Q Several months ago our insured's garage was broken into and two four-wheel-drive all terrain vehicles were stolen. These two vehicles were used to maintain the property and each had implements that can be attached for yard care. In Connecticut, you must register ATVs if by chance you should drive onto someone else's property or cross a state road.
The Connecticut Department of Motor Vehicles states that the registration is an ATV registration and not a motor vehicle registration. The ATV registration does not allow the use of ATVs on a public highway; these are designed for off-road use only. A motor vehicle registration is designed for vehicles designed for highway use only.
I cannot understand why the insurance company would deny the theft loss to this insured when by all definitions of the policy it is covered personal property.
--EDWARD A. NEGIP, Clark-Prout Insurance Agency, Inc., Webster, Massachusetts
This response is based on the assumption that an ISO Homeowners 3 Special Form was in force and is applicable to this loss. Bear in mind that we are an outside party and do not have full details about all aspects of the loss so we can only offer possible explanations of why coverage was denied.
A First, refer to Section 1--Property Coverages, Coverage C--Personal Property, under the section Property Not Covered.
The policy states: "We do not cover:...3. Motor vehicles or all other motorized land conveyances..." and "...We do cover vehicles or conveyances not subject to motor vehicle registration which are: a. used to service an 'insured's' residence; or b. designed for assisting the handicapped..."
The ATVs are motorized land conveyances and, therefore, are specifically not covered unless they are not subject to motor vehicle registration and are used to service an insured residence.
Next we must look at the insurance terminology and concept of motor vehicle registration. The policy states that to be covered, the vehicle or conveyance must not be subject to motor vehicle registration. When used for insurance purposes motor vehicle registration is a generic term used most often to mean any type of local, state, or federal government mandated registration of a motor vehicle or conveyance. Further, an all terrain vehicle is a motor-driven vehicle and thus is subject to a type of motor vehicle registration. Because each state has its own terminology regarding what is considered what, the insurance contract intent is to exclude a broad range of situations without having to specifically name each possible interpretation of terminology among the various state BMVs or DMVs.
To further examine, according to Black's Law Dictionary, a motor vehicle is: "any self-propelled vehicle defined as including every device in, upon, or by which any person or property is or may be transported or drawn upon...although sometimes regarded as synonymous with or limited to automobiles, often has a broader meaning..."
It would also be useful to look one step further and ask several other questions regarding the usage of the vehicles. Are the ATVs used solely for the purpose of servicing or maintaining the insured residence? Are they ever used for any other purposes such as entertainment or pleasure? Are they ever used to service any other non-insured residence or business (whether or not for income)? Do they ever leave the insured premises except to be serviced or to travel back and forth between the insured's residences (should more than one residence be involved)? Denial of coverage would most likely be the outcome of a claim if the usage is anything but service of an insured residence, even when the vehicles are not subject to motor vehicle registration.
The only additional comment that may be offered is that if the vehicles were not used for any purpose other than the service and maintenance of insured residences, and based on the statement made to the insured by the Connecticut DMV regarding the difference between a motor vehicle registration and an ATV registration, some ambiguity may exist in the insured's eyes and warrant another review by the insurer.
Since we have had no contact with the insurer, we cannot state that the above reasons are the actual basis for denial of the loss, but we hope that they will lend insight as to why a claim may have been denied.
Q Please inform on the use of ISO endorsement CG 24 07, Products/Completed Operations Hazard Redefined. An underwriter advised me that this endorsement expands coverage. I disagree and feel use of this endorsement reduces coverage and/or restricts coverage.
--STEVE ZELTZ, Eagle Insurance Associates, Cheltenham, Pennsylvania
A First, it would be prudent to look at the actual wording of the CG 24 07:
"With respect to 'bodily injury' or 'property damage' arising out of 'your products' manufactured, sold, handled or distributed:
1. On, from or in connection with the use of any premises described in the Schedule, or
2. In connection with the conduct of any operation described in the Schedule, when conducted by you or on your behalf,
Paragraph a. of the definition of 'Products-completed operations hazard' in the Definitions Section is replaced by the following:
'Products-completed operations hazard':
a. Includes all 'bodily injury' and 'property damage' that arises out of 'your products' if the 'bodily injury' or 'property damage' occurs after you have relinquished possession of those products."
This endorsement amends the definition of products/completed operations for any premises or operation scheduled on the endorsement or declarations.
Next, we will look at paragraph a. of the definition of products/completed operations found in the commercial general liability coverage form. It states:
"14. 'Products-completed operations hazard':
a. Includes all 'bodily injury' and 'property damage' occurring away from premises you own or rent and arising out of 'your product' or 'your work' except:
(1) Products that are still in your physical possession; or
(2) Work that has not yet been completed or abandoned.
However, 'your work' will be deemed completed at the earliest of the following times:
(a) When all of the work called for in your contract has been completed.
(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site.
(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.
Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed..."
The unendorsed CGL coverage form covers any bodily injury or property damage resulting from the products/completed operations hazard if:
* the bodily injury or property damage occurs away from any premises owned/operated/controlled by the insured, and
* the products are no longer in the possession of the insured or the completed operations have not been completed or abandoned.
What happens to a restaurant exposure if an unendorsed CGL is used? There would be no products coverage for bodily injury resulting from any food consumed on-premises. Remember, the coverage exists as long as the bodily injury occurs away from premises. So if a customer contracted food poisoning after eating at a restaurant, the insured's CGL would not respond.
What the CG 24 07 does is redefine products/completed operations so that there is coverage for any bodily injury or property damage that occurs on premises from a products/competed operations exposure as long as the insured has relinquished control of the product to a customer. So in the case of a restaurant, once the customer is served (control of the product is relinquished), there is on-premises coverage if food poisoning should occur.
The CG 24 07 does broaden products/completed operations coverage by removing the off-premises restrictions. *