Liability Coverage Under Dwelling Program—Similar to Homeowners

Summary: Under the dwelling program, personal liability coverage is available using personal liability supplement DL 24 01 07 14. This supplement may be combined with a personal liability schedule (DL 24 03 07 14) and added to the dwelling property forms to form a dwelling package policy or, with the addition of a set of conditions found on DL 24 02 07 14 and a company declarations page, the supplement may also be used on a monoline basis. Personal liability supplement DL 24 01 provides liability coverage that is very similar to the coverage found in the liability section of the homeowners forms.

Comments in this discussion refer to the 2014 edition dwellings forms; since the 2014 personal liability form is virtually identical to the homeowners 2011 section II, see Personal Liability Insurance; see Homeowners Section II Exclusions; see Personal Liability—Additional Coverages; and see ISO Homeowners Section II Conditions, for a more in-depth discussion.

Topics covered: Definitions Coverages Exclusions Additional coverages Conditions Mandatory endorsements Miscellaneous endorsements

Definitions

The 2014 personal liability supplement includes definitions for aircraft liability, hovercraft liability, motor vehicle liability, and watercraft liability. Each type of craft is defined; the aircraft definition excludes model or hobby aircraft, since these cannot be used for transporting people or property. The definitions are the same as those appearing in the ISO HO 00 03 05 11 (See ISO Homeowners Definitions). In the definition of insured, references to “any person named above” have been changed to “resident of your household who is your relative”. This was done for the sake of clarification and as a result of recent case law. One court found the “any person named above” language possible of being interpreted two different ways.

Coverages

Personal liability coverage—providing bodily injury and property damage coverage—is designated coverage L on the personal liability supplement; medical payments to others coverage is referred to as coverage M (on the homeowners forms these coverages are E and F, respectively). Minimum limits of liability required on the personal liability supplement and the homeowners forms do not differ. The minimum coverage L limit is $100,000 per occurrence; the minimum coverage M limit is $1,000 for each person. These limits may be increased for an additional premium.

The insurer promises to pay damages for which an insured is legally liable, so long as there are no exclusions and the limits are sufficient. The insurer also promises to defend a suit at its own expense. The 2002 wording “Our duty to settle or defend ends when our limit of liability for the “occurrence” has been exhausted by payment of a judgment or settlement” makes it clear that the insurer owes a duty to defend until settlement is reached or a judgment rendered.    

Exclusions

Motor vehicle liability (as defined) and watercraft liability (as defined), are excluded with exceptions as indicated. An exception exists for a motor vehicle if it is being used solely to service an “insured's” residence. This exception is changed in the new form, and now the exception is for a motor vehicle used to “service a residence”. This broadens the coverage so that if the insured wishes to assist a neighbor using his riding mower, he can and coverage will still apply.

A new exception has been added for vehicles used off a residence premises that are battery powered toys and are not built or modified to exceed five miles per hour. These vehicles are designed for children under the age of seven.

The exception to the exclusion for intentional injury or property damage has been changed to include damage to property as well as injury if the insured causes the damage in an attempt to protect persons or property. The earlier form only provided coverage for injury caused by the insured if he was protecting persons or property, not damage to any property that might be damaged as well.

Another change is to the controlled substances exclusion. The 2002 form contained an exception for the legitimate use of prescription drugs by a person following the orders of a licensed physician. Physicians are not the only possible prescribers; dentists, certified nurse practitioners and other professionals are allowed to prescribe medications. Therefore the exception now applies if the medication is ordered by a licensed health care professional, and not just if the medication is prescribed by a licensed physician.

Additional Coverages

The additional coverages for claim expenses, first aid expenses, and damage to property of others are identical on the personal liability supplement and the homeowners forms. Coverage for loss assessment—the fourth additional coverage on homeowners policies—must be added by endorsement (DL 24 14 12 02) to the personal liability supplement; it is not an automatic coverage.

Conditions

There is no difference between the liability conditions on the homeowners forms and the personal liability supplement, except in their arrangement. As mentioned earlier, an additional set of five conditions on endorsement DL 24 02 must be added when a monoline personal liability policy is written. The additional conditions are: liberalization; waiver or change of policy provisions; assignment; death; and cancellation.

Mandatory Endorsements

Depending upon the state, endorsement DL 01 XX (where the XXs represent each state's individual identification number) must be attached. This endorsement amends the cancellation provisions in the DL 24 01 to conform to state requirements.

Miscellaneous Endorsements

As is the case with homeowners liability coverage, coverage may be amended for the dwelling insured. Discussed here are some of the more common endorsements. Loss assessment liability may be added by attaching endorsement DL 24 14 as noted earlier. No more than two locations can be written in addition to the initial residence premises. Assisted living care liability may be added to cover a person regularly residing in an assisted living care facility, so long as the person is related to an insured by blood, marriage, or adoption and is not residing in the insured's household. Assisted living care coverage endorsement DP 04 59 07 14 (which also provides property coverage) is attached.

A student residing away at school can be endorsed onto the policy as an additional insured. The definition of an insured includes a full-time student under age twenty-four who was a resident relative in the named insured's household before leaving to attend school. By attaching endorsement DL 24 27 12 02, a student older than age twenty-four, or attending school part-time, is covered as an additional insured as long as that student is either a relative or is under age 21 and in the care of the insured or a resident relative of the household. 

The rules allow for premises liability arising out of certain incidental occupancies, such as a home office or studio. Endorsement DL 24 09 12 02 is attached. The endorsement does not respond to bodily injury to an employee.