Homeowners Liability Coverage - FL Adjuster Claim Professional Exam
Introduction to Homeowners Liability
This lesson covers the liability coverages in standard homeowners policies, select endorsements, and mentions boatowners insurance policies.
Homeowners Policy Fundamentals
Homeowners insurance is a package policy combining property and liability coverage. There are six homeowners forms, differing only in property coverage. Section II - Liability Coverage is identical across all forms.
Key Terms and Definitions
We, Us, Our: Refers to the insurance company.
You, Your, Insured: The named insured and spouse. "Insured" also includes household residents, students living away, and those responsible for animals, watercraft, or vehicles.
Motor Vehicle: Self-propelled vehicles or trailers, including cars, motorcycles, lawn mowers, and motorized wheelchairs.
Business: Full-time, part-time, or occasional trade/occupation with compensation of at least $2,000/year.
Residence Employee: Workers like gardeners or maids performing duties related to the residence premises.
Insured Location: Includes residence premises, other premises listed in declarations, temporary residences, vacant land, and more.
Occurrence: An accident causing bodily injury or property damage during the policy period.
Bodily Injury: Physical harm, sickness, or disease, including care, loss of services, or death.
Property Damage: Physical injury to or loss of use of tangible property.
Damage vs. Damages: "Damage" is physical loss; "damages" is monetary compensation for loss.
Example: If an insured accidentally breaks a neighbor’s window, the "damage" is the broken window, but "damages" is the money paid to replace it.
Section II - Liability Coverages
Coverage E - Personal Liability
Pays for bodily injury or property damage the insured is legally liable for due to a covered occurrence. Includes:
- Legal defense costs, even for baseless or fraudulent claims.
- Damages up to the policy’s liability limit.
Coverage F - Medical Payments to Others
Pays reasonable medical expenses within three years of an accident, regardless of liability. Covers:
- Persons on the insured location with permission.
- Persons off the premises if injury results from insured’s actions, residence employee’s actions, or animals owned by the insured.
- Medical expenses: Costs for medical, surgical, x-ray, dental, ambulance, hospital, nursing, prosthetics, and funeral services.
Example: A guest slips on the insured’s porch; Coverage F pays medical bills, even if the insured isn’t liable.
Additional Liability Coverages
- Claim Expenses: Legal fees, bond premiums, and reasonable expenses incurred at insurer’s request.
- First Aid Expenses: Costs for first aid provided to others for covered injuries.
- Damage to Property of Others: Up to $1,000 per occurrence for replacement costs, even if not legally liable.
- Loss Assessment: Up to $1,000 for assessments by a property owners’ association for covered claims.
Example: John’s son accidentally drops a borrowed TV. The policy covers up to $1,000 for replacement, regardless of liability.
Liability Exclusions
The policy excludes coverage for:
- Motor Vehicle Liability: Excludes vehicles registered for public roads, used in racing, rented, or for business (except golf carts, stored vehicles, or recreational vehicles).
- Watercraft Liability: Excludes racing, rented, or business-use watercraft (except stored or smaller vessels).
- Aircraft and hovercraft liability.
- Expected or intended injury (except reasonable force for protection).
- Business or professional services.
- Premises not listed as insured locations.
- War, communicable diseases, abuse, or controlled substances.
Personal Liability Exclusions: Loss assessments, contractual liability (except for insured location contracts), damage to owned or rented property, and injuries to insureds or eligible for other benefits.
Medical Payments Exclusions: Injuries to residence employees off-premises, those eligible for other benefits, nuclear incidents, or regular residents (except residence employees).
Liability Conditions
- Limit of Liability: Coverage E limited per occurrence; Coverage F limited per person.
- Severability of Insurance: Coverage applies individually to each insured.
- Duties After Occurrence: Notify insurer, cooperate, forward legal documents, and avoid direct payments to claimants.
- Duties for Medical Payments: Injured party provides proof and medical records; may require a physical exam.
- Other Insurance: Homeowners policy pays after other primary insurance but before excess (e.g., umbrella) policies.
Selected Endorsements
- Home Business Insurance (HO 07 01): Covers home businesses with up to three employees and $250,000 revenue, excluding food/personal care product manufacturing.
- Permitted Incidental Occupancies (HO 04 42): Covers incidental businesses like offices or studios.
- Home Day Care (HO 04 97): Covers day care operations, excluding vehicle or employee injury liabilities.
Boatowners Policy
Homeowners policies provide limited watercraft coverage. A boatowners policy offers:
- Property Coverage: Open perils for boats, motors, trailers, and portable equipment.
- Liability Coverage: Covers damages from operation, maintenance, or use, plus defense costs and medical payments.
- Uninsured Watercraft Coverage: Compensates for injuries caused by uninsured watercraft.
Key Review Points
- All six homeowners forms have identical Section II liability coverage.
- Coverage E (Personal Liability) and Coverage F (Medical Payments) address different obligations.
- Endorsements like Home Business, Incidental Occupancies, and Home Day Care expand coverage.
- Boatowners policies provide comprehensive watercraft coverage beyond homeowners policies.