Malcolm accidentally shot and seriously injured Dwight. The incident occurred in the home of Malcolm’s parents but Malcolm had lived away from the home for many years. However, during the year in which the accident occurred, Malcolm had visited and lived in the house for long periods.
When a verdict of $1.3 million was awarded to Dwight because of the injury, Malcolm requested coverage from his parent’s homeowners carrier, Travelers, who refused to honor the request.
Here is how the courts ruled.
In June of 2011, while visiting with Malcolm Brown, Dwight Stewart was injured when a gun that Brown was holding, fired. The injury occurred at a dwelling that was owned by Malcolm’s parents, Joseph (his birth father) and DeLisa (his step mother) Hayes. The home was insured in the Hayes’ name under a policy issued by Travelers Casualty and surety Company (Travelers). After a trial court issued a summary judgment in favor of Travelers that no obligation of coverage existed, Stewart appealed.
The Hayes originally lived in the location where the firearm incident occurred. However, at the time of the shooting, the Hayes had been legally separated and had been renting out the home since they both lived elsewhere. Malcolm, at the time of the event, was not a regular resident at the location. However he did have access to the home and, during 2011, had been staying at that location several nights a week. Prior to then, Malcolm had lived apart from the Hayes for several years, in various locations and in other states.
The higher court reviewed the circumstances, including the issue that neither the insureds nor Brown had directly reported the incident. Travelers learned of the shooting in July, 2012 when Stewart’s attorney sent a request that the insurer pay a default judgment against Brown for 1.3 million dollars. That judgment was levied after Brown failed to appear at a jury trial alleging his negligent use of a firearm.
In the higher court’s opinion, the trial court was justified in its finding that, as Brown was not an insured, Traveler’s had no obligation to respond to the claim. Further, as there was no coverage, there was no merit in Stewart’s allegation of bad faith on the part of Travelers. The lower court ruling in favor of Travelers was affirmed.
Travelers Casualty and surety Company, Plaintiff-Appellee v. Dwight Stewart, Defendant-Appellant. USCAppt. 11th District. No. 15-14047. Filed October 14, 2016. Affirmed Westlaw 5746256.
Who is an insured?
The primary question to answer at the time a claim is presented is whether the individual who caused the damage is an insured. When the named insured causes the damage, the answer is obvious but when anyone else causes the damage, the answer is found either in the Definitions section or in the Who is An Insured section. These sections should be read very carefully because complexities of relationships can result in very significant gaps in coverage.
Read the PF&M analysis of the AAIS, ISO, and MSO Homeowners definitions of insured. While there are many similarities, there are also differences within the forms that could affect a client.
HO 0003–AAIS SPECIAL FORM HOMEOWNERS ANALYSIS
Insured is the person or persons named in the declarations (named insured) and that person’s relatives who live in the household. In addition, there are a number of persons who are insureds based on conditions and circumstances:
· Relatives of the named insured who are under the age of 25, enrolled in school fulltime, are still financially dependent on the named insured and lived in the household prior to moving out to attend school
· Non-relatives of the named insured under the age of 21 who live in the household and are in the named insured’s care or in the care of a relative of a named insured who also lives in the household. These non-relatives are also covered while away from the household attending school fulltime provided they continue to be under the care of the named insured or a relative resident and had lived in the household prior to moving out to attend school.
The definition of Insured is further expanded but only for the Liability section of the policy:
· The named insured’s real estate manager but only within the scope of his or her duties that relate to the described location
Example: Prissa is out of the country on an extended, two-month vacation. She hires a realtor to rent out her home during the time she is away. The realtor is an insured under Prissa’s policy while he is acting as her rental agent on the premises.
· Any person employed by any of the insureds described in the first grouping of insureds is an insured but only for incidents involving a motorized vehicle that is covered by this policy. The insured status is limited to when that person is performing the duties for which that he or she was employed.
· Any person that is using a covered motorized vehicle on the insured premises is an insured but only if the named insured had given that person permission to use the vehicle. The insured status applies only to liability resulting from the use of the vehicle.
· Other parties also qualify as insureds, but on a more limited basis. If a loss situation involves an eligible owned watercraft, golf cart or animal (usually a pet), coverage extends to persons/organizations who, with the insured’s knowledge/permission, have some related responsibility for the loss. This applies only if an insured, as defined in the first grouping of insured, owns the watercraft, golf cart or animal. The policy grants insured status for such parties but only to the extent that they are liable for injury or harm involving such insured property. This applies only if the insured gave permission for the watercraft, golf cart or animal use. Entities that are liable for watercraft or animals incidents are not insured if the use or control or either was business related.
Example: Millie’s grandson and his friend Jake are riding Millie’s horses on her property and on park trails connected to her property. The horse becomes spooked by a snake, runs off the trail and tramples a hiker. Jake is considered an insured.
Example: Jake feels terrible about the injury he caused. He volunteers to care for Millie’s four horses for a month. While Jake is grooming one of the horses, a neighbor girl enters the barn. Jake becomes distracted and the horse bolts to take the sugar cube out of the girl’s hard. The girl is bowled over and must be taken to the hospital. Jake is an insured under this situation.
IMPORTANT: The vicarious liability protection that the special form policy grants to entities that are in possession of an insured’s crafts, vehicles or animals only applies in instances where the use or possession involves an insured’s permission.
|Example: A person riding in Charla’s golf cart (which she uses to transport supplies and implements for gardening around her estate) strikes a postal worker in Charla’s driveway.|
|Scenario 1: The driver is a friend, helping Charla do some landscaping–the situation is covered.||Scenario 2: The driver has just stolen Charla’s golf cart and the accident occurred while she was attempting to escape – the situation is NOT covered.|
HO 00 03–ISO HOMEOWNERS 3 – SPECIAL FORM COVERAGE ANALYSIS
5. The Special Form homeowner policy considers all of the following to be insureds (with notes on any exceptions):
(refer to separate definition)
- Your relatives if residents of “your” household
(meaning relatives who live at the insured location with the named insured)
- Persons under the age of 21 residing in “your” household and in “your” care or in the care of “your” resident relatives
Note: Such persons must BOTH be younger than 21 AND have a named insured, his or her spouse or a relative of the named insured/spouse as their caregiver.
The definition of insured includes persons who are residents of the named insured’s household who are full-time students. In order for a full-time student to qualify as an insured, he or she must either be younger than 24 years of age and be related to an insured OR be younger than 21 years of age and be in the care of someone in the named insured’s household.
The following persons are insureds, but ONLY regarding section II, the liability portion of the homeowner policy:
- Any party having legal responsibility for either animals or watercraft that is eligible for coverage under the homeowner policy.
Examples: Nancer Editbee’s home is insured by an ISO Special Form policy. Let’s look at whether the following are insureds under her policy:
- Nancer’s 12 year old neighbor who walks Nancer’s dog (yes, an insured)
- Frank, who rented Nancer’s RV for the weekend (no, not an insured – due both to rental and type of property)
- Jeri, a stranger who stole Nancer’s cat (no, not an insured)
· Paul, a friend from work who borrowed Nancer’s canoe (yes, an insured)
Related Court Case: Animal Liability Exclusion Stands as Written
However, anyone in possession of an insured’s watercraft or animal is denied insured status if any business purpose is involved.
- Any person working for an insured while operating a motor vehicle that qualifies for homeowner coverage,
- Any person who has the insured’s permission to use an eligible motor vehicle, but only while on the insured premises.
Examples: Tom Kinpushion’s large home (on four acres of land) is insured with a Special Form homeowner policy. Let’s look at whether the following are insureds under his policy:
- Tom’s visiting childhood friend who hits Tom’s neighbor while driving Tom’s car out of his garage (no, not an insured)
- Tom’s neighbor, Pete, while using Tom’s lawn tractor in his (Pete’s) lawn cutting service (no, not an insured)
- Tom’s other neighbor’s daughter Nikki whom Tom hired to cut Tom’s 4 acres (yes, an insured)
· Tom’s son while using his electric wheelchair at the nearby grocery store (yes, an insured)
Related Court Case: “Automobile Exclusion Held Not Applicable To Liability Arising From Vehicle In Dead Storage”
The 05 11 edition of the Special Form policy’s definition of insured continues using a clarification. Whenever the word “insured” immediately follows the word “an,” the phrase refers to one or more “insureds.” In other words, an “insured” means one or more persons who have covered status under the policy.
MPL 01–MSO COMMON PROVISIONS FORM ANALYSIS
SECTIONS I AND II– GLOSSARY
Note: This part applies to the entire policy.
When the named insured is an individual, the term insured is:
1. The person who is listed on the Declaration
2. Any of the following but only when residing in the household of the named insured
A. The named insured’s spouse
B. Any relative of either the named insured or the named insured’s spouse
C. Any person who is not yet 21 and is in the care of the named insured or in the care of a relative residing in the household of the named insured.
3. A fulltime student (A student is considered fulltime if the school he or she is attending considers the student fulltime), but only if that student was residing in the household of the named insured prior to moving out in order to attend school. However, the student is an insured only if he or she is one of the following:
A. The named insured’s or the named insured’s spouse’s relative and is less than 24 years old.
B. In the care of the named insured or in the care of a resident relative and is less than 21 years old.
4. The legal representative of the named insured. This applies only when the named insured dies. The legal representative is a very limited insured because the status applies only as regards the named insured’s property and any liability that results from that property.
An important statement is made in these items that really applies to all of the above insureds. When the named insured dies, all persons who were insureds based on the above as of the time of death, remain insureds as long as they remain household residents.
|Example: Marty is the named insured. Millie is his wife. Becky and Paul are their children. Marty dies.
Scenario 1: Becky and Paul live with Marty and Millie. Becky, Paul and Millie are insureds as long as they remain in the household.
Scenario 2: Becky and Paul each have their own homes. Becky moves in with Millie and Marty to care for Marty. Paul moves in after Marty dies. Becky is an insured because she was an insured at the time of Marty’s death. Paul is not an insured because he moved in after Marty’s death.
Note: This part applies only to Section II
1. When a person or an organization is considered legally responsible for either an animal or a watercraft an insured owns, that person or organization is an insured. This insured status is limited and does not apply to any who possess the animal or watercraft as part of their business or to those who possess the animal or watercraft without the insured’s permission.
2. A person employed by an insured, as defined in Part A, and operating a covered vehicle is an insured provided the employment is not related to business. Any other person who uses a covered vehicle on the insured premises is an insured provided that person has permission to use the vehicle.
Asking the important questions
The Personal Lines Producer Risk Evaluation System General Information Questionnaire asks very specific questions about the named insured’s relationships. It asks questions regarding marital status and requires a listing of individuals whom the named insured may expect to be covered as insureds under the policy. This listing can help you address potential gaps in coverage when the coverage form and the named insured’s expectations do not match.
Review the Single Family Owner Occupied Personal Risks Questionnaire that asks these important questions.
Account number: _________________________________________________________________
Agency number: _________________________________________________________________
Producer number: _________________________________________________________________
|Cell phone numbers:||Named Insured:||_________________________|
___ Married ___ Single ___ Divorced ___ Separated ___ Widow ___ Other
If married or separated, name of spouse: ___________________________________________________
List below all people whom currently reside in the household. This should include:
- Family members
- Persons under 21 in the applicant’s care. This includes foster children.
- Other residents who are not related. Some examples are significant others, roomers, boarders, tenants, and domestic employees.
Relationship to Applicant
List below all family members whom do not currently reside in the household including noncustodial children, college students away at school, or any family who lives in an assisted living / skilled care facility.
Relationship to Applicant
Is any property held in a trust? ___ Yes ___ No
If yes, answer the following:
Trust Name: ______________________________________________________________
Is the residence a historical landmark or showcase home? ___ Yes ___ No
If yes, answer the following:
Are tours conducted? ___ Yes ___ No
How many tourists visit annually? _______
What is the maximum number of visitors on a single day? _______
Is the property used for community activities? ___ Yes ___ No
If yes, answer the following:
Describe the activities.
How often is the property used for this purpose? _________
What is the maximum number of visitors who might attend? _______
Does the applicant belong to a homeowners or condominium owners association?
___ Yes ___ No
If yes, attach a copy of the Association agreement and bylaws.
Is the residence located in a flood plain? ___ Yes ___ No
If yes, does the applicant carry flood insurance? ___ Yes ___ No
Is the residence located in a known earthquake area? ___ Yes ___ No
If yes, does the applicant carry earthquake insurance? ___ Yes ___ No
Does the applicant carry firearms or have firearms in the residence? ___ Yes ___ No
If yes, complete the firearms supplement.
Have there been any water-related (including backup of sewers or drains) losses?
___ Yes ___ No
If yes, answer the following:
Is there any evidence of water leaking or seeping in the residence? ___ Yes ___ No
Are there odors in the residence that could suggest the presence of mold? ___ Yes ___ No
Are underground or above ground storage tanks on the premises? ___ Yes ___ No
Are flammables, chemicals, or fuel stored on the premises? ___ Yes ___ No
If yes, describe the property stored, where it is stored, and procedures to prevent ignition.
Is lead paint in the residence? ___ Yes ___ No
Are chemicals sprayed on the premises? ___ Yes ___ No
If yes, describe is the chemical(s) sprayed and state whether the applicant or contractor does the spraying.
Does the applicant own, lease, or rent additional residences? ___ Yes ___ No
If yes, prepare a separate questionnaire for each residence.
Does the applicant own rental property? ___ Yes ___ No
If yes, prepare a questionnaire for rental property.