Boomerang Kids Create Coverage Headaches

Did you know a significant percentage of personal lines accounts include adult “kids” who still live at home? In 2005, there were 22 million adult kids living at home, compared with 17 million in 1970.

A study published by the Russell Sage Foundation in December 2007 estimates that approximately 34% of 18 to 34-year-olds were living with their parents. In fact, sociologists have coined the phrase “open nesters,” contrasted with “empty nesters,” as this phenomenon continues to generate more study.

The $64,000 question: how are they insured? The ISO HO-3 considers “resident relatives” to be “insureds,” though, unlike their personal auto policy (PAP), neither term in “resident relative” is defined. What if an adult daughter separates or divorces her husband and moves back in with mom and dad until she gets back on her feet? Is she a resident of their household now and covered by their HO policy?

Even trickier questions occur with regard to the PAP policy. Both the daughter and parents will likely have PAPs and may drive each other’s cars. Are there any coverage loopholes in this situation? What if the daughter is still covered by a PAP in her husband’s name?

For more information, click here.


Insuring Physical Damage on Employee Autos

Under a business auto policy (BAP), liability coverage for the business can be extended to employee-owned autos using Symbols 1 or 9 and the employees can be covered as insureds by endorsement. However, what if an employer, as a perk or out of a sense of obligation, wants to extend physical damage coverage under the BAP to employees if they damage their own vehicles while on business?

The Virtual University received an inquiry from a member as to whether Symbol 7 coverage might work if employee autos were declared. The premise was that Symbol 7 applies to “described” autos and not explicitly to “owned” autos. Clever, but there’s a problem.

To learn more, including how a court opined on this topic, click here.


Homeowners Associations Provide Pitfalls

Wouldn’t life be easier for agents and others in the insurance industry if there were no such things as condo or homeowners associations? Given the variety of CC&Rs, condo statutes and demands from lenders and others, properly insuring either the association or individual unit owners can be a challenge.

On the flip side, it’s very unlikely that many buyers of a townhouse or a stand-alone home in an association never consider the insurance implications of such purchases. But when it’s time for the agent to provide coverage, issues surface. These issues include: condo vs. HO association, CC&Rs, state statutes, type of architecture and form of ownership, insurable interests, one master policy with individual HO-4sor HO-6s vs. a limited master policy and HO-3s, additional insureds, flood insurance requirements and more.

Go online for an article that examines the insurance aspects of owning homes in a homeowners’ association, including situations where residential property is improperly insured—and the E&O exposures it creates. For the details, click here.

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