Friday, June 19, 2009

Summer rental...what about my Stuff!

Summer is here and it is time to get the family in the van to hit the open road. Whether you travel to the cabin in the mountains or the condo on the beach one thing is for certain, to paraphrase the comedian George Carlin, you will be bringing a lot of “stuff”. Here is a brief synopsis of where you can expect to find coverage in your homeowner’s (HO) policy for the “stuff" you bring and the “stuff” that is already there.

Stuff I bring
The standard ISO HO policy provides coverage on a worldwide basis for your personal property up to the amount insured under your Coverage C – Personal Property limit. The only limitation to the amount is 10% of the Coverage C limit for property which stays at another residence, such as a second home or college dorm. It also includes guest’s property, so if family comes to visit you, or goes with you to the vacation property there would be coverage for their stuff as well.

Stuff that is already there
The definition of eligible property under Coverage C of the HO policy includes personal property owned or used by an insured. This would include the contents of a rented property such as a hotel room, cottage, condo, lodge, etc. As for coverage for the building of the rental property, coverage is a little precarious. There is no coverage for off-premises building under the standard HO policy, and under the liability or Section II coverage of the HO there is a an exclusion under the property damage liability except for damage caused by fire, smoke or explosion. There is a modest amount of coverage under the Section II liability for Damage to Property of Others, but at the most it is only $1,000.

One important note for the personal property coverage mentioned above; coverage is limited to the perils insured against under Coverage C. The standard policy typically only insures for Named Perils. I would strongly encourage that you endorse your policy or be sure you have coverage for Open Perils on Coverage C. This will give you the broadest coverage possible, not only for your peace of mind on vacation but also with your everyday life.

Friday, June 12, 2009

Don't "Volunteer" for trouble!

Volunteering is as American as apple pie. Whether its staffing the rummage sale at church, coaching kids on the baseball team, or serving on the board of the United Way, most of us genuinely like to jump in an lend a hand. It is one of the features of this country that makes us great, but of course it also presents some challenges from an insurance coverage standpoint should something bad come out of it.

Unfortunately one of the negatives of living in this country is the litigiousness of our society. A seemingly innocuous stint as a basketball coach for the local recreation program can turn into nightmare claims scenario when a child suffers a severe head injury during a practice; or, while you’re a serving as a board member for a local not for profit and are personally sued because of a management decision the board made. Sadly these scenarios are not as rare as they may seem, and the time to investigate coverage is before they occur.

Let’s examine where we would likely find coverage, if any, for our activities as volunteers. The first place one might look is their Homeowners/Renters (HO) insurance policy. The good news is there is some coverage to be found here, the problem is it is limited. The typical HO policy will respond to the actions of an insured while functioning in his/her capacity as a volunteer (no compensation). The caveat is that they are limited to claims of liability for bodily injury and property damage only. The policy may and should be endorsed to include Personal Injury coverage (libel, slander, etc) as well.

What about claims other than bodily injury or property damage such as the second example above, a management mistake that results in a financial loss only? Here an insured might find coverage in their Personal Umbrella Policy (UMB), if they have one. This is somewhat of a precarious expectation though as there is no standardization in UMB policies, thus requiring a careful review of policy language to see if coverage is there and to what extent.

Ultimately your own personal coverage should be considered a supplement to the coverage provided by the organization you are volunteering for. Before choosing to volunteer you should be asking what if any liability coverage is in place to protect you as volunteer for the organization. Depending on the capacity under which you are serving you should be looking for the following:

  1. General Liability. This is coverage for the organization similar to your personal liability. You want to be sure they have it and that is includes you as volunteer as and insured. Thus if you are sued you can look to this policy to protect you. If the volunteering is athletic or sports related, you want to be sure the policy is covering the athletic particpants and not excluding them. If children are involved you want to be sure there is abuse or molestation coverage as well; should some sort of accusation arise during your service.
  2. Directors & Officers Liability. This is coverage to protect the organization and board members for the management of the organization. Thus if a donor or some other stakeholder sues over financial decisions made by the board you will be protected. Often times the By-laws of a not for profit will state the organization will indemnify board members for their service, but this does you little good if there is no insurance to back up the indemnification and the organizations assets are all there is. You’ll want to be sure it included Employment Practices Liability as well, to help protect against employment related claims (i.e. wrongful termination, harassment, etc).
  3. Automobile Liability. If in your duties as a volunteer you are driving vehicles owned by the organization. You want to be sure they have adequate limits of coverage and that you as a driver are covered as an insured. With respect to using your own vehicle, typically your own insurance is primary, so the burden is on you to make sure limits are adequate and the insurance company is aware of the activity. The organization may have a Non-owned automobile policy, but it will be secondary to your coverage and protect them only.

The bottom line is your own personal insurance should be secondary to the insurance coverage of the organization you are volunteering for. A little due diligence on your part in the beginning can add to the satisfaction you receive from volunteering.

After all, volunteering is a good thing and shouldn't be ruined by an unforeseen accident.

Thursday, June 4, 2009

Look past the limit of liability and see the all the coverage!

Too often when it comes to liability insurance, clients see the limit of insurance as all that they are buying. When they are in the purchasing phase of the insurance buying cycle often they base their decision on limit vs. cost. While at this critical juncture, I encourage my clients to look past the limit to what else they are getting with their coverage. This helps them to not only better understand the cost, but more importantly the real value of the coverage.

Let us examine this further with some background information. In order for any liability policy to pay for a claim it has to be proven the covered entity was negligent and thus responsible for the financial loss being claimed by the third party and for which the coverage is applicable. As part of the coverage provided by the insurance company, they retain the Right to defend against the claims in order to protect their financial interest. Very often policy language stipulates in addition to this right they have a “duty to defend” these claims, whereby the company is required to provide a defense even if ultimately the claim is found not to be covered by the insurance. In my opinion, the real value of a liability insurance policy lies in this Defense and it is applicable no matter what type (Personal, Business, Automobile, Professional, etc.) of liability coverage you purchase.

As an additional benefit, most standard liability policies provide for the Defense Costs (the costs and fees associated for fulfilling the defense) to be outside the limit of liability limit. That is, the money they spend to defend is in addition to the limit of liability available to pay for losses. Thus there is the potential for the company to pay for thousands of dollars in legal costs associated with a claim in addition to amounts they may pay if found liable. This feature however is a little bit of a double edged sword, because as you may have surmised, the insurance company will want to keep these costs to a minimum and will be inclined to settle claims before they get out of hand in there eyes (Note: This goes to the heart of reasoning to purchase higher limits of coverage, but that is the subject of another posting).

There are, of course, several other supplemental coverage items included with most liability insurance coverage. However, none are as important in this author’s opinion as the defense.