Divorced Parents and Dual Households

Both the ISO homeowners and personal auto policies cover resident relatives as insureds. What if a covered loss happens to a child away at college whose divorced parents have joint custody? Is the child a resident of the mother’s, father’s or both households relative to coverage?

In the Florida case of Progressive v. Wesley, a child was killed in an automobile accident. At the time of the accident, her parents were divorced and the father was awarded primary custody of the child; however both parents shared parental responsibility. The child kept a room at the home of both parents. According to the court, “Either determination of [the child’s] residency would be reasonable. We must accept the interpretation which would favor the insured.” Coverage was afforded under the policies of both parents.

In the Ohio case of Prudential v. Koby, a 32-year-old captain in the U.S. Army was ruled to have held dual residency at his home as well as that of his parents. The court stated, “…there was no requirement that, in order for a person to be a resident of the named insured’s household, such residence must be the sole or exclusive residence of the person.”

Residency will depend on the facts of each case, but there is ample case law to demonstrate that a child can be the resident of more than one household.

For more information, click here.

Insuring Liability for Loss of Electronic Data

The CGL policy excludes “elec¬tronic data,” for which there is something of a buy-back with the CG 04 37 endorsement, contingent on physical damage to tangible property. So, just what does the CG 04 37 cover and how?

The latest CGL definition of “prop¬erty damage” is damage to tangible property. However, the definition states that electronic data is not tangible property. Therefore, if an insured caused a PD loss that resulted in loss of electronic data, there would be no coverage. For example, while installing wiring in a building, an insured caused a power outage in the building that resulted in the loss of electronic data. The unendorsed CGL would not cover this loss.

In fact, the latest version of the CGL emphasizes this fact even further by adding an exclusion for electronic data. The policy does not cover damages from the loss, loss of use, damage to, corruption of, inability to access or inability to manipulate elec¬tronic data. The exclusion also includes a definition of electronic data.

Endorsement CG 04 37 12 04 pro¬vides a means for buying back liability coverage for damage to electronic data. The endorsement adds a provi¬sion specifying that “loss of electronic data” is a category of “property damage.” Such loss must, however, result from “physical injury to tan¬gible property”—presumably some direct damage to software media or the computer hardware itself. The endorsement provides for a “loss of electronic data limit”—a sublimit of the occurrence limit—to be specified in the endorsement schedule.

For more information, including several real-life examples and an alternative to the CG 04 37, click here.

Coverage for Personal Use of Business Property

A country club golf pro vacationed in Florida with his family. A thief broke into his rental car and stole his golf clubs. The HO carrier denied the claim, citing the business personal property exclusion. Does this exclusion apply when property is used for personal reasons?

The 1991 and 2000 ISO HO-3 forms differ in two main ways in the amount of coverage provided for business property. The 1991 form provides $2,500/$250 on/off premises coverage for personal property “used at any time or in any manner for any ‘business’ purpose.” The 2000 form provides $2,500/$500 on/off premises coverage for personal property “used primarily for ‘business’ purposes.”

Note that in the 1991 form, the $250 off-premises limitation applies to property used at any time in any manner for any business purpose. In other words, if the property is ever used for business purposes by the insured, the $250 limitation applies even if the property is being used for non-business purposes at the time of loss. In contrast, the $500 off-premises limitation in the 2000 form only applies to property used primarily for business purposes. While a professional golfer may use his golf equipment primarily in his occupation, there is some leeway unlike the 1991 form.

For a complete analysis of this issue, click here.

Bill Wilson (bill.wilson@iiaba.net) is Big “I” director of the Virtual University, an online learning center for agents and brokers.