Homeowners’ Liability Often Extends Beyond the Home
By JOHN E. DOWD Jr.One misconception about homeowners’ liability insurance coverage is that it covers only incidents in the home. In actuality, the comprehensive personal liability (CPL) coverage under a homeowners’ insurance policy is really not associated with any location, other than the limitations and exclusions on the policy.
Here are some examples of what probably would be covered by CPL:
• Sports incidents: for example, you are playing golf and you drive a ball that hits someone in the head and disables them. If you are found liable, as long as you were not doing it professionally, your policy will likely provide coverage.
• After shopping at your local market, you accidentally drop a bottle of olive oil in the parking lot, and it shatters and bleeds the oil onto the pavement. Another shopper comes along, slips, and seriously injures herself on the pavement. While the assumption is that the injured party will take action against the market, the typical practice of attorneys is to go after everyone associated with the incident.
• You are on vacation at a hotel, and you are so excited to leave the room to enjoy a sightseeing tour that you forget to turn off the faucet. The running water causes significant damage to the hotel structure. The hotel decides to go after you for damages. Your CPL will defend you and may pay out damages if you are deemed liable.
• Your kid lends his skateboard to a friend, and the friend, who may not be experienced with the skateboard, gets seriously injured trying to make a maneuver. Parents can be held liable for this injury, and there is a very good chance this will be covered by the CPL coverage.
• If your dog bites a stranger at the park, your CPL will cover you as the owner and responsible party for the dog, as long as the policy does not exclude coverage for your dog breed. Some homeowners policies exclude coverage for breeds deemed dangerous, such as pit bulls.
Additionally, the CPL coverage will usually extend coverage for the following items, even if an incident happens away from the insured premise:
• Trailers that are not attached to a motor vehicle;
• Motorized golf carts;
• Watercraft that does not have a motor or is not more than a specified amount of horsepower;
• Sailboats below a certain length;
• A vacation residence (however, certain conditions may apply, so you also may need to schedule it); and
• Non-motorized bikes.
Here are examples where coverage does not exist and is excluded by nearly every homeowners’ insurance policy:
• Your cars, which are clearly excluded if registered for road use. This is exactly why you need to get a separate auto insurance policy;
• Motorized recreational vehicles, especially if they are off the premises;
• Any incident related to business; and
• Intentional acts.
Policies vary, so it is important to review your policy to see what may be covered and what may not be covered. Additionally, some policies allow you to endorse a coverage that may not be on the policy. This is why it is so important to sit down with your agent to address additional risks you may have and make sure coverage for those risks is addressed.
Liability coverage is perhaps the most important coverage you should have, simply because most of these cases involve attorneys, and if coverage exists, the insurance companies provide for your defense, as well as any settlement up to the limits of your policy. Again, an annual review of your personal risk exposure with your agent is essential. It could be a very short conversation with your agent from year to year if nothing has changed in your life, but more often than not, changes do occur that could expose you unnecessarily to a potentially uninsured loss exposure. Ignorance is never a good defense.
One thing that you should carefully note is that, if you are involved with any activity where you charge a fee of some kind, there is a good chance that the insurance company will deem this to be a commercial exposure and will therefore not cover the activity under your CPL. Your agent or broker is always available to answer these questions, and you should never hesitate to put him or her on the spot.
John E. Dowd Jr. is the fourth-generation president and CEO of the Dowd Insurance Agencies. The Dowd Agencies is a full-service agency, founded by his grandfather in 1898, which provides personal, commercial, and financial-planning needs. The Dowd Agencies has six offices in Western Mass.; (413) 538-7444; [email protected]