Questions & Answers

Q. Our insured is renting a facility for a wedding reception. Does homeowners liability provide coverage for our insured for the rental of this facility?

A. The Homeowners exclusion 1.E.(2) excludes coverage to “bodily injury or property damage arising out of a premises: rented to an insured; that is not an insured location. Insured location is defined as: a. the residence premises; b. the part of other premises, other structures and grounds you use as a residence and: (1) which is shown on the declarations page; or (2) which you acquire during the policy period for your use as a residence; and c. any premises you use in connection with a premises in a. or b. above.” Other premises used in connection with covered residence premises would include a public hall or other facility rented or used by the insured.

It is important to note that although HO liability is being extended to include bodily injury and property damage, exclusion 2.C. does exclude property damage to property rented to, occupied or used by, or in the care of the insured with an exception to the exclusion providing fire legal liability (plus smoke and explosion) for any property in the care of the insured.

Q. We have a closing on a house and the mortgage company is requiring an original policy. Isn’t there a rule about binders at closings?

A. Yes, Article 21.48A of the Texas Insurance Code, Section 2. (f) states: A lender that requires a borrower to secure insurance coverage before the lender will provide a residential mortgage or commercial real estate loan shall accept an insurance binder as evidence of the required insurance if:

(1) the insurance binder is issued by a licensed local recording agent, and if requested to do so, the agent shall furnish appropriate evidence to the lender;

(2) the local recording agent is appointed to represent the insurance company whose name appears on the binder and is authorized to issue binders and, if requested to do so, the agent shall furnish evidence to the lender;

(3) the insurance binder is accompanied by evidence of payment of the premium; and

(4) the insurance binder will be replaced by an original insurance policy for the required coverage within 30 days of the date of the issuance of the insurance binder.

Q. We had a company deny a liability claim for our insured, who hit a water skier with a borrowed outboard motor boat. The adjuster said the horsepower exceeded the limit in the homeowners policy. Is this correct?

A. No, homeowners liability provides coverage for any boat that is not owned or rented by the insured, regardless of the horsepower. Therefore, there would be liability and medical payments because the boat was borrowed.

Liability and medical payments coverage applies for watercraft as follows:

Not motor powered—coverage for owned, rented or borrowed. Inboard or In/Outboard 50 h.p. or less—coverage for owned, rented or borrowed. Inboard or In/Outboard more than 50 h.p.—no coverage for owned or rented, but coverage does apply for borrowed. Sailboats less than 26 feet—coverage for owned, rented or borrowed. Sailboats 26 feet or more—no coverage for owned or rented, but coverage does apply for borrowed.

Q. We had a question regarding the self-insured retention under an umbrella. Some of us thought the SIR was like a deductible. Others thought it is applied only if the loss is not covered under an underlying policy. Can you clear this up for us?

A. Self-insured retentions, under both personal and commercial umbrellas, are not deductibles. The insured is obligated to absorb the SIR only when the loss is covered by the umbrella, but not covered in a scheduled underlying policy. An example would be discrimination, which would not be covered in the General Liability policy, but could be covered in an umbrella, depending on the carrier. If the insured had a discrimination judgement against him or her, the insured would be responsible for the SIR and the umbrella carrier would pay above that to the policy limits. If the claim was covered by the underlying GL, the SIR would not apply and the insured would have full coverage, with the umbrella limits on top of the GL limits.

Topics Homeowners Property