The liability portion of any homeowners policy is there to protect the insured from claims against him due to damage to property of others or injury. Two coverages are included, Personal Liability Coverage and Medical Payments to Others. An often misunderstood coverage is the additional coverage of Damage to Property of Others. It provides limited payment for quite broad coverage. Let's take a look at how this coverage works.
The insuring agreement
The ISO HO 00 03 10 00 states that "we will pay, at replacement cost, up to $1,000 per "occurrence" for "property damage" to property of others caused by an "insured"". The first thing to notice here is that legal liability is not mentioned the way it is in other liability sections of the policy. Here, coverage exists simply for an "occurrence" that causes loss. If an occurrence happens, the policy will pay for damages except for what is excluded. For example, while visiting friends the insured's eight-year-old knocks over and breaks a valuable vase owned by the friend. The repair or replacement of the vase is covered under damage to property of others up to $1000 since the destruction of the vase was accidental. It doesn't matter that the occurrence happened off premises. An insured was involved in damaging another person's property, and therefore coverage is provided. This is often called good will coverage because it keeps the peace between neighbors and friends. Accidents happen, and this coverage allows the insured to make things right with others without having to accept liability for the incident.
As with any insurance coverage, exclusions exist. Many of these are obvious. If an amount is recoverable under section I of the policy, then no coverage is afforded here. This would be seen most likely with property of others on the insured's premises. For example, the insured's pipe springs a leak and damages luggage of a visiting friend. This is covered under coverage C in section I, so there is no need for it to be covered under the liability portion of the policy.
Damage caused intentionally by an insured over the age of thirteen is excluded. This is because many states view those under that age as not being responsible for their actions, even if the action is intentional. It has been held that they don't fully understand the potential consequences. A ten year old burns a hole in the carpet with a magnifying glass. The act is intentional, but the child is given the benefit of the doubt and cannot be held liable the way an older person would.
The next two exclusions are self-explanatory. The coverage is for damage to property of others. Therefore, damage to the insured's property or the property of a regular tenant is excluded. Coverage for the insured's property is found under section I coverages.
Business activities are excluded next. This is a policy to protect the individual homeowner, not a business. Therefore, any damage that arises from business activities of the insured is excluded. Remember the policy lists business as a defined term, and the definition includes a trade, profession, or occupation engaged in on a full time, part time, or occasional basis. For example, the insured is a seamstress part time; she does altering and custom work for individuals. The insured is sitting on the sofa altering a sweater for a customer and she snags the yarn, damaging the sweater beyond repair. Damage to the sweater is excluded, even though the insured was at her own home sitting on her sofa. She was conducting a business activity when the damage occurred. Therefore there is no coverage.
Damage is also excluded if the accident occurs in connection with a premises owned, rented , or controlled by an insured other than an "insured location". Remember that insured location includes:
- The residence premises
- A non-owned residence in which the insured is temporarily residing
- Land where a dwelling is being built
- Other premises shown in the declarations or acquired during the policy period
- A premises occasionally rented to the insured for non-business use
- Vacant land
- Cemetery plots
If the insured rents a condominium at the beach for the summer, that's an insured location. It's rented to the insured for non-business use, as well as being a non-owned residence in which the insured is residing. A premises that is other than an insured location would include a secondary home, a dance studio the insured regularly rents to practice in, or a rental dwelling owned by the insured.
The use of motor vehicles, aircraft, watercraft, and hovercraft are excluded as usual. There is however an exception to the exclusion. If the vehicle is designed for recreational use off public roads, is not owned by an insured, and is not regulated by law or regulation by a government agency to be used on public roads, then coverage does apply. This would include kiddie cars, golf carts, four wheelers, and other similar equipment.
Aside from the few exclusions and restrictions, the coverage for damage to property of others is as direct as it sounds. Coverage is provided when the insured accidentally damages property belonging to someone else. Liability is not an issue. The coverage is designed to apply to those things that just happen in life and accidentally damage the property of another person. As stated earlier, this is good neighbor coverage, a way of keeping peace between neighbors and friends.
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