PERSONAL LINES CLAIMS THAT CAUSE PROBLEMS

Terry L. Tadlock, CIC, CPCU, CRISCoastal Plains InsuranceHilton Head Island, SCterry@coastalplains.com

LEARNING OBJECTIVES

1. To review Personal Automobile and Homeowners claim situations that may cause confusion in our agencies.

 2. To learn the construction of the Personal

Automobile and Homeowners Policies so students can research any coverage question that may arise.

 Note: All questions should be answered based on the

2005 edition of the Personal Auto Policy and the 2011 edition of the Homeowners policies.

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KIDS AND THEIR CARS

Marty and Nancy Green have a problem with their auto insurance, and they have asked for your advice. It seems that their 17 year old son, Shane, has dropped out of high school and is getting a job. He is still living at home, but Marty is concerned that his dropping out of school and his driving record are going to affect their insurance, especially in light of the DUI ticket he got over the weekend. Nancy and Marty want to take Shane off of their policy and have him buy his own insurance. They feel this will teach him some responsibility as well as save them money. What can be done?

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KIDS AND THEIR CARS

Problem: Who Is An Insured?

Family member requires residency and relationship. We have relationship and residency. It seems as though the son is an insured on both policies.

"Family member" means a person related to you by blood, marriage or adoption who is a resident of your household. This includes a ward or foster child.

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KIDS AND THEIR CARS

Problem: Are there any policy exclusions that may affect coverage?

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KIDS AND THEIR CARS

B. We do not provide Liability Coverage for the ownership, maintenance or use of: 3. Any vehicle, other than "your covered auto,"

which is:a. Owned by any "family member," orb. Furnished or available for the regular

use of any "family member."However, this exclusion (B.3.) does not apply to

you while you are maintaining or "occupying" any vehicle which is:a. Owned by a "family member;" orb. Furnished or available for the regular

use of a "family member." 2

KIDS AND THEIR CARS

 

 

When Marty and Nancy drive their son’s vehicle will his policy will his son’s policy respond? If so, what happens when the claim exceeds the son’s limits if 25/50/25? Will Mom and Dad’s policy respond on an excess basis?

Would your answers above change if the Green’s 16 year old daughter was driving her brother’s vehicle and had an accident that exceeded the brother’s limits?

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KIDS AND THEIR CARS

Problem: Will a Personal Umbrella policy respond?

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KIDS AND THEIR CARS

First, the worst case scenario. Most personal umbrella companies will require the son to have his own personal umbrella policy. This will require the underlying limits to be increased as well as pay an additional umbrella premium. I think we just defeated the whole purpose for putting the vehicle in the son’s name. The parents personal umbrella policy would exclude coverage for the son’s use of the vehicle in his name.

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KIDS AND THEIR CARS

Second, the umbrella company may not have an exclusion for the son using his vehicle, but in order to respond, The parents would have to pay the difference between the son’s 25/50/25 limits and the required underlying limit. I personally have not seen this type of umbrella language, but have read about claims where they did exist.

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To Deliver Or Not To Deliver, That Is The Question:

Joe and Sandy Johnson have been your clients for 3 years. They have a son John, who is 17 years old. The Johnsons have 3 cars, all of which are rated for pleasure use. John has taken a part-time job delivering pizza for Dominoes. Joe calls to report an accident that John had while delivering a pizza. John was totally at fault. Will the Personal Auto Policy cover this claim?

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To Deliver Or Not To Deliver, That Is The Question:

Problem:

Is the business Use Of a Car Rated For Personal Use an Issue?

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To Deliver Or Not To Deliver, That Is The Question:

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7. Maintaining or using any vehicle while that "insured" is employed or otherwise engaged in any "business" (other than farming or ranching) not described in

Exclusion A.6.

This Exclusion (A.7.) does not apply to the maintenance or use of a:

a. Private passenger auto;

b. Pickup or van; or

c. "Trailer" used with a vehicle described in a. or b. above.

To Deliver Or Not To Deliver, That Is The Question:

Keep in mind that rating questions seldom impact insurance coverage. This is the “business” exclusion in the current ISO Personal Auto Policy. So what does it exclude?

 

Only the business use of a vehicle larger than a pick-up or van is excluded. So far our pizza delivery person is ok.

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To Deliver Or Not To Deliver, That Is The Question:

Problem:

Is Pizza Delivery Excluded?

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To Deliver Or Not To Deliver, That Is The Question:

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5. For that "insured’s" liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance.

This Exclusion (A.5.) does not apply to a share the expense car pool.

To Deliver Or Not To Deliver, That Is The Question:

It comes down to the interpretation of “public or livery conveyance.” Most courts have ruled this does not apply to pizza delivery.

 

What about rural mail route carriers? Newspaper delivery persons?

Senior center carriers?

3

How To Insure The Company Car

Bob is a pharmaceutical representative with a local company. Bob's employer has furnished him with a company car. Bob's boss has assured him that it is ok to use the company car for his personal use. Bob is concerned about his coverage and has called your office with the following question: Will my Personal Auto Policy extend coverage to me and my family while driving the company owned car for personal use?

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How To Insure The Company Car

Problem:

How will the Personal Auto Policy respond to the use of the Company Car?

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How To Insure The Company Car

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B. We do not provide Liability Coverage for the ownership, maintenance or use of:

3. Any vehicle, other than "your covered auto", which is:

a. Owned by you; or

b. Furnished or available for your regular use.

How To Insure The Company Car

Would a company car be considered “furnished or available for regular use”? Where is it parked every night? Where are the keys kept?

 

Does it matter if at the time of the loss the company car is being used personally instead of for business?

 

Is there any endorsement that may help in this situation?

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When “Extended Non-Owned Coverage – Vehicles Furnished or Available For Regular Use” Should

have Been Considered

There are two situations that come to mind that are frequently occurring and my fear is the insureds have no idea of the danger.

 

1. The Elderly parent that no longer drives, but allows a family member or friend to use the

car for the benefit of the owner as well as their personal use. The elderly parent still owns and insures the vehicle.

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When “Extended Non-Owned Coverage – Vehicles Furnished or Available For Regular Use” Should

have Been Considered

 

2. The active military personnel that owns and insures their vehicle, but leaves it with family of friends when they are deployed or not able to drive due to their assignment.

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When “Extended Non-Owned Coverage – Vehicles Furnished or Available For Regular Use” Should

have Been Considered

Could the vehicles that the drivers are using be considered “Furnished or Available for Regular use”? If so, what impact would there be on the insurance provided? Both of these are questions that need to be considered if these situations arise.

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When “Extended Non-Owned Coverage – Vehicles Furnished or Available For Regular Use” Should

have Been Considered

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B. We do not provide Liability Coverage for the ownership, maintenance or use of:

2. Any vehicle, other than "your covered auto, which is:

a. Owned by you; or

b. Furnished or available for your regular use.

When “Extended Non-Owned Coverage – Vehicles Furnished or Available For Regular Use” Should

have Been Considered

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3. Any vehicle, other than "your covered auto," which is:

a. Owned by any "family member," or

b. Furnished or available for the regular use of any "family member."

However, this exclusion (B.3.) does not apply to you while you are maintaining or "occupying" any vehicle which is:

a. Owned by a "family member;" or

b. Furnished or available for the regular use of a "family member."

When “Extended Non-Owned Coverage – Vehicles Furnished or Available For Regular Use” Should

have Been Considered

In both of these situations it would not be a stretch to consider the vehicles furnished or available for regular use. If that is the case, the insurance provided by the owners of the vehicles would respond, but their insurance would apply as excess due to the exclusion.

 

Just one more thought…You may want to check the coverage provided by your Excess/Umbrella Liability policy. If a similar exclusion exists there would be no coverage there as well!

5

IDENTITY THEFT

Marty Moneybags is one of your more affluent personal lines customers. You currently write his Personal Auto, Homeowners, Personal Umbrella and Life insurance. He has called your office with a very disturbing story. He has been notified by creditors that he has 3 credit card accounts, two personal loans and a car loan that are in default. Marty has insisted that these accounts are not his. To make matters worse, his bank has called to tell him he is overdrawn and his personal savings account has no money to cover the outstanding checks. Marty is devastated. He discovers his identity has been stolen.

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IDENTITY THEFT

Problem: Identity theft and the insurance policy. Will we respond?

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IDENTITY THEFT

C. Coverage C – Personal Property

1. Covered Property

We cover personal property owned or used by an "insured" while it is anywhere in the world. After a loss and at your request, we will cover personal property owned by:

a. Others while the property is on the part of the "residence premises" occupied by an

"insured"; or

b. A guest or a "residence employee", while the property is in any residence occupied

by an "insured" 7

IDENTITY THEFT

This endorsement will provide coverage up to $15,000 for: • Costs for notarizing affidavits or similar documents attesting

to fraud; • Costs for certified mail to law enforcement agencies, credit

agencies, financial institutions or similar credit grantors; • Lost income, up to a maximum payment of $200 per day,

resulting from time taken off work to complete fraud affidavits, meet with or talk to law enforcement agencies, credit agencies and/or legal counsel. The total payment for lost income is not to exceed $5,000

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IDENTITY THEFT

• Loan application fees for re-applying for a loan or loans when the original application is rejected solely because the lender received incorrect credit information;

  • Reasonable attorney fees incurred to defend lawsuits

brought against the insured by merchants, financial institutions or their collection agencies; remove any criminal or civil judgments wrongly entered against an insured; and challenge the accuracy or completeness of any information in a consumer credit report;

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IDENTITY THEFT

• Charges incurred for long distance telephone calls to merchants, law enforcement agencies, financial institutions or similar credit grantors, or credit agencies to report or discuss an actual identity fraud.

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IDENTITY THEFT

Order Credit Reports

Place Passwords on Accounts

Secure Important Information (Home/Work)

Don’t Give Personal Information (Phone)

Guard Your Mail and Trash

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IDENTITY THEFT

Protect Your SS Number

Don’t Carry Too Many Credit Cards

Pay Attention To Your Billing Cycle

Be Wary Of Promotional Scams

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IDENTITY THEFT

Update Your Virus Protection

Do Not Download Files

Use a Firewall Program,

Use a Secure Browser

Try Not To Store Financial Information on your Laptop

Dispose of Computer Properly 11-12

MOTORIZED VEHICLES:

The Thompson’s have been clients since moving to your town 6 years ago. They have their Personal Auto and Homeowners insurance with your agency. The Thompson’s have two teenage children that are very active. The entire family enjoys hunting, fishing, camping and most outdoor activities. They live on 5 acres of land just out of town. They own a four-wheeler that is used around the property to do chores as well as to navigate their hunting lease. They have a small John Deere tractor, a go-cart, a golf-cart that is stored at the country club and their newest acquisition is their Yamaha Personal watercraft. What insurance concerns do you have for the Thompson’s?

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MOTORIZED VEHICLES:

Coverage Issues: PAP Language

B. We do not provide Liability Coverage for the ownership, maintenance or use of:1. Any motorized vehicle which:

a. Has fewer than four wheels; orb. Is designed mainly for use off public roads.This Exclusion (B.1.) does not apply;a. While such vehicle is being used by an

"insured" in a medical emergency; orb. To any "trailer"; orc. To any non-owned golf cart.

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MOTORIZED VEHICLES:

DEFINITIONS

B. In addition, certain words and phrases are defined as follows: 1. "Aircraft Liability", "Hovercraft Liability",

"Motor Vehicle Liability" and "Watercraft Liability", subject to the provisions in b. below, mean the following:a. Liability for "bodily injury" or

"property damage" arising out of the:

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MOTORIZED VEHICLES:

DEFINITIONS, Cont.

B. In addition, certain words and phrases are defined as follows: Cont.

(1) Ownership of such vehicle or craft by an "insured";

(2) Maintenance, occupancy, operation, use, loading or unloading of such vehicle or craft by any person;

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MOTORIZED VEHICLES

DEFINITIONS, Cont.

(3) Entrustment of such vehicle or craft by an "insured" to any person;(4) Failure to supervise or negligent supervision of

any person involving such vehicle or craft by an "insured"; and

(5) Vicarious liability, whether or not imposed by law, for the actions of a child or minor

involving such vehicle or craft.

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MOTORIZED VEHICLES

DEFINITIONS, cont.

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7. "Motor vehicle" means:a. A self-propelled land or amphibious

vehicle; orb. Any trailer or semitrailer which is being

carried on, towed by or hitched for towing by a vehicle described in a. above.

MOTORIZED VEHICLES

Policy excludes liability arising out of:

Ownership

Maintenance

Entrustment

Negligent Supervision

Parental vicarious Liability14

MOTORIZED VEHICLES

Problem: Replacement of motorized vehicles

4. Property Not CoveredWe do not cover:c. "Motor vehicles".

This includes a "motor vehicle's" equipment and parts. However, this Paragraph 4.c. does not apply to: (1) Portable electronic equipment that: (a) Reproduces, receives or transmits audio, visual or data signals; and

(b) Is designed so that it may be operated from a power source other than a "motor vehicle's" electrical system.

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MOTORIZED VEHICLES

4. Property Not Covered, Cont.

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(2) "Motor vehicles" not required to be registered for use on public roads or property which are: (a) Used solely to service a residence; or (b) Designed to assist the handicapped;

MOTORIZED VEHICLES

Section I property coverage gives back coverage in the following situations:

Used SOLEY to service A residence – Does this mean that the insured that uses his lawn mower to mow

grass at the church is no longer covered. The intent was to eliminate coverage for 4-wheelers, why

didn’t they just say so!

DESIGNED to assist the handicapped – The design must be such that it assist a handicapped person, not just used by a handicapped person.

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MOTORIZED VEHICLES

Solution:

Purchase a recreational vehicle policy!

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MOTORIZED VEHICLES

Problem: Liability caused by motorized vehicles

SEE POLICY LANGUAGE ON PAGE 15

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MOTORIZED VEHICLES

Section II Liability coverage specifically excludes:

Registered for use on public roads

Required to be registered for use on public roads

Racing

Rented to others

Used to carry persons or property for a fee

Business use, except golf16

MOTORIZED VEHICLES

The Section II Liability exclusion then gives back coverage for:

  Dead storage

Used SOLEY to service A residence

Used to assist the handicapped if at the time of the occurrence it is being used by the handicapped

person or parked on the insureds residence. If a child decides to take the wheelchair or rascal for a ride, is it covered?

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MOTORIZED VEHICLES

The Section II Liability exclusion then gives back coverage for:

If owned by an insured only on the insured location, if non-owned covered anywhere. Note the give back for toys

Owned golf carts if designed to carry no more than 4 people and travel no more than 25mph. The golf cart must be located within the legal boundaries of:

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MOTORIZED VEHICLES

The Section II Liability exclusion then gives back coverage for:

A golf course while:

Playing golf or another approved activity by the club, Traveling to and from where the golf carts are stored, or Crossing public streets at the point designed to get from one hole to another.

  A private residential community if it is legal to operate and the

insured lives in and has permission to operate.

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PERSONAL LINES CLAIMS THAT CAUSE PROBLEMS

Terry L. Tadlock, CIC, CPCU, CRISCoastal Plains InsuranceHilton Head Island, SCterry@coastalplains.com