Sometimes an adjuster will deny a claim, citing a policy provision that clearly excludes coverage for the claim. But that doesn’t necessarily mean the claim isn’t covered. It’s possible that the claim is covered elsewhere in the policy. This is an issue (“Entirety of Contract”) I explore in my book “When Words Collide: Resolving Insurance Coverage and Claims Disputes.” For example, consider this claim I assisted with about 10 years ago….
The Denied Claim
A 1991 ISO HO 00 03 homeowners insured’s brother-in-law was helping him clean up some storm damage when a tree limb fell and damaged his lawn tractor. The adjuster denied the damage as a liability claim under the “Damage to Property of Others” because it requires the damage to be “caused by” an insured:
We will pay at replacement cost up to $500 per occurrence for property damage to property of others caused by the insured.
In this case, the adjuster might be right…but that doesn’t mean the damage is not covered.
In the “Damage to Property of Others” policy provision cited in the LIABILITY Section II of the form, it does require the damage to by “caused by” an insured. In addition, it excludes loss arising out of the use of a motor vehicle, the only exception being certain recreational vehicles.
Therefore, this additional coverage does not apply to this loss and we can’t otherwise comment on potential liability coverage under Section II since we don’t know what happened and whether the insured could otherwise be legally liable. Since the adjuster is citing this “no fault” additional coverage in Section II, presumably this is because s/he feels the insured was not liable for the damage.
However, the adjuster has failed to examine Section I of the policy which says:
COVERAGE C – Personal Property
We cover personal property owned or used by an “insured” while it is anywhere in the world. At your request, we will cover personal property owned by others while the property is on the part of the “residence premises” occupied by an “insured”; [emphasis added]
It is a common misconception that the policy only covers property owned or rented by the insured. As the highlighted language shows, if the insured chooses to extend coverage, it will apply to the property of others as long as it’s on the part of the premises occupied by an insured, damaged by a covered peril, and not otherwise excluded.
What about any exclusions pertaining to damage to motor vehicles? Motor vehicles are excluded under “Property Not Covered,” but the following exception is made:
We do cover vehicles or conveyances not subject to motor vehicle registration which are…Used to service an “insured’s” residence;
Note that, unlike the 2000 ISO HO 00 03 policy, the 1991 form does not require that the vehicle be used solely to service the insured’s premises.1 So, as long as the cause of loss is covered, the claim should be covered under Section I, less the deductible.
The lesson here is that, just because the insurer correctly cites exclusionary language in one part of the policy, that doesn’t mean that the loss is necessarily excluded if you can find coverage in another part of the policy.
1 Footnote: Since this claim occurred, ISO introduced a 2011 homeowners program. The 2011 HO 00 03 form covers damage to a motor vehicle used to service “a” (translation: “any”) residence, not just an insured’s residence. So, coverage under that form edition would depend on whether the brother-in-law’s mower had ever been used to service a premise that was not a residence. Explain THAT to an insured! To learn more about this, see this article:
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