle refers to a separate definition that appears later in this section.

2. "Bodily injury" refers to sickness, disease, or bodily harm; and includes death that is related to the injury or illness.

3. "Business" - besides referring to traditional pursuits that generate income such as a job, trade or occupation, the term includes any activity that, at its core, results in meaningful compensation. The reference to compensation recognizes that an activity can represent a business (or non-personal) exposure without having a tie to monetary gain. Further, it does not require an activity to be full-time in order to be considered a business. Part-time and even occasional activities may also qualify. The definition has four distinct categories of exceptions. An activity is not considered a business if it is purely voluntary (no compensation - expense reimbursement is allowed), free home daycare, performing day care services to a person the policy defines as a relative and any pursuit that results in less than $2,000 income. The income total is cumulative over the 12 months prior to a given, current policy period.

Example: Angelina Askbucks has a Personal Liability supplement with July 1, 2020 to July 1, 2021 effective dates. She is engaged in the following activities:

· Tutoring algebra for three high school students. Since July 1, 2019 she has received $850 for this work - not a business

· Since early 2018, she has belonged to her college's Alumni Board where she is reimbursed her travel expenses and gets free meals during the quarterly meetings - this is not a business

· Every month she caters a local college sorority networking dinner. Since August 2019 she has received more than $6,500 - this is a business

4. “Employee” refers to any person who is hired or leased by a person considered to be an insured. However, the term does NOT apply to performing duties related to an insured's household or personal (non-business) responsibilities. Such persons (i.e., domestics) are residence employees.

5. “Insured” - Under this form, all of the following qualify as insureds (with notes on any exceptions):

(refer to separate definition)

Your relatives if residents of "your" household

(Meaning relatives who live at the insured location with the named insured)

Persons under the age of 21 residing in "your" household and in "your" care or in the care of "your" resident relatives

Note: Such persons must BOTH be younger than 21 AND have a named insured, his or her spouse or a resident relative of the named insured/spouse as their caregiver.

The definition of insured includes persons who were residents of the named insured’s household but are full-time students. In order for a full-time student to qualify as an insured, he or she must either be younger than 24 years of age and be related to an insured OR be younger than 21 years of age and be in the care of someone in the named insured’s household.
Any party having legal responsibility for either animals or watercraft is insured but only if the animals or watercraft are eligible for coverage under the dwelling policy. However, anyone in possession of an insured’s watercraft or animal is denied insured status if the reason for the possession is business related. Also, any party that was not given permission to have control of the animal or watercraft is not an insured.

Any person working for an insured while operating a motor vehicle that qualifies for dwelling coverage
Any person who has the insured’s permission to use an eligible motor vehicle, but only while on the insured premises

Example: Janie isn’t as young as she once was and cutting her large lawn is too big of a job. She hires her neighbor’s teen daughter, Hanna, to cut the two acres around her home. While cutting Janie’s lawn, Hanna qualifies as an insured under Janie’s policy.

Note: The current “insured” definition contains a very subtle change. In the previous edition, the definition made reference to the definition applying to any entity above having possession of an insured’s animal or watercraft. The new edition has been changed to refer only to the specific subpart of the definition. 07 14 change. It is part of ISO’s continuing effort to narrow defined terms in order to make the policy’s coverage intent clear.

Note: The form makes a distinction when it uses “an insured.” The policy states that using “an” means a reference to one or more persons who are specifically defined by the term “insured.” Over the years, courts in various jurisdictions have ruled that different references to insureds within a policy create different interpretations of who is an insured. The current definition wording is intended to control the situation.

6. “Insured location” is any of the following:

· Locations which fall under the form’s definition of “residence premises”

· The area of any premises or structure used by an insured as a residence IF the structure or premises is described in the Declarations or was acquired during the policy period

· Any premises that has a connection to a described or newly acquired premises, but only if it is used by the named insured

· Any temporary residence being used by an insured. However, the temporary residence doesn’t qualify for coverage if it is owned by an insured.

· The following type of land:

o Vacant land which an insured rents or owns (farmland is not considered to be vacant)

o Land which the insured has rented or purchased for the purpose of building an eligible residence (as long as the planned residence has a maximum capacity of four families)

· An insured’s individual or family cemetery plots or burial vaults

· A premises that’s rented to an insured, as long as the rental is infrequent and is not connected with any business pursuit.

7. “Motor Vehicle” refers to vehicles that are capable of self-propulsion over either land or land and water (amphibious). Trailers and semi-trailers are also considered to be motor vehicles when they are towed by a self-propelled vehicle.

Example: Magatha’s home is insured by a dwelling policy and a PL supplement. Magatha loves the outdoors and she usually keeps a camper trailer in her driveway. The camper has recently caused her some problems. She lives in a neighborhood with plenty of children and her yard is often used as a play area by lots of youngsters. Last Halloween, two children from two different households were seriously hurt when they fell after tripping over the space between the camper trailer and vehicle hookup. The accidents occurred an hour apart. After the first accident, Magatha detached the trailer and parked her SUV alongside it. Unfortunately, it didn’t prevent the second accident. When she turned in the claims, her insurer investigated the two losses. Later, her carrier told her that, in the first accident, the loss involved a motor vehicle since the camper was attached to her SUV. Therefore, only the second loss would be covered.

8. “Occurrence” is an accident that causes “bodily injury” or “property damage.” The bodily injury or property damage must take place during the policy period. The term accident is expanded to include exposure to a repeated or continual set of the same harmful circumstances.

9. “Property damage” refers strictly to tangible property that has been physically injured, lost or destroyed, including the loss of the use of tangible property.

10. “Residence employee” is any of the following persons:

· Individuals hired by (or leased to) an “insured” and whose responsibilities include household or domestic services or whose responsibilities are related to a “residence premise’s” maintenance or use

· Individuals hired by (or leased to) an “insured” and whose responsibilities include household, domestic services, or similar duties, but which are performed elsewhere, unless the location is connected to an insured’s “business.”

A person who is either a temporary substitute for a regular residence employee or who is hired to meet a temporary (including seasonal) workflow need does not meet this definition.

11. “Residence premises” refers to a place shown on the Declarations where the named insured resides. It can be any of the following:

· A one family dwelling, related structures, and grounds.

· A two- to four-family dwelling as long as the named insured lives in one of the family units.

· A portion of ANY structure as long as the named insured lives there.

Other structures and grounds found at the same location as the documented residence premises are also treated as residence premises.

Example: Marlon’s home has a large backyard with a huge oak tree. The tree contains a large treehouse that is popular with Marlon’s children and their friends. The treehouse qualifies under the definition of residence premises.

LIABILITY COVERAGES

A. Coverage L - Personal Liability

This portion of the Personal Liability Supplement is designed to handle claims or lawsuits filed against an eligible insured. However, the claim or suit must involve “bodily injury” or “property damage” AND the “insured” must have a legal obligation to pay the damages. Further, the damages must be the result of an instance that is considered an “occurrence.” The section’s wording makes liberal references to an “insured” instead of the “insured.” The insurance company promises to pay:

· Up to, but not exceeding, the limit of insurance that is shown on the Declarations. If a lawsuit is involved, eligible damages also include any prejudgment interest that may apply to the outcome.

· For the cost of providing their insured with a legal defense. The insurer is obligated to defend even against suits that are totally without merit. The insurer retains the right to choose who represents the insured and also has the right to settle a claim should that decision be based upon an investigation of the loss. The insurer DOES NOT have to continue providing defense coverage after the limit of liability is exhausted because a settlement or judgment has been paid.

Example: Justa Simpleton owns a dwelling fire policy which includes the DL 24 01–Personal Liability supplement. Justa rents the property and his tenant has complained about the poor condition of the property's front steps. Justa asks his friend, Klutz, to go with him to make repairs. Justa and Klutz loosen the stairs as preparation for replacing them. Justa asks Klutz to go inside and tell the tenants what is happening. Justa, eager to get finished, pulls the rotted wooden stairs away from the dwelling and begins to dismantle them. A few minutes later, Klutz steps out the front entrance and, well, it was a painful experience. Klutz decides to end his friendship and, not coincidentally, sues Justa for $75,000. Justa’s dwelling policy has an insurance limit of $100,000. The policy handles the eventual settlement ($75,000) as well as all of the related defense costs.

Example: Let’s expand on the above situation, starting from the point where Klutz has just bounced two or three times on the spot where the stairs used to be. Justa sees the fall and rushes over to help. Unfortunately, Justa trips and he loses his grip on his stainless-steel hammer. Worse, the hammer lands on Klutz’s previously undamaged nose. Klutz files a suit, but this time for $150,000. The claims person from Justa’s insurance company looks into the loss and writes Klutz a check for the full amount of the $100,000 limit of insurance and wishes Justa luck. In this instance, the insurer has no obligation to defend Mr. Simpleton for Klutz’s suit seeking the remaining $50,000.

Note: This article illustrates how an umbrella liability policy might act to pick up the defense obligation from a primary insurer.

B. Coverage M - Medical Payments to Others

This section pays for medical expenses that either occur or are identified after a “bodily injury” loss takes place. However, payment is available for no longer than three years from the accident date. The expenses must be both reasonable and necessary and typically include coverage for the following services:

· Medical

· Surgical

· X-ray

· Dental

· Ambulance

· Hospital

· Professional nursing

· Prosthetic devices

· Funerals

Coverage under this portion of the policy may apply to accidents that occur either on or away from the insured location. If the “bodily injury” occurs on location, the coverage applies to any person who is on the “insured location” with the “insured’s” permission.

Example: Lucy Baggum was busy painting an old home she recently inherited from her Grandma. Lucy insured the dwelling under a DP 00 02–Dwelling Property 2 - Broad Form that has a DL 24 01–Personal Liability supplement attached. The limits of insurance under the DL 24 01 include $5,000 for medical payments.

Lucy stops her painting when she hears a knock at her front door. It turns out to be a person running for the local school board. When Lucy says she doesn’t have time to listen to any political spiel, the candidate pushes her way into the house and tries to give Lucy a pamphlet. The candidate slips on a paint roller, falls to the floor, and fractures her hip. Her medical expenses exceed $2,000. Lucy is upset that the candidate was hurt. Later she’s enraged to find that she’s is being sued for the candidate’s injuries and her insurer advises that there is no insurance coverage because the candidate was hurt while in Lucy’s home without permission.

Protection under Coverage M may also apply to losses that occur away from an “insured location.” However, the “bodily injury” must be the result of one of the following:

· The injury is the result of a condition on or adjoining an “insured location”

· The actions of an “insured”

· The actions of a “residence employee” while performing work for an insured

· An act by an animal which is owned by or entrusted to an “insured”

Coverage M does not apply to "you" or regular residents of "your" household except "residence employees.”

Example: Jenny Gracias is enjoying a walk in a city park that is just across the street from her “white elephant” home. She insured it with a DP 00 03–Dwelling Property 3 – Special Form and a DL 24 01–Personal Liability supplement. Jenny is walking Kannibul, a 125-pound dog that belongs to her friend who is out of town. As Jenny and Kannibul return to her home, a group of teens tease Jenny for wearing generic athletic shoes (kids!). When one of the teens throws an aluminum can at Jenny, Kannibul breaks loose from his leash and ends up compromising the teen’s future ability to have heirs. The dog attack results in nearly $3,000 of emergency medical treatment. Although Kannibul belongs to another person, since he was in Jenny’s care, the liability supplement would respond by paying the teen’s medical expenses.

EXCLUSIONS

Forms that use the “we cover everything unless we exclude it” approach are ALWAYS a challenge to read and understand. Any person reviewing exclusions must read the policy language very carefully. Particularly close attention must be paid to exclusions that contain exceptions. One approach that is helpful in trying to comprehend exclusions is to try to identify what other type of endorsements or policies might handle the coverage situations that are excluded. The two most common reasons a given circumstance is excluded is because it is considered uninsurable or it is covered by another type of insurance policy. The following summarizes the situations that are excluded from liability coverage:

Neither Coverage L nor M is available to protect an insured who is responsible for bodily injury or property damage that occurs under the following circumstances (note that there are exceptions):

A. Motor Vehicle Liability

1. The Personal Liability Form coverage parts L- Personal Liability and M - Medical Payments to Others do not protect an insured against an “occurrence” related to “motor vehicle liability” when the loss involves:

a. A motor vehicle which is actually registered to be used on public roads or property.

b. Vehicles that are not registered for public road use but that are required by the governmental authority to be registered. The registration requirement is determined by the location of the place where the occurrence happens.

c. Coverage is also excluded when the “motor vehicle” (as defined by the policy’s definition section) meets any of the following conditions:

(1) Used in an organized or prearranged race, speed contest or other competition, including or preparing for the race

Note: Since this exclusion refers to prearranged or organized events, it would appear that a spontaneous event, such as a drag race, might be covered. Of course, such a race would have to involve vehicles that aren’t excluded by other parts of the policy.

(2) Rented to other persons

(3) A vehicle whose owner charges a fee to carry persons or property

(4) A vehicle that is used in a “business,” with the exception of a motorized golf cart while it is being used on a golfing facility.

2. If a vehicle fails to fall under exclusion A.1, a motor vehicle is still not covered EXCEPT when the vehicle meets one or more of the following conditions:

a. Is on an “insured location” and in dead storage

b. ONLY used in connection with maintaining an “insured’s” residence

Example: Flora insures a get-away cabin and its surrounding property with a dwelling policy and Personal Liability supplement. She has an ATV with a hitch for various pieces of lawn equipment. She and her neighbor are at their cabins, clearing their lawns of leaves and dead grass. Her neighbor asks if he can borrow Flora’s ATV and its grass dethatcher attachment. As Flora drives her ATV off her property and onto her neighbor's yard, she hits a large, exposed tree branch. The ATV skids sideways and hits her neighbor’s daughter. Since the injury occurred away from a covered location, it is unlikely to qualify for coverage.

c. Made for use by handicapped persons and the loss occurs when either of the following is true:

(1) The vehicle is being used by a handicapped person

Example: An insured's teen grandson and a couple of his friends decide to hop on the insured's electric cart. When the grandson sees his mom, he quickly stops the cart. His friends are violently jolted against the rear of the vehicle and then they fall off. One friend receives some severe cuts and the other suffers a fractured leg. None of these injuries are covered. While the type of vehicle is eligible, the use (joyriding) excludes it from coverage.

(2) The vehicle is parked on an “insured location”

(Note that even if a vehicle such as a motorized wheelchair is involved in a loss, the loss is not eligible for coverage UNLESS the wheelchair is being USED by a handicapped person or is parked.)

d. A recreational vehicle that is MADE as a recreational vehicle to be used off public roads AND one or more of the following apply:

(1) The vehicle is NOT owned by an insured

Example: An insured is invited to a friend's rural cabin for a weekend. The friend permits the insured to enjoy himself, granting her use of an all-terrain cycle. The insured is riding the cycle, loses control and rams it into the porch of a neighboring cabin. The loss would be eligible for coverage under the insured's Personal Liability form because it involves a non-owned vehicle.

Note: The policy now makes a more specific reference to the requirement that such vehicles qualify for coverage only if both OWNED by an insured and only while operated at a site meeting the policy’s insured location definition. 07 14 change.

Note: Item d.(2) was expanded under the 07 14 Edition of the Personal Liability Form. Subpart (2) (b) is the added item.

(2)(a) The vehicle IS owned by an insured, but the loss occurs on an insured location. The insured location must qualify as such under the policy’s definition.

(2)(b) The vehicle is owned by an insured, but the loss occurs away from an insured location. However, this off-location protection is quite narrow. It applies only when the loss involves a vehicle that is designed to be used by young children (6 years and younger) as a toy, is battery-powered and is incapable of moving faster than 5 mph on level ground. In other words, the policy responds to, essentially, losses resulting from motorized, preschooler operated toys.

Note: The 5-mph restriction applies whether the motorized toy’s speed capability was provided by the manufacturer or is due to later modification.

Of course, though the coverage is narrow, it is still valuable that the Personal Liability Form could respond to hazards caused by certain motorized property.

e. A motorized golf cart which is owned by an insured and which is built for carrying four or fewer persons and is not capable of traveling faster than 25 mph on level ground. Further, the golf cart MUST be operated within the legal boundaries of the following:

(1) A golfing facility at which the golf cart is either kept or is being used by an insured to do any of the following:

(a) Play golf or some other activity sanctioned at the facility (interesting - what if the facility sanctioned golf cart races?)

(b) Ride between the areas where golf carts or motor vehicles are parked or stored

(c) Cross public streets in order to get to other areas of the golfing facility

2) A private community which, with the consent of the community’s property-owner association, allows golf carts to travel upon its roads. However, the person operating the cart must have a residence located within that private community.

Example: Joe owns a dwelling that is insured by a DP 00 03 that is endorsed with DL 24 01. Joe is involved in the following:

Scenario 1: While driving a golf cart, Joe hits a pedestrian who is walking next to Joe's home. Joe had borrowed the golf cart to haul around some land mulch and topsoil. This loss would not be covered as it did not involve golfing.

Scenario 2: While driving a golf cart, Joe hits a pedestrian who is walking next to Joe's home. Joe just bought the golf cart and he was learning how to operate it. This loss would not be covered as it did not involve golfing.

Scenario 3: While driving a golf cart, Joe hits a pedestrian who is walking on a golf course. Joe owns the golf cart and he was making his way to the next hole. This loss would be covered as it involved golfing. (This piece needs to line up to the other 2)

The Personal Liability Supplement policy is designed to tightly control the exposure to any imaginable liability related to motor vehicles.

However, even with the latest wording, it is not always clear that a vehicle's involvement with a loss will result in it being ineligible for coverage.

B. “Watercraft Liability”

1. The Personal Liability Supplement coverage parts L - Personal Liability and M - Medical Payments to Others do not protect an insured against an “occurrence” related to “watercraft liability” when the loss involves watercraft that meets any of the following criteria:

a. Used in an organized or prearranged race, speed contest or other competition, including practicing or preparing for the race

Note: Since this exclusion refers to prearranged or organized events, it would appear that a spontaneous race might be covered. Regardless, there is a racing exception. The exclusion does not apply to races involving sailing vessels or predicted log cruises where specified locations or spots are predetermined and the single or multiple participants compete to see how quickly they can arrive at each destination.

b. Rented to other persons

c. Available to carry persons or property if a fee is paid to its owner

d. Used in a “business”

2. If a situation involving watercraft fails to fall under exclusion B.1., a watercraft liability loss is still not covered EXCEPT when the watercraft meets any of the following criteria:

a. Stored

Example: An insured's garage is covered under a DP 00 02–Dwelling Property 2 - Broad Form with a DL 24 01. The insured owns a three-car garage, but only one car. The insured's next-door neighbor professionally races powerboats but doesn’t have a garage. He asks if he can store his race boat in the garage during the boat-racing off-season. The insured lets his neighbor store the boat for free. The liability exposure for the boat is covered while it is being stored. Why? Well, no matter if the boat is so powerful that it could actually attain flight, the liability exposure is small if the craft is stored.

b. A sailing vessel. The exception is not affected by the vessel having auxiliary power, but the sailboat must be one of the following:

(1) Shorter than 26 feet

(2) Longer than 26 feet but neither owned by nor rented to an insured.

In other words, a loss involving a short sailing boat could be covered. Also, a loss involving a long sailing boat which an insured borrows (or may just be temporarily operating at the time of loss) may be covered under the policy.

c. Not a sailing vessel. However, if powered, the power must be from:

(1) An inboard or inboard-outdrive engine or motor. That engine or motor must be:

(a) No more than 50 horsepower and the engine must NOT be owned by an insured, or

(b) Greater than 50 horsepower and the engine must NOT be owned by or rented to an “insured”

(2) An outboard engine or motor that:

(a) has 25 or less horsepower. There is no ownership requirement.

(b) has greater than 25 horsepower and an insured must NOT own the engine/motor,

(c) has greater than 25 horsepower and an insured gets the engine/motor during the policy period,

(d) has greater than 25 horsepower and an insured gets the engine/motor before the policy period,

but only if:

(i) the insured declared the engine or motor the policy’s inception date

(ii) the insured insures them within 45 days of purchasing the motor or engine.

Items (c) or (d) apply for the entire policy period.

Note: When horsepower is referenced in the policy, the term means the maximum power rating which the manufacturer has assigned to the engine or motor.

Example: Yanni Seegouh was sued by a trout fisherman that he hit after he carelessly started and drove his outboard boat. When Yanni bought the used outboard last year and added it to his policy, he told his insurer that it was a 25 hp engine. Yanni’s insurer turned down the claim when they found that the engine’s manufacturer rated it as a 40 hp engine. Yanni’s complaint that the engine was now too old to go anywhere near 40 hp did not persuade the insurer to change its mind.

The liability supplement appears to be splitting a number of coverage hairs concerning watercraft. It would be quite simple to either exclude or include all types of watercraft. However, this ISO form should be given credit for permitting coverage for certain common exposures such as “owned,” lower-powered outboards, any type of boat that’s in storage or coverage for larger, or more powerful boats which an insured may rarely use (borrow). These modest watercraft liability considerations fill the gap and act as a bridge to the fuller coverage that is and should be provided by watercraft endorsements and policies.

C. Aircraft Liability

No exceptions on this issue. The Personal Liability supplement does not cover this exposure.

F. Coverage L - Personal Liability

Personal liability coverage is also unavailable to protect an insured against the following circumstances:

1. Liability for:

a. Loss Assessments

The personal liability section of the Personal Liability supplement is inapplicable to assessments that are levied on a property ownership group member because of damage to community-owned property.

Example: Fern Green owns a townhouse that is insured by a DP 00 03 which includes a Personal Liability supplement. Fern’s townhouse is part of the Turnaround Terrace Townhome Association. Last month, the antique, carved wood front entrance to the community of townhomes was severely damaged by vandals who doused the entrance with gasoline. The fire caused thousands of dollars in damages. Today, while opening her mail, Fern receives a notice that she, along with the other members of Turnaround, will be assessed nearly $900 dollars apiece to have the entrance repaired and restored. Fern calls her insurance agent who, sadly, informs her that such assessments are not eligible for coverage.

b. Contractual Liability

This exclusion does not apply to written contracts that directly relate to the ownership, maintenance or use of an "insured location." It also makes an exception in cases where the liability of others is assumed by the "insured" before an "occurrence." These exceptions apply unless excluded in item a. above or elsewhere in this policy.

Example: Perry Wildunkrazee (whose small home is insured under a DP 00 01 policy with a DL 24 01-Personal Liability Supplement) decides to throw the ultimate bachelor’s party for his best friend. He hires “Insane Party Guyz Ltd.” to handle the catering and the entertainment which involves a comedy act and jugglers. “Insane Party Guyz” requires Perry to sign a written agreement to be personally responsible for any damages that result from the party. Perry signs the agreement and tells his friend to get ready for a terrific farewell to the land of bachelors.

In this instance, liability arising out of the agreement will be covered by DL 24 01–Personal Liability as long as it is not excluded elsewhere in the policy.

Example: Let’s look at another scenario involving Perry Wildunkrazee. Perry is in the same home, insured by the same supplement. Perry has a part-time activity. Besides his full-time job, he uses part of his home to repair and restore vintage drum sets. He typically makes several thousand dollars a year from this pursuit. There was a fire in his studio that was caused by faulty wiring. Flame and smoke ruined an antique drum set that was valued at $12,000. Before he received the refurbishing job, he signed the owner’s agreement to be fully responsible for any accidental damage to the set. Even though the loss occurred after the agreement, the loss is still not covered because it involved a business activity.

2. Loss or damage to an insured’s property

This exclusion is a reminder of what is meant by “liability.” It refers to a responsibility to OTHER parties. Naturally, liability coverage should not apply to property that belongs to an insured.

Example: Let’s add to the original Perry Wildunkrazee scenario. The bachelor’s party is underway and the entertainment includes an exotic juggling act involving flaming objects. The jugglers lose control during their act and their batons burn-up several guests' coats and destroy Perry’s couch and part of his carpeting.

In this situation the result would be:

Guests' coats - covered
Damage to Perry's couch - not covered
Damage to Perry’s carpet - not covered

3. Loss or damage to property that is rented, occupied, or controlled by any insured.

This is another exclusion against an exposure that should be handled by a property coverage part or policy. There is an exception for such loss from fire smoke or explosion. This is referred to traditionally as Fire Legal Liability coverage.

4. Loss involving bodily injury to persons eligible for workers compensation or disability benefits

The applicability of this exclusion is not affected by whether the benefits are voluntary or mandatory. It also applies to benefits mandated by a non-occupational disability or occupational disease law. This item is meant to avoid duplicate coverage for a single loss by forcing protection to the proper provider.

Example: Again, let’s use the Perry Wildunkrazee party, noting that, in Perry’s state, the law requires employers to provide insurance for their employees while on the job. This time some of Perry’s guests are enjoying an exotic gymnastics act. While attempting a human pyramid, the gymnasts fall over, landing on some revelers. Several guests and entertainers are injured. While the injuries to the guests may be handled, the injuries to the entertainers are excluded because of the state law requiring insurance for employees.

5. "Bodily injury" or "property damage" losses that are (or should be) covered by a nuclear energy liability policy.

As was the case with item 4. above, this exclusion’s intent is to prevent the Personal Liability supplement from stepping into the coverage responsibility of another policy - in this case a nuclear energy liability policy. The latter is a type of policy issued by any one of the following companies:

· American Nuclear Insurers

· Mutual Atomic Energy Liability Underwriters

· Nuclear Insurance Association of Canada

Also included are any one of the successors to these companies.

Note: The Personal Liability supplement prohibits coverage even when protection under other carriers has been exhausted.

6. Loss involving bodily injury to any insured

This exclusion eliminates coverage for bodily injury to any individual who qualifies as an “insured” under the policy definition. This exclusion remains effective even for lawsuits that attempt to mitigate damages suffered by an insured such as those that sue a person for total or partial reimbursement.

G. Coverage M - Medical Payments to Others

Medical Payments to Others coverage does not apply to "bodily injury":

1. That is experienced by "residence employees"

This is a coverage limitation rather than elimination. The policy provides coverage for residence employees only when the injury does not take place in an area that is not an “insured location" AND is not in the course of their employment as an insured’s residence employee. In other words, employees in the course of employment, are covered for medical payments either on or off an insured location. They are also covered on the insured location even if NOT in the course of employment.

Example: Carson Muchloot owns a dozen properties which he rents out. All of the homes are insured by DP 00 03 policies which include DL 24 01 Liability Supplements. Carson employs Mr. Greenderson Thumb as a gardener to service his rental properties. One Friday, Greenderson finishes work on a Carson property. He then decides to have lunch and take the rest of the day off to do some work at his own home. Greenderson is unloading some topsoil and, while carrying it to his backyard, he stumbles over a garden hose, breaking his leg. Greenderson’s injury is not covered since he was not at any of the insured locations and it occurred while doing a personal chore.

2. Loss suffered by persons eligible for workers compensation or disability benefits

Example: Let’s change the circumstances of the Carson Muchloot situation. First, be aware that Carson also carries a separate disability income policy for his employees, including Mr. Thumb. In this scenario, Greenderson has lunch, then goes to another Muchloot property. Again, he is unloading some topsoil and, while carrying it to the rear of the property, he stumbles over a garden hose and breaks his leg. Even though he was hurt at an insured location and while on the job, Greenderson’s injury is not covered since Mr. Carson has protected him with a disability policy.

3. Loss that that involves nuclear activity

Medical payment does not apply to any incident triggered by nuclear activity.

4. Loss suffered by any regular resident of an insured location unless the person is a "residence employee."

Example: Jeff Alumnus insures his very old, two-family home with a DP 00 01 policy which includes a DL 24 01 Liability Supplement. Jeff lives in the bottom half of the home and the top half is sparsely furnished for use by guests. Glen, one of Jeff’s fraternity brothers, is trying to find a job in town. Glen is a 22-year-old graduate student. Every week, Glen travels from college and lives in the upstairs of Jeff’s home from Thursday evening through Saturday morning. On Fridays, Glen goes job-hunting, attends interviews, etc., and then he goes back to college. This arrangement has been going on for over a month. One Thursday evening, Glen is sitting on an old wooden chair in the upstairs apartment. He is preparing for a morning interview. Glen is injured when the chair collapses and he breaks his back. Since Glen regularly enjoys Jeff’s hospitality, his injuries are excluded from coverage.

ADDITIONAL COVERAGES

The following items are covered in addition to the limits of liability which appear in the policy:

A. Claims expenses

The policy will pay for the following expenses that are related to claims covered under this policy:

1. Expenses that the insurance company incurs and any costs which are assessed against an "insured" in any suit that the insurance company defends.

2. Any premiums on bonds which are required in any suit that the insurance company defends. However, premiums will not be paid for the portion of any bond amount that is greater than the limit of liability found under Coverage L. Additionally, it is not the responsibility of the insurance company to apply for or to furnish any bond.

3. Reasonable expenses that are incurred by an "insured" at the request of the insurance company

These include actual loss of earnings up to $250 per day for helping the insurer’s investigation or defense of a claim or a suit.

4. Interest which accrues on an entry of judgment

The insurance company will pay any accumulated interest on the entire amount of a judgment which occurs before the insurance company makes payment. This interest paid will only be for the part of the judgment that does not exceed the limit of liability shown on the policy.

B. First aid expenses

The policy will pay expenses for providing first aid to other people who suffer "bodily injury" that is caused by an “insured.”

Of course, the loss has to be eligible for coverage under the policy. Further, this additional coverage excludes payment for first aid given to any "insured." In other words, this additional coverage is intended only for eligible third parties.

Example: Paula is at a local batting cage:

Scenario 1: When she swings at a pitch, she loses control of the bat and hits a young man. The young man is treated at that location by an Emergency Medical Technician. The injured person forwards his $400 treatment bill to Paula. This would be covered as it was an accidental, eligible injury.

Scenario 2: When a young man laughs wildly at her poor hitting technique, she loses control of her temper and she repeatedly hits the young man. The young man is taken to a nearby ER and his treatment costs $400 - this would not be covered as it was an intentional (ineligible) injury.

C. Damage to property of others

1. The policy will pay up to $1,000 per "occurrence" for damages an “insured” causes to the property of others. Any payment is based upon the cost to replace a damaged item. There is no requirement that an insured be negligent. However, the coverage is subject to some exceptions.

2. No payment will be made for property damage that occurs under the following circumstances:

· Intentionally caused by an "insured" who is 13 years of age or older

· When the property is owned by an "insured"

· When property that is owned by or rented to a tenant of an "insured" or a resident of the insured’s household

· Results from a business activity an insured

· Resulting from an act or omission in connection with a premises owned, rented, or controlled by an "insured," other than the "insured location"

· Involving the ownership, maintenance, or use of aircraft, watercraft, hovercraft or motor vehicles, or all other motorized land conveyances

Note: The exclusion for motorized items does not apply to any such item that meets ALL of the following criteria.

The motorized land conveyance must:

· Be designed for recreational use off public roads

· Not be subject to motor vehicle registration

· Not belong to an "insured"

Example: Jeremy is operating his friend's motor cart at a city park when he loses control of the cart; it runs into and knocks over a mobile hot dog stand - this is eligible for coverage (non-owned cart, not requiring registration, used off-road).

Example: Jeremy is operating his motorbike in his neighborhood when he loses control. The motorbike runs into and heavily damages the side of a neighbor's new sedan - this is ineligible for coverage (owned vehicle, used on public streets [though not requiring registration]).

CONDITIONS

A. Limit of Liability

Under Coverage L - Personal Liability

The limit of liability which is shown on the policy Declarations is the maximum amount that will be paid for a single “occurrence.” This maximum obligation is not affected by any of the following:

· The number of "insureds"

· The number of claims made

· The number of persons injured

Furthermore, ALL eligible injuries and damages that are the result of any one accident or of continuous or repeated exposure to the same general harmful conditions are considered to be one "occurrence."

Under Coverage M - Medical Payments to Others

The limit of liability which is shown on the policy Declarations is the maximum amount that will be paid for medical expenses paid for "bodily injury" suffered by any one person as the result of one accident.

B. Severability of Insurance

This insurance applies separately to each "insured." This provision does not increase the limit of liability for anyone "occurrence."

Example: George and Georgette Smith have a dwelling policy which includes a DL 24 01 Liability Supplement with a $100,000 insurance limit under Coverage L - Personal Liability. The Smiths are spending a sunny day working around their home. Mr. Smith is painting the upper story of their house while Mrs. Smith is cutting their front lawn. While cutting a path toward the front sidewalk, Mrs. Smith looks backward toward the house to tell George to be sure to paint the window frames. Mrs. Smith is startled by a person’s shriek. She had crossed onto the sidewalk and ran over a passing pedestrian’s foot with her mower. Mr. Smith rushes over to help her, still carrying the extension ladder. He drops the ladder and it slides out into the street into the path of a car. The driver slams on his brakes to avoid the ladder but is then rear-ended by another car. In this scenario, the $100,000 limit is available to respond to both the mower accident involving Mrs. Smith and the ladder accident involving Mr. Smith. The two incidents, though related by circumstances, are separate occurrences involving separate insureds.

C. Duties After Loss

In case of an accident or "occurrence," the "insured" is required to:

1. Give written notice to the insurance company or the agent as soon as it is practical. The loss notification should include:

a. The insured’s name and specific policy information such as policy number and effective dates.

b. Details regarding the time, place, and circumstances of the accident or "occurrence."

c. Claimant and witness names, addresses, contact information, etc.

Note: This requirement strives to be reasonable as it takes reality into consideration such as the loss circumstances, location, time of the occurrence and other factors that might prevent immediate notification. However, an insured must not interpret the requirement as meaning “at his or her convenience.” It’s critical that an insurer be quickly notified of possible losses in order to begin its evaluation. Insureds should make an effort to tell their agent or insurer of an incident.

There is added wording that tells an insured that his or her noncompliance with the policy provisions could result in a coverage denial. It also states that this may only occur if the noncompliance is “prejudicial” to the insurer. The reference to “prejudicial” is very likely to cause more problems than it will solve. An insured’s understanding of “prejudice” is quite different than the legal term for harming or negatively affecting another party’s rights.

2. The Personal Liability supplement notifies the insured that they have to participate by assisting the carrier with defending or resolving a claim or suit.

3. Quickly send the insurance company every notice, demand, summons, or other process relating to the accident or "occurrence." This is the best way to make sure that the insurer is able to evaluate and handle a possible claim.

4. When the insurance company requests cooperation, the "insured" must help in all of the following ways:

a. With making a settlement

b. To pursue other parties who have an obligation to either share or reimburse the insurance company for a loss payment that it makes on behalf of an insured

c. With lawsuit details, attending hearings and trials

d. To gather and give evidence and help to secure witnesses

5. When an “occurrence” involves Damage to Property of Others, an insured must send the insurance company a sworn statement of loss and to display any damaged property that is in the "insured's" control.

Note: The insured must send the loss statement within 60 days after the occurrence.

6. The only time an “insured" is permitted to help pay for any damages is when it involves first aid to others at the time of the "bodily injury." If the “insured” volunteers to make a payment under any other circumstance, it is at his or her own expense. Making voluntary payments is dangerous since it could compromise the rights of the insurance company. Such voluntary payments could be interpreted as admitting fault before the loss can be properly investigated.

D. Duties of an Injured Person - Coverage M - Medical Payments to Others

Under this portion of the liability supplement, the injured person or his representative must provide the insurance company with both of the following:

· A written proof of claim as soon as is practical. The insurance company may request that this be given under oath

· Authorization for the insurer to obtain copies of medical reports and records.

Finally, the injured person has to agree to be examined by a doctor of the insurer's choice; when and as often as reasonably required. In this instance, the insurer must not abuse this provision. It should have a valid reason for the timing and the frequency of any examinations.

E. Payment of Claim - Coverage M - Medical Payments to Others

Payment under this coverage is not an admission of fault by either the "insured" or the insurance company. The reason for such payments is to handle any immediate needs of injured persons without giving up the right to evaluate any liability.

F. Suit Against Us

Under this provision, an insurer makes several things clear concerning the decision to sue:

· A suit can’t be filed without first complying with the policy provisions.

· No other parties can join the insurance company in any action against an "insured."

· When a loss involves Coverage L - Personal Liability, the insurer may not be sued until the obligation of the "insured" has been determined by final judgment or agreement.

G. Bankruptcy of an Insured

The insurer’s obligation to uphold this insurance contract is not affected by an “insured” who is financially bankrupt or insolvent.

H. Other Insurance - Coverage L - Personal Liability

When a loss occurs that is eligible for coverage under Coverage L - Personal Liability and other sources of insurance are available, then coverage under this policy becomes excess over the other. However, this provision does not apply when the other insurance is written specifically to cover liability losses on an excess basis over the limits of liability that apply in this policy.

I. Policy Period

Coverage under this insurance contract applies only to bodily injury and property damage that take place during the policy period that is shown in the policy Declarations.

J. Subrogation

An "insured" may surrender his or her rights of recovery against any person, if the surrender is done before any loss and it is in writing. If the insured does not surrender (waive) these rights, the “insured” may be required to assign them to the insurance company. Once an assignment is made, the insurer has the right to recover payments that it has made for a loss from another party that may be responsible for the loss.

Example: Abby Leever agrees to watch her best friend Lucy’s toddler (named Petey) while Lucy goes shopping. Abby is watering her flower garden and sees her postman deliver the mail. She puts down the hose and goes to her mailbox. Before she can do anything, Petey picks up the hose and drenches a pedestrian. The pedestrian runs blindly out to the street to avoid the spray and is struck by a car. The pedestrian suffers cuts, abrasions, and broken bones.

Abby’s insurer, Never Forget or Forgive Mutual, investigates the loss and pays for the pedestrian’s medical expenses and other damages. Never Forget then asks Abby to assign it her subrogation rights. The insurance company then sues Lucy to recover payment for the loss caused by little Petey.

Any recovery pursued by an insurer is limited to reimbursement, not for any amount that exceeds what was paid by the insurer. An assignment also obligates the "insured" to sign and deliver all related papers and cooperate with the insurance company.

K. Concealment or Fraud

The dwelling liability form is meant to provide protection against liability to others that is fortuitous and when incidents are accompanied by actions taken in good faith by insureds. Loss reporting and/or actions involved in acquiring insurance protection that is fraudulent do not qualify for coverage. In such instances, an insurer has the right to deny claims and/or revoke coverage.