Water damage

Mold and wet rot

Earthquake

Residence held in trust; nonrelated residents

Identity theft

Introduction—liability coverage gaps

Bodily injury to an insured

Volunteer activities

Renting a motor vehicle

Business pursuits

Introduction—Property Coverage Gaps

For most insureds, standard homeowners policies will provide coverage for most of their needs. However, there are coverage gaps that insureds—as well as other insurance professionals—must address in order to protect themselves. Some coverage gaps can be closed, but, unfortunately, others cannot. At the very least, being aware of exposures for which there is no coverage may encourage prudence.  In the following discussion, we examine common property coverage gaps, suggesting coverage that may be added when available, and urging caution when it is not.

Water Damage

Claims for water damage to property appear to be on the increase, although this may be a result of increased attention to a frequent result of water damage—mold—which is discussed later. Water damage can originate from many sources, some covered and some not.

Commonly, water that escapes from a plumbing, heating, air conditioning, or automatic fire sprinkler system or a household appliance and damages covered property has been held to be covered. The form also states that the insurer will cover the cost of tearing out and replacing any part of a building necessary to access the system or appliance from which the water escaped. Loss to the system or appliance itself is not covered. In the ISO homeowners form there is no further restriction of coverage.

But in some homeowners forms, there are restrictions that an insured should note. Some forms state that "sudden and accidental" discharge or overflow of water from a system is covered. The use of the word "sudden" conveys an immediacy to the peril that an insured might find difficult to document. An insured can be in the position of not knowing there has been a loss until it manifests itself by, say, a wet patch on a wall or floor. And, although commonly the courts hold that the date of a property loss is the date upon which it first manifests itself, the insured is nonetheless in a position of uncertainty. Webster's New Collegiate Dictionary (Tenth Edition) defines "sudden" as " happening or coming unexpectedly…. marked by or manifesting abruptness or haste… made or brought about in a short time."  And, although the first meaning conveys the unexpectedness of the event, many insurers look to the last meaning and deny losses if it appears that the discharge has continued over some period of time. Some insurers specifically state that the peril does not include damage from seepage or leakage over a period of " weeks, months, or years."

One source of water may be overflow from a system off the residence premises, such as a neighbor's garden hose left turned on. The HO 00 03 05 11 covers loss to the dwelling itself, but not to personal property. There is coverage for personal property on the ISO HO 00 05 10 00, which takes the place of the 1991 HO 00 03 with HO 00 15 04 91 attached.

There are some homeowners forms that strictly limit loss caused by water damage, even in open perils policies. This may take the shape of excluding all water damage unless caused by a coverage C named peril or build-up of ice in gutters. Unless attention is paid to the wording of the policy and any endorsements, insureds may find to their dismay that there is no coverage.

Some water damage coverage gaps can be filled. Coverage for backup or overflow of sewers, drains, and sumps can be purchased (ISO endorsement HO 04 95 10 00). Even though the amount of coverage is subject to a separate deductible (often $250) and coverage is typically limited to  $5,000, the charge is minimal. When this coverage is added to a homeowners policy, the water damage exclusion is deleted and replaced by the wording in the endorsement; "water which backs up through sewers or drains or which overflows from a sump" is eliminated from the exclusion, thus providing coverage for this peril.

There is a coverage difference between the older water back up form and sump overflow (HO 04 95 11 92) and the current HO 04 95 (05 11) water back up and sump discharge or overflow. The older form, by simply deleting the "water which backs up through sewers" language gave unintended coverage when the source of the backup was a flood. This was the situation during the 1993 Mississippi River flooding, when the water from the St. Louis municipal sewer system could not empty into the already overflowing river. Now, the current form eliminates coverage for "water, or water-borne material, which: (1) backs up through sewers or drains; or (2) overflows or is discharged from a sump, sump pump or related equipment; as a direct or indirect result of flood…"

The newest form HO 04 95 (05 11) specifies that coverage is for water or waterborne material that originates from within the dwelling and backs up through sewers and drains; the earlier forms did not have this specification. Likewise the newest form states that the water exclusion does not apply to the coverage under this endorsement. The newest form also allows the insured to specify a limit instead of having a set $5,000 limit.

Flood coverage should be considered for any insureds in flood plains. Federally insured mortgagees require flood insurance as a condition of lending money, but there are many homeowners who either have grandfathered mortgages or no mortgages who go without this coverage. Time and time again there are storms where people lose their homes because they have no flood coverage.

 Mold and Wet Rot

Mold and wet rot occur as a result of water intrusion.  The homeowners forms have traditionally excluded coverage for mold and wet rot—but as a result of on-going conditions, not as a result of a covered cause of loss. For example, mold will often occur in a humid bath or laundry room. This situation is not covered. But if a tornado lifts off the roof of a house allowing rain to soak the insulation between walls, any resulting mold should be covered. Of course, insureds must comply with policy provisions to protect and preserve property from further loss. But in the case of a severe widespread storm, this is not always possible. (Think of Hurricane Katrina, August 2005, or the widespread tornado damage in Oklahoma City, May, 2003. Clean-up continued for weeks and months; rebuilding for months, even years.) So, in the tornado example, if mold is found to be developing between walls in the months following the roof's being replaced, it is likely that the mold had begun to grow before dry-out could begin. Mold remediation experts generally hold that dry-out will not be effective unless begun within twenty-four to forty-eight hours following the water intrusion. (For more information on coverage for mold in current forms, see Mold—An Overview).

However the 2000 and 2011 forms have included coverage for mold, fungus or wet rot that is hidden behind walls, ceilings and floors if the loss is caused by accidental discharge of a plumbing, heating, air conditioning, sprinkler or household appliance on premises or a storm drain off premises. It is impossible for an insured to know of leaks behind a wall without removing the wall, and it is unreasonable to expect insureds to routinely remove walls to check for leaks. The revision allows for the mold damage to be covered, but the damaged pipe is not covered as that is wear and tear.

But because of the increase in the number of suits filed alleging bodily injury or property damage as a result of mold, insurers are attempting to limit their exposure by either curtailing coverage or eliminating it altogether. ISO has issued endorsements that may be used to limit coverage for both the 1991 and 2000 homeowners. (See, for example, HO 03 34, which limits liability coverage for loss resulting from mold, fungi, or bacteria, or HO 04 05 12 02, which schedules limited coverage for property remediation and restricts liability coverage to an aggregate amount.) These endorsements allow property coverage to be scheduled; liability coverage may be scheduled on an aggregate basis. The amount of coverage offered is thus left to the individual insurer. Some insurers do not offer a choice; one insurer restricts coverage for mold damage caused by a peril insured against to $2,500. In this form, liability coverage is excluded completely. One form precludes coverage for mold and wet rot even if caused by an exception (water damage resulting from a coverage C named peril or from build-up of ice in gutters) to the water loss exclusion. In this instance, it appears that if firefighters used water to suppress a fire (a coverage C named peril) and the water was not completely dried, and mold resulted, this loss would not be covered.

It appears that the best way of closing mold and wet rot coverage gaps is to read the policy carefully and request coverage be added when possible to do so.

Earthquake

Earthquake coverage is readily available (yes, even in California. Go to Web site http://www.earthquakeauthority.com for information.) There are very few parts of the country that are immune from earthquake damage, although of course some parts are more susceptible than others. Insureds should be encouraged to add the coverage. Under the ISO 2000 homeowners program a coverage gap emerged that can easily be filled. Open perils coverage for personal property could be added to the 1991 homeowners HO 00 03 04 91 by attaching form HO 00 15 04 91. This endorsement included coverage for loss to personal property caused by earthquake. But the ISO 2000 HO 00 05 10 00 and 2011HO 00 05 05 11 , intended to replace the HO 00 03 with HO 00 15 attached, does not provide earthquake coverage for contents; the coverage must be added by attaching HO 04 54 earthquake.

Residence Held in Trust; Nonrelated Residents

Prior to the 2000 homeowners, property held in trust—as when a married couple deeds their residence to a trust so that children may inherit the property without the residence becoming part of the estate—could not be written without leaving unintended gaps. The solutions for insuring this property have not been particularly satisfactory. Many insurers do not wish to insure a dwelling with a trust as named insured. Indeed, the language of the policy—"you" meaning the named insured and spouse—suggests the reasoning, since a trust cannot have a spouse or resident relatives. And, if the trust is named insured, then the persons residing in the dwelling have no coverage for their own personal property or for personal liability. Some insurers will write the dwelling in the name of the occupants with the trust as additional interest (HO 04 10 10 00), but this does not protect the trust against premises liability. If allowable, using the additional insured endorsement (HO 04 41) is an option; this endorsement provides insurable interest coverage as well as premises liability. But if the trust has a grantor or beneficiary whose interests must be protected, other than the named insured's, this endorsement is not feasible since the scope is limited. 

The ISO homeowners 2000 program includes an endorsement that allows all interests to be protected—HO 05 43 residence held in trust. This endorsement allows the grantor or beneficiary of the trust, if other than the trustee shown as named insured on the declarations page, to be scheduled. The grantor or beneficiary thus become insureds, as do spouses, resident relatives, or persons under age twenty-one in their care, and coverage for their personal property, loss of use, and personal liability is provided. If the trustee does not reside in the dwelling, then there is no coverage for any resident of the trustee's household. Premises liability coverage only is provided for the nonresident trustee.

This endorsement does not provide any kind of fiduciary liability coverage. If the trustee needs this coverage, then specialty coverage must be obtained.

Persons regularly residing with the named insured, who are not related by blood, marriage, or adoption, can now obtain coverage through use of endorsement HO 04 58 05 11, other members of your household. Prior to the 2000 homeowners, coverage for these individuals was limited to personal property. Coverage C allows an insured to cover property of others (but only while the property is on the part of the residence premises occupied by an insured—leaving another coverage gap); however, from an insurer's standpoint, two exposures are being covered for one premium. Endorsement HO 04 58 allows the resident to be scheduled as an insured. The individual then receives contents coverage, and personal liability and medical payments coverage. For more information on these and other endorsements, see Standard Homeowners Endorsements.

Identity Theft

Every day a new scam emerges involving identity theft. Most times personal information is stolen and used to deplete bank accounts, make extensive purchases, or, in some cases, obtain a home equity loan—on the victim's own home. In some instances, an unknowing victim's home was sold by a fraudulent seller to a fraudulent buyer, with the bank or mortgagee left holding the bag.

There are some homeowners forms that automatically include coverage; in others, coverage must be added by endorsement. Coverage varies from $5,000 to the $15,000 offered by ISO's endorsement HO 04 55 05 11, identity fraud expense coverage. Note, though, that coverage only reimburses expenses. The insurer does not provide any other kind of assistance in mitigating this type of loss. The insured must do this himself. Reimbursable expenses include reasonable attorney fees to defend lawsuits brought by merchants or financial institutions, remove any criminal or civil judgments wrongly entered against an insured, or challenge the accuracy of any information on a consumer credit report. Included as well are costs to re-apply for loans denied because of identity fraud and lost income as a result of having to take time off work to settle the situation.

 Introduction—Liability Coverage Gaps

As we noted earlier, there are some property coverage gaps that cannot be closed. The same is true for liability exposures. For many insureds, homeowners section II personal liability and a personal auto policy (PAP) provide sufficient coverage. But again, there are gaps for which there is no insurance. The individual must therefore act as her own risk manager, avoiding the exposure if possible, or recognizing that the occurrence may result in potential financial damage.

Bodily Injury to an Insured

Coverage for bodily injury to an insured is excluded in the homeowners policy. Most jurisdictions uphold this exclusion as not against public policy. There are at least two instances where the exclusion can cause a coverage gap; one of these is insurable, but the other is not.

First, many insureds become foster parents. Remember that "insured" means: "you and residents of your household who are: (1) your relatives; or (2) other persons under the age of 21 and in the care of any person named above…" Thus, for coverage purposes, foster children are insureds. But what happens if the child is injured while in the insured's care, and the natural parent sues? The preclusion of coverage for bodily injury to an insured prevents a defense as well as indemnification. For this reason, anyone contemplating foster care must obtain verification from the placing agency that they will be covered under the agency's policy in the event of this kind of situation.

The second situation is uninsurable. The case of Salviejo v. State Farm Fire and Casualty, 958 P.2d. 552 (Haw. App. 1998) illustrates the point. The insured's father, who resided with the insureds, took his granddaughter to a McDonald's one day. The child was injured while playing in the play area. The parents sued McDonald's and the play equipment manufacturer. The manufacturer filed a third party suit against the grandfather, alleging negligent supervision. Because the policy excluded coverage for bodily injury to an insured and also for any claim to share in damages or repay someone else obligated to pay damages because of bodily injury, there was no coverage for the grandfather. The insureds argued that this exclusion was against public policy as demonstrated by the fact it was omitted in the auto policy, but the court upheld it as not violating public policy and therefore enforceable.

Although most states (forty-two, at last count) do not allow the exclusion in an auto policy, some do. The majority opinion is that injured insureds should be allowed to recover for their injuries, even if caused by a resident relative.

For a more complete discussion of the household exclusion, see Intrafamily or Household Exclusions. For a discussion of how different jurisdictions have addressed who a resident relative is, see Resident Relatives.

Volunteer Activities

Many persons engage in volunteer activities. Indeed, were it not for this, many not-for-profit organizations would grind to a halt. For the most, liability for these activities is found in the homeowners forms. However, if the volunteer has some fiduciary responsibility—serving as a church treasurer, for example—the homeowners forms will not respond to a loss involving a breach of fiduciary responsibility because no bodily injury or property damage was involved.

A common fund-raising activity for school organizations is to have the parents work for a business and donate their pay to the organization. Working for an amusement park or a sports facility are common examples. Unanswered questions in this situation are: Who controls the work? Are the parents "volunteers" or does the fact that they are paid (even though their pay goes to the organization) alter the volunteer status? If the business controls the work and a volunteer is injured, will workers comp respond? If the business involves serving alcoholic beverages and a customer drives drunk and injures another person, is the volunteer covered in event of a suit?

There are no easy answers to these questions; at present this is a potential coverage gap that would not appear to be easily closed.

The current CGL states in section II who is an insured that "each of the following is also an insured: Your ' volunteer workers' only while performing duties related to the conduct of your business." And, "volunteer worker" is defined as "a person who is not your 'employee' and who donates his or her work and acts at the direction of and within the scope of duties determined by you, and is not paid a fee, salary or other compensation by you or anyone else for their work performed for you."  Some would argue that because of this the business's CGL protects the volunteers. Others point to your prefacing "volunteer workers" and state that the workers are not the business's volunteers; they are the not for profit organization's volunteers. At best, the matter is ambiguous, and to date there has been no litigation on this matter.

Renting a Motor Vehicle

Renting a motor vehicle can be the source of coverage gaps. First, the common situation of renting a private passenger motor vehicle while on vacation. Liability coverage under the PAP should apply since the policy promises to pay damages "for which any 'insured' becomes legally responsible because of an auto accident."  Of course, the policy exclusions apply. The potential coverage gap exists in physical damage coverage.  Physical damage coverage applies to a "non-owned auto" as defined: "any private passenger auto, pickup, van or 'trailer' not owned by or furnished or available for the regular use of you or any 'family member' while in the custody of or being operated by you or any 'family member'."

Coverage will only transfer, though, to a "non-owned auto" if the insured carries physical damage coverage on at least one vehicle insured on his or her PAP. The insurer will then provide the broadest coverage applicable to an insured's covered auto to the rented auto. For example, if the insured has two vehicles, one a ten year old vehicle carrying only other than collision and the other a new vehicle carrying both collision and other than collision, the rental vehicle will automatically have both collision and other than collision coverage.

Sometimes purchasing the rental company's collision damage waiver (also called a loss damage waiver) is an option. The insured may prefer not to have an accident to the rental car impact his own policy. The down side to this, however, is the "fine print" of the collision damage waiver agreement—the print that effectively precludes payment if any driver has consumed alcohol, or if the vehicle is driven in any "reckless" manner, or if anyone other than the driver who is named in the rental agreement drives, etc. See Rental Car—Loss of Use, for a question on a loss of use claim by a rental agency. Some state statutes now prohibit rental companies from charging for loss of use, holding that this is a cost of doing business. The current PAP makes this point in that it will not respond if a state statute prevents payment for loss of use and loss to the rental car.

For a complete discussion on this topic, see Rental Cars, the PAP, & the Loss Damage Waiver.

With regard to the PAP's response to liability coverage for drivers other than the insured whose name is on the rental contract, see Rental Car Liability Coverage. Also, see Coverage for Rental Vehicle not Used by Insured?, for information on the PAP's response when a driver other than an insured drives a rented vehicle.

There are different concerns when renting a vehicle while on a business trip. Of course, insureds can rent a vehicle in their own names and, should an accident occur, turn the claim over to their own carriers. But if the accident is the insured's fault, the insured is subjected to higher premiums over the next three years.

An alternative is to seek coverage under the employer's business auto policy (BAP). The problem has been that the BAP states that an insured is "anyone else while using with your permission a covered auto you [the named insured] owns, hires, or borrows." It is unlikely that Large Corporation Inc. will hire an auto; rather, the employee will contract in his name. The policy should therefore be endorsed with CA 20 54 employee hired autos, which states that "an employee of yours is an insured while operating an auto hired or rented under a contract or agreement in that employee's name, with your permission, while performing duties related to the conduct of your business." For more information, see Business Auto Endorsements. Also, see Personal Auto Policy—Coverage for Long-Term Rental Vehicle. 

There are two other common rental situations that can present coverage gaps. The first of these is renting a small truck for personal moving purposes.  The coverage gap here depends upon the insurer's interpretation of liability coverage. The PAP promises to pay damages for bodily injury or property damage for which an insured is legally liable as the result of an auto accident. "Auto" is not defined. Traditionally, insurers have held that liability coverage extended to the insured's use of, say, a rented moving truck (the kind typically rented from U-Haul), although physical damage coverage might not transfer to the vehicle. Now, this matter is in doubt. There is an exclusion in the liability portion that eliminates coverage for any vehicle which has fewer than four wheels or is designed for use off roads, so those favoring coverage state that liability for use of other vehicles should be covered. But those against this argument point to the common dictionary definition of "auto" and the personal vehicle manual, which distinguishes autos from trucks. (See "Auto" as Defined on the Personal Auto Policy. Note, though, that most persons distinguish between pickups, SUVs, and autos; yet the PAP promises to pay damages only for legal liability arising out of an auto accident.  Does this mean that the insured will not have liability coverage if he borrows a pickup?

The courts do not agree on this issue. A rented six-wheeled box truck with load capacity in excess of 2,000 pounds was not a "private passenger auto" within the meaning of the auto policy, ruled one court (Gardner v. Ryder Truck Rental, Inc., 261 A.D.2d 505 [N.Y.S. 2d 1999]). But the court in Merchants Rent-a-Car, Inc. v. Arbella Protection Insurance Company, Inc., 764 A.2d 883 (N.H. 2000) reached a different conclusion when considering whether a rented truck with gross vehicle weight of 10,000 pounds was covered by the insured's physical damage for a nonowned auto. The court found the damage to the truck was covered. The court first viewed the description applicable to a newly acquired auto, which limited gross vehicle weight for a pickup or van to under 10,000 pounds. (As an aside, the smallest U-Haul truck can carry up to 3,100 pounds, which puts the gross vehicle weight at over 10,000 pounds.) But there was no such restriction for a nonowned auto under part D coverage for damage to your auto, and the truck qualified as a van. The court turned to Webster's Third New International Dictionary which said a van was a vehicle used for transportation of goods. This was the truck's use at the time of the accident, and so the insured's personal auto policy had to respond. The question of the insured's liability coverage was not addressed.

One non-ISO form solves the dilemma by stating in the exception to the exclusion of liability coverage that it will provide liability coverage for use of a vehicle that is not "your covered auto" if the vehicle is a moving van for personal use. Lacking this language, though, the best procedure is to contact individual insurers and obtain, in writing, their interpretations as to coverage. If the answers are that liability and physical damage coverage are not contemplated, then coverage should be obtained from the rental company.  

The next rented vehicle coverage gap has arisen over the past few years with the marked increase in motor home rental. Again, the liability for an accident arising out of the use of such a vehicle could be questionable, although in one California case coverage for the insured's liability was never an issue. In this case, the named insured, his resident girlfriend, and the motorhome's owner took the vehicle for a test drive. The named insured stopped suddenly, and the owner, who was standing up at the time, fell and cracked a vertebrae in his neck. The girl friend took over the wheel, but the owner's neck was not stabilized while she drove and the owner became paralyzed. The insurer paid the named insured's liability and medical payments limits, but did not extend coverage to the girlfriend. This case is Gilmer v. State Farm Mutual Automobile Insurance Co., 1. Cal. Rptr. 3d 756 (Cal. App. 4th 2003). The same arguments that apply to the truck rental situation discussed previously could be used here. Physical damage coverage appears definitely precluded, because a "nonowned auto" means a "private passenger auto, pickup, van or ' trailer'," and it is difficult to hold that a motor home fits any of these. There are two possible solutions. First, coverage may be purchased through the rental company. Any insured contemplating this, however, is urged to read the coverage agreement. Some coverage agreements state that the insurance is excess, while others offer only state minimum liability coverage. Coverage for physical damage to the motor home should be obtained from the rental agency.

The other option is to contact the insurer, and ask that coverage be added to the PAP for the length of the rental. This can be accomplished by attaching endorsement PP 03 23 01 05 miscellaneous type vehicle to the PAP, and scheduling the motorhome as if the insured owned it. Of course, this action depends upon underwriting approval. Some insurers will simply bind coverage for a short period of time.

As was the case with a moving truck rental, some auto policies recognize motor home rental, and declare that they will provide liability coverage for an insured's use of a miscellaneous vehicle having at least four wheels, which includes a motorhome within the definition of "miscellaneous vehicle."

Business Pursuits

One of the most difficult of the homeowners liability exclusions to tackle is that for business-related activities. The ISO homeowners forms commonly exclude coverage: the 1991 form does not apply to bodily injury or property damage "arising out of or in connection with a 'business' engaged in by an 'insured'. This exclusion applies but is not limited to an act or omission regardless of its nature or circumstances involving a service or duty rendered, promised, owed or implied to be provided because of the nature of the ' business'." Business "includes trade, profession or occupation." The courts generally hold that two elements must be present to determine if the activity is a business: 1) a continuity or recurrent character of the activity; and 2) a profit motive. Couch on Insurance (Third Edition) notes that "the question of whether a given activity constitutes a ' business pursuit' within the meaning of a policy exclusion, is determined by the facts of the individual case, particularly the nature of the activity, and its connection to the liability in question." But it is often the very facts of the case that throw the matter into confusion and thus into a court. 

For example, does the income earned by a teen-aged babysitter qualify as a "business"? One can argue that both elements are there. But the court in AMCO Insurance Co. v. Moran, et al., 929 P.2d 162 ( Kan. 1996) ruled otherwise. The insured minor babysat a neighbor child two and a half days a week during the summer, receiving $2.00 per hour. When a child in her care was badly burned in a hot bath, the parents sued, and the insurer declined to cover the claim, citing the business pursuits exclusion. The court said the money received was insufficient to meet the profit motive test, but noted that not all babysitting activities would fall outside the exclusion. (The court may have had home day care in mind, which is commonly excluded by endorsement to homeowners policy. Coverage may be purchased if the insurer allows; see later in this discussion.)

But what of the hapless businessman or businesswoman who travels and accidentally trips a busboy while at dinner, or inadvertently damages a hotel room? The CGL could respond to the injury, but probably not the damage to the hotel room. Exclusion j. damage to property you own, rent, or occupy, including costs incurred by…any other person… precludes coverage, and the exception giving back coverage for property damage to premises rented to the named insured for a period of seven or fewer consecutive days will not cover the executive if the named insured is the business. A possible solution here is for the businessperson to pay using a corporate credit card. Even if the hotel room is booked in the individual's name, it is still the corporation paying the bill, and so a strong case could be made that the premises is actually rented to the corporation. 

Many homeowners forms clarify that the exclusion does not apply to activities that may be related to a trade, profession, or occupation, but are usually not viewed as "business" in nature. This approach allows coverage for the businessman or woman in the examples above. Without this language, though, it is often left to the courts to decide. Thus, in United Food Service, Inc. v. Fidelity and Casualty Company, 189 A.D.2d 74 (N.Y. App. Div. 1993), the court found no coverage for an insured when he was on business-related travel and hit a sprinkler head in his hotel room, consequently causing extensive damage. But in Georgia Farm Bureau Mutual Insurance Co. v. Gaster, 546 S.E.2d 30 (Ga. App. 2001), the court reached the opposite conclusion when a client visited a realtor in her home, and tripped while descending into the sunken living room. The court said that maintenance of the step was an activity usual to home ownership and would occur whether or not real estate activities were being pursued in the home. Unlike the New York court, the Georgia court took the "activities usually not viewed as 'business' in nature" approach.

Some types of business activities can be afforded coverage on the homeowners forms. The ISO homeowners 2000 and 2011 expands the definition of "business" from the 1991 forms, and broadens coverage by stating what will not be considered a business (but still does not state that activities normally nonbusiness in nature fall outside the exclusion). Thus, business means "a trade, profession or occupation engaged in on a full-time, part-time or occasional basis" or any other activity engaged in for money or other compensation." But excepted are activities, for which "no ' insured' receives more than $2,000 in total compensation for the twelve months before the beginning of the policy period." Therefore, a home hobbyist whose hobby includes selling at a craft fair, a teen age babysitter, or someone who does the occasional odd job for a neighbor is not considered engaged in a business provided the person receives no more than $2,000 income for that activity in the prior twelve months. (Volunteer activities for which no compensation other than for expenses is received, mutual exchange of home day care services, and home day care services to a relative of an insured are not considered a "business.")

Other exposures can be covered by endorsement. Liability for teachers, salespersons, messengers, collectors, or clerical workers can be added with endorsement HO 24 71 10 00 business pursuits. An incidental business on the premises—office, studio, or private school—can be covered by attaching endorsement HO 04 42 10 00, which increases coverage for on-premises business property as well as providing liability coverage. Generally day care liability coverage is excluded by mandatory endorsement, but coverage can be added provided the insurer agrees (this is endorsement HO 04 97 05 11 home day care coverage). Incidental farming can be covered by use of endorsement HO 24 72 incidental farming personal liability. For more information on these and other endorsements, see Standard Homeowners Endorsements.

As is common today, many persons have begun businesses in their homes. Not every aspect of this exposure can be addressed through endorsement HO 07 01 05 11 home business insurance coverage—for example, there is no professional liability coverage—but most insureds will find the coverage is adequate. The endorsement is targeted to common home businesses: sale of craft work, small service businesses such as bike repair, or office services such as bookkeeping. The form includes coverage for business personal property, business income and extra expense, and personal liability including advertising injury. For more information, see ISO Home-Based Business Coverage—Property. Also, see ISO Home-Based Business Coverage—Liability. If the insured runs a bed-and-breakfast, consult AAIS form ML-450, which may be attached to an AAIS homeowners form. See The AAIS Home-Based Business Coverage Form—Property. Also, see The AAIS Home-Based Business Coverage Form—Liability. The AAIS form also includes nonowned auto liability coverage and hired auto liability coverage, which would be a plus for the home business owner who may occasionally travel and rent a car for business purposes.