HO 04 97–ISO HOME DAY CARE COVERAGE ENDORSEMENT

(July 2020)

PURPOSE

This form is intended to provide property and liability protection for a daycare that is operated by an insured on the “residence premises.” The specific operation has to be described on the form (or elsewhere on the policy).

Note: The coverage is for day care, so it is not assumed that an eligible operation involves children only. Conceivably, the business could involve the care of adults; therefore, attention should be paid to the applicable operation’s description. However, since it is limited to day care, it is less likely that that exposure deals with persons older than pre-school aged children. While adult day care is growing in popularity, its services typically involve multiple persons served at commercial centers or in-home, assisted living.

DESCRIPTION OF BUSINESS

The endorsement requires the insured to supply the following information about their day care operation:

· The number of persons receiving day care services,

· Where the business is conducted (Is it in the dwelling or is it in another structure such as detached garage or separate building?)

· If the day care operation is held in some structure other than the dwelling, a complete description of that structure has to be included

· Limit of insurance for each structure used for providing day care

Note: While the day care operation may be located in an “other structure,” the described business MUST STILL be located on the described location.

Example: Ben Samaruhtun’s home is insured under a homeowner policy. Besides the land on which his house and two other buildings are located, Ben also owns an adjacent lot. On that lot, which has a separate legal address, there is a four-room building that Ben uses for his childcare business. Ben has a HO 04 97 endorsement that describes the four-room building, but it doesn’t mention that the building has a separate legal address. Therefore, even though the building is described on the endorsement, it is ineligible for coverage.

In Ben’s instance, since the form would have to show the address as either being his residence or a building that is separate, but on the same location as the residence, this coverage would never apply.

In the above circumstance, Ben’s only proper recourse for coverage would be to secure commercial insurance for the daycare operation at the separate address.

SECTION I

In this section, any possible protection under Coverages A and/or B of the homeowner policy does not respond to loss to the structure described in this endorsement. Instead, a specific limit of insurance is selected and shown on the HO 04 97 endorsement. The same causes of loss that are eligible for coverage under the basic (unendorsed portion of the homeowner policy) also apply to the described structure. Of course, an eligible cause of loss must directly inflict damage to the covered property in order for the endorsement’s protection to apply.

Example: Chelsea Grunge runs Chelsea's Child Care out of a converted pole barn that is located directly behind her house. A fire severely damages Chelsea's home, but does not harm the childcare area. However, Chelsea and her husband file a claim for lost childcare income because they can't access the other building while the home is being repaired. The loss of income is not eligible for coverage.

Coverage C—Personal Property—Item 8 under Special Limits of Liability is deleted and replaced by a provision which limits the personal property coverage for any property contained in the "residence premises" that is used in connection with a business (the limit is $2,500). HOWEVER, this limitation DOES NOT apply to such property that is used in connection with the described home day care operation. The entire limit of insurance shown in the declarations under Coverage C extends to property used in connection with the described business. Therefore, in the case of a day care for young children, there would be coverage for property such as:

toys	baby bottles	cribs
portable cribs	walkers	beds
video recorders (used for children’s entertainment)	video game systems and similar property	playground equipment (that does not qualify under Coverage B)

Section II—Coverages and Exclusion

Coverage E—Personal Liability and Coverage F—Medical Payments To Others apply to "bodily injury" and "property damage" that are related to the home day care services for which an insured is compensated to provide on a regular basis.

Note: The compensation does not have to be monetary. The trading of dissimilar services qualifies as compensation too.

Example: Betty stays at home to care for her infant son as well as her brother’s daughter, who is a toddler. Since Betty is still a rookie mom and her husband uses their only car to commute to work, Betty has a very hard time getting errands completed. However, things have greatly improved over the last month. Betty’s neighbor, Clarisse, suggested a wonderful arrangement. Clarisse is a cafeteria manager and her husband is a doctor. Clarisse also has a new baby and she and her husband have a very difficult time getting out of the home at nights and weekends. Clarisse arranges to take Betty’s shopping list and shop for her groceries on Fridays after work. In exchange, Betty takes care of Clarisse’s son for three or four hours every Wednesday evening. If Clarisse’s son should get injured while in Betty’s care, the fact that she has traded her care for Clarisse’s shopping service would exclude coverage under her unendorsed homeowners policy. The shopping service qualifies as compensation. Therefore, without this endorsement, a loss could be excluded.

Section II exclusion is modified

Coverage for the day care operation is granted by making Section II Exclusion E.2. inapplicable to the described operation. Normally exclusion E.2. bars coverage for any “business”-related losses. However, when the HO 04 97 is attached to a homeowner policy, the business-related exclusion makes an exception for the specified day care operation that is listed either on the endorsement, declarations or elsewhere in the policy.

Part of exclusion remains in effect

Although there is coverage for bodily injury or property damage that is directly connected to the described day care operation, this extended coverage does NOT include losses involving the maintenance, use, operation, loading or unloading of the following, by the "insured," to any person:

· Draft or saddle animals

· Vehicles for use with draft or saddle animals

· Aircraft

· Hovercraft

· Motor vehicles or all other motorized land conveyances, or

· Watercraft

This applies only if they are owned or operated or hired by or for the "insured" or employee or used by the "insured" for the purpose of instruction.

Example: Paula’s Prydful Tot Kare is located in her ranch style home. Her home is insured by an ISO HO 03 homeowner policy, which has a HO 04 97 endorsement attached to it. The policy declarations page shows Paula’s Prydful Tot Kare as the business. Last week, Paula and her staff of two were much busier than usual. Jim, Paula’s husband, owns a motorcycle shop. Jim brought home three mopeds and he gave the kids a short class on bike and moped safety. Then, to the kids’ delight, he, Paula, and her staff gave them riding lessons on the mopeds. Katy was scared to get on a moped, but after some encouraging words, Paula got Katy to try it. Katy was excited as she started the moped’s engine; she squealed as the bike headed off, and then she screamed as she lost control of the moped. Katy fell off the moped and tumbled to an asphalt driveway. The moped’s hot muffler burned one of her legs and the turning tire rubbed against the other leg. Katy needed stitches for several deep cuts, skin grafts and several weeks of rehabilitation. Her serious injuries would not be covered because they involved a motor vehicle during a riding class.

However, there can be gray areas involved with a given loss.

The endorsement also does not cover "bodily injury" to any of the insured’s employees who are hurt while performing their job. This exclusion does not apply to residence employees who are hurt while performing duties connected with the residence.

Example: Sharon Karingly works for “Tethered Tykes,” a childcare business that is run out of Lynn and Larry Tethers’ home. The Tethers’ home is insured under a homeowner policy, which has a HO 04 97 that lists “Tethered Tykes.” One day, Sharon rushes over to save Timmy, who has climbed the Tether’s Silver Maple Tree and can’t get down. Just as Sharon puts Timmy safely on the ground, she trips over a large, protruding tree root and severely wrenches her back. This job-related injury (it occurred in the course of caring for one of the children) is excluded by the HO 04 97 endorsement.

Section II—Conditions

The homeowner policy’s Limit of Liability and Severability of Insurance provisions no longer apply when the HO 04 97 is used. The conditions are replaced by the following:

Aggregate Limit of Liability

The total limit during an annual policy period for all damages incurred under Coverage E and medical expense payable under Coverage F is an annual aggregate limit that is equal to the dollar amount shown on the declarations page for Coverage E. No more than this amount will be paid, regardless of the number of “occurrences,” “insureds,” claims made against the policy, or the number of persons injured.

Sub-Limit of Liability - Subject to the annual aggregate, the total liability under Coverage F for all medical expenses payable for “bodily injury” to one person as the result of one accident cannot exceed the dollar amount listed on the declarations page for Coverage F. This figure is a sub-limit of liability and DOES NOT increase the aggregate. The limits listed apply, regardless of any provision to the contrary contained in the policy, including the policy declarations.

Severability of Insurance

Regardless of the number of insureds, the insurance will apply separately to each “insured,” except when determining the limit of liability. The annual aggregate does not increase.

Note: These conditions severely reduce the limit of insurance available to respond to day care-related losses that occur during a policy period. Normally, each insured under a homeowner policy enjoys full, separate liability protection for each separate liability loss. Further, the protection provided for medical expenses is a separate amount of insurance that does not affect the total paid for liability damages to others. However, under the HO 04 97 endorsement, each loss that involves liability and medical expense payments during a single policy term reduces the amount of insurance available for subsequent losses.