Interesting Insurance Puzzle - coverage question

[Rob]

Some BOP writing carriers might be willing to exclude products/compl ops and attach a designated premises endorsement. Then it really doesn't matter that they repair heavy equip.

Yes but then we don't have coverage for products and completed operations!

[LadyBroker]

Isn't the bigger exposure here that the client 'may bring engines here for repair'....does he have a business policy for his GL exposures? I have to believe that loss would be far larger and more catastrophic than the structure burning down.

[LadyBroker]

Oops...looks like I didn't see page 2 of the replies, and someone just above me had the same GL thought as I....sorry for the duplication.

[Rob]

Isn't the bigger exposure here that the client 'may bring engines here for repair'....does he have a business policy for his GL exposures? I have to believe that loss would be far larger and more catastrophic than the structure burning down.

Yes the corporation has a GL policy that includes products and completed operations.

The building is owned by the corporation officers (as individuals).

I've already suggested that we write a separate policy for the building.

[rotter]

Sorry Rob, I don't have any idea about this.

[LadyBroker]

Does the corporation's policy list the home based location as a place of operations? If not, that could be a problem, too.

Isn't this fun?

[Rob]

Does the corporation's policy list the home based location as a place of operations? If not, that could be a problem, too.

Isn't this fun?

Yes it does list the home location as the premises.

Great fun! I love a good insurance puzzle.

[CATHIEA]

Oh how I love a puzzle. And apparently so do a lot of other people. Here's the good news - Allstate generally will continue on the homeowner portion as long as the insured can show proof they have the commercial exposure covered - I do this regularly with Allstate. Just write the building coverage either with the carrier that has the GL or another property carrier (Bliss & Glennon has a couple of really cheap property carriers - around a $0.50 rate). Make sure to add the location for liability and get a cert to the Allstate agent for his file.

FYI - Fire legal only covers fire damage to rented structures due to negligance. How would you explain to your client that they have no coverage if the building burns down thru no fault of theirs? That is the E&O claim.

[Rob]

Oh how I love a puzzle. And apparently so do a lot of other people. Here's the good news - Allstate generally will continue on the homeowner portion as long as the insured can show proof they have the commercial exposure covered - I do this regularly with Allstate. Just write the building coverage either with the carrier that has the GL or another property carrier (Bliss & Glennon has a couple of really cheap property carriers - around a $0.50 rate). Make sure to add the location for liability and get a cert to the Allstate agent for his file.

FYI - Fire legal only covers fire damage to rented structures due to negligance. How would you explain to your client that they have no coverage if the building burns down thru no fault of theirs? That is the E&O claim.

Yes and I must stress that is what I told them, however I needed to specifically state why it wouldn't and the negligence part now makes sense to them as well as the possibility of damage due to other perils.

[gregcw]

The customer is a heavy equipment repair business (Husband and wife). They are incorporated and work out of their home. He travels to business sites to repair heavy equipment.

They have a detached structure where he may bring an engine back to rebuild or work on. The value of this detached structure is more than the "other structures" coverage amount on their homeowner's policy since they built it themselves and is about the same size as their primary dwelling. Their Allstate agent advised that it wouldn't be covered since it is used in business and which brings us to an obvious coverage deficiency should this structure burn down.

Now the question: If their corporation were to lease the structure from them (as individuals) and pay rent to them (as individuals) for the use of the detached structure, would said detached structure be covered under "Fire Legal liability" of their corporation's CGL policy? I was suspecting that since they have an interest in both the property and the corporation that there would most likely be a coverage problem. Would this type of question be more appropriate for an attorney to address?

If not, I could write a homeowners policy for them but the business use of the structure could pose an underwriting problem, so if not, could we write a commercial building policy, even though it is on their property and it is zoned as residential?

Any input or advice would be greatly appreciated. I won't take your advice and run with it (unless you are 100% confident), I'm just looking to get some input from others in the industry to see how you view this.

Thank you

Rob Winter

Rob.

The HO-3 exludes coverage for an adjacent structure used for business in all but the most recent edition. If you were to write an HO-3 you need to determine which edition of the HO-3 is being used. The Fire Legal Liabilty, which more correctly is Tenants Legal Liability, would possibly not be applicable here because of the dual relationship as an individual owner and corporate (principal) tenant. I just know that the time of the claim is not when you want to find out. If you wanted to find out I would talk to a claims department rather than an attorney. If the attorney does not have a great deal of insurance law background his opinion may not be valid.

I think that the correct way to handle this is with either a CPP or BOP, if you can find a carrier willing to write it as a BOP, with the building covered. Since he is a corporation, he needs to enter into a lease with himself as an individual and outline his responsibility to insure the building in the lease. For the Premises Liability he should also be named as either an Additional NAMED Insured (usually no additional premium) or Additional Insured (usually an additional premium). This makes it simpler both for the property coverages and any liability suit naming both the individual and corporate entity.

GREGCW CIC

[Rob]

Here is what I recommended but at the end she threw in a monkey wrench by saying they (as individuals) also have their girl scout and cub scout meetings in this building (there is a wall within that separates from the business tools) and that she has woodworking equipment from a woodworking business that she used to have. I said that the easy thing to do would to not do that! She said she can't have the cub scout meetings in her house.

1. Fire Legal Liability on the commercial liability policy for Wise Diesel Equipment Repair would not be an appropriate measure for insuring the detached structure currently insured (but actually not covered) under your Allstate policy for two reasons: 1) In order for it to pay the property owner (you as individuals), the tenant needs to be held legally liable and negligence on the part of the tenant has to first be legally proven. Thus it is called Fire "Legal"

[E&S Man]

How is the Allstate exclusion worded? The building and commercial activities are not covered by Allstate, but the cubscout meetings are personal activities held on the homeowners premises (address listed on the Homeowners policy).

I would think that Allstate would have a hard time denying premises liability for such a meeting that was not commercial in nature.

If the building in question has a separate address, ignore everything I just said.

That being said, If the diesel repair company is a sponsor of the cub scouts (or any other deal for that matter), then it would likely revert back to a commercial exposure). If that's the case, how about some sort of a BOP or ther package for the commercial operations (making sure a proper lease agreement exists to cover the insurable interest aspect of the property coverage).

Are we having fun yet?