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Reading and understanding all of the language in a homeowners\u2019 insurance policy are not formalities to be skipped over while searching for the signature line. As with any contract, the fine print can have real and lasting consequences, and its contents will control over any contradictory verbal assurances. Taking the time to understand the terms of their policies might have headed off bad outcomes for homeowners in two recent cases.<\/p>\n
Business Purposes Exclusion<\/strong><\/p>\n \tJoan bought property consisting of a home, two barns, and other outbuildings. She also purchased a homeowners\u2019 insurance policy that excluded coverage for any nondwelling structure that was rented out \u201cunless used solely as a private garage.\u201d Joan rented the barns to a commercial marina, which used them for winter storage of customers\u2019 boats. When one of the barns collapsed due to snow and ice on its roof, Joan submitted a claim for loss of the barn.<\/p>\n \tThe insurer denied coverage, prompting Joan to point out that the rental exclusion should not apply because the marina was using the barn as a \u201cprivate garage.\u201d Her point made sense as far as it went, but the insurer won because of a separate exclusion from coverage for any nondwelling \u201cused in whole or in part for business purposes.\u201d Joan\u2019s main occupation was as a financial analyst, and she brought in only a few thousand dollars by renting out the barn. But all that was necessary for the business purposes exclusion to apply was that the insured regularly engage in the conduct with an intent to profit.<\/p>\n \tIt was significant for the court that, by failing to disclose her conduct, Joan had prevented the insurer from knowing the risks it was insuring. The purpose of a business pursuits exclusion, after all, is to rule out coverage for a whole set of risks and liabilities flowing from business activity. It did not matter that the damage to the barn was not caused by the boats that were stored there for profit.<\/p>\n \u201cHousehold\u201d Defined<\/strong><\/p>\n \tAt the heart of another dispute over homeowners\u2019 insurance coverage was what turned out to be an erroneous assumption by the homeowners that \u201cresidents of your household\u201d meant any persons living on the same parcel of land, even if in a different house from that occupied by the insureds. Ken and June lived in one house and their daughter and 10 year old grandson lived rent free in another house that was only 20 feet away and had the same mailing address. The close knit family often shared meals and activities, and Ken and June regularly cared for their grandson.<\/p>\n \tWhen the grandson accidentally shot a playmate with a rifle, Ken and June submitted a claim under their homeowners\u2019 policy, which covered \u201cresidents of your household who are your relatives.\u201d The insurance company succeeded in arguing that it had no obligation to defend the grandson in a suit for his friend\u2019s injuries because he was not a resident of Ken\u2019s and June\u2019s household.<\/p>\n \tIn legal terminology, a \u201chousehold\u201d is a collection of persons living together as a unit under one roof or within a single \u201ccurtilage.\u201d \u201cCurtilage\u201d is a technical term for the area next to a house that is inside the same enclosure, is used for the intimate activities of the house, and is protected from observation by passers by. The house where the grandson lived did not meet any of these criteria so as to make the grandson part of Ken\u2019s and June\u2019s \u201chousehold.\u201d The four individuals in this case probably constituted a household in many respects and for many purposes, but not in the context of interpreting the homeowners\u2019 insurance policy.<\/p>\n","protected":false},"excerpt":{"rendered":"As with any contract, the fine print in a homeowners’ insurance policy contract can have real and lasting consequences. Continue reading