Below are several questions recently received by the Virtual University "Ask an Expert" service. How would you answer these quandaries?

• "An independent agent, as well as many other businesses, has access to client information that could be used to commit identity theft. An employee could use the info illegally for his or her personal gain, give it to someone else or sell it. Where is the business protected? Employee Dishonesty, CGL or some other coverage? Is it available at all?"
• "We insure a records management business that stores medical records. Due to HIPAA, the business is concerned about liability if an employee uses stored information for identity theft or discloses sensitive information about a patient such as AIDS, etc. The CGL excludes coverage due to the CCC exclusion. The employee dishonesty bond does not provide protection. I have spoken to two underwriters and three bond brokers and have not been able to identify the coverage our insured needs. Can you identify what type of a bond or policy provides this coverage?"
• "The resident of an apartment building reported a broken ice maker. Building maintenance entered the apartment when the resident was not at home and made the repair. The tenant subsequently discovered his Rolex watch was missing from the kitchen drawer. The tenant, an attorney, is certain the maintenance person stole the watch and has filed suit against the landlord for recovery. What insurance carried by the landlord, if any, would respond to this claim?"
• "A contractor did a job at a client’s home and one of his employees stole some jewelry from the home. Would this be covered under his CGL policy?"

To read VU faculty members’ responses to these and other questions, click here.

Rental Cars and Unauthorized Drivers

An insured is going on vacation and renting a car in his name. He has a 19 year old that he understands cannot drive the rental car per the rental car company’s requirement. However, he is planning on letting the 19 year old drive the car anyway. Would his personal auto policy respond?

It is highly unlikely that his PAP would respond because of these exclusions:

Clearly, the client understands that the 19 year old is not entitled to use the vehicle and it is presumed that he knows that. His only option would be to buy the rental company’s liability and LDW/CDW coverages, although almost certainly they would be voided if an unauthorized driver uses the vehicle.

The solution here is to abide by the signed contract. It is doubtful that teaching a young person to willfully violate agreements is a good lesson to pass along anyway.

For a complete analysis, including a link to a document you can share with your insureds about why it is usually best to purchase the CDW, click here.

BAP Coverage for Employees’ Property

How does the BAP respond to the following two scenarios recently brought to VU’s faculty?

• "The president of a corporation drives a company-owned commercial vehicle insured under the CA 00 01 10 01 and strikes his personal home owned by him and his wife. I feel this PD loss is covered because there are separate entities involved (corporate vehicle and a privately owned residence). The carrier of the corporate vehicle is mentioning the care, custody & control exclusion, paragraph 6, on page four of 15 of the form. It is also mentioning that an insured cannot profit from a loss (president strikes his home and collects for damages). What is your opinion on the coverage issue(s) and please advise if other issues are involved."
• "A corporate officer backs a company-owned vehicle into his personal vehicle in the parking lot. The insurer denies the claim stating that the corporate officer cannot be liable to himself. I do not find any exclusions in the CA 00 01 10 01 that states this…liability rests with the corporation, not the corporate officer. Am I correct, incorrect or careless?"

These claims involve the concept of separation of insureds, legal liability issues and owned property exclusions. In the BAP, the definition of "insured" makes it clear that coverage is afforded distinctly to each insured. The "CCC"/ownership exclusion applies only to the negligent party’s property.

Therefore, if the suit is made against the employer, the policy would respond. The difficulty would most likely be in establishing liability on the part of the employer for the employee damaging his own property but, if that’s possible, then the policy should respond.

For more information, click here.

Insuring Property in Storage

An insured has to place items in a self-storage facility for approximately six to seven months while building a new home. Does the homeowners policy cover these items, or do you need to obtain more specific coverage?

As long as there is a homeowners policy in place on the current residence, or a tenant’s policy if they are renting, the insured should be OK. Although you should review the form, most homeowners policies cover personal property anywhere in the world. There is typically a limitation on property usually located at another residence, but that doesn’t apply to a storage facility.

Subject to certain restrictions, personal property owned or used by an insured is covered worldwide. While often misinterpreted as limiting all off-premises personal property coverage to 10% of the Coverage C limit, the HO policy only applies the 10% limit to personal property that is "usually located at an insured’s residence, other than the residence premises." That is, for the restriction to apply, the insured must have more than one residence. In addition, the personal property must be "usually located" there. For example, if the insured has a second home, the Coverage C on the homeowners policy covering his or her main residence only extends 10% of the Coverage C limit to personal property usually kept at the second home. For personal property the insured takes back and forth, the 10% limit would not apply.

Personal property stored in a mini-warehouse is not subject to the 10% limit under the insured’s Coverage C. Again, the 10% limit only applies to "property usually located at an insured’s residence, other than the residence premises." A mini-warehouse is clearly not a residence, thus the 10% limit does not apply to property stored there; full Coverage C applies, subject to other restrictions discussed in the full article from which this is excerpted.

For other restrictions of coverage, click here.

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