An agency in Massachusetts has an insured who owns land in the commonwealth and is building a new one-family home on it. They currently reside in Connecticut and have an HO3 policy with an agency in Connecticut.

The insured is acting as the general contractor for the construction project. To address this exposure, the Massachusetts agency advised them to purchase a commercial general liability policy and ensured that they secured a contract and requested an additional insured endorsement and a certificate of insurance from every sub.

The Massachusetts agent believes that the HO3 policy coverage would extend to the land for the insured's personal liability. For instance, if a friend visited the property and was injured, the HO3 would respond to the liability. However, their Connecticut agent disagrees, stating that coverage would not extend to the property in Massachusetts.

Q: Does HO3 liability coverage extend to a dwelling being built in another state?

Response 1: Assuming it's an ISO policy, the definition of “insured location" includes:

10. "Insured location" means:

f. Land owned by or rented to an "insured" on which a one-, two-, three- or four-family dwelling is being built as a residence for an "insured"

Barring any unusual exclusion and provided the home is being built as a residence, the personal liability coverage included in the Connecticut homeowners policy applies to the Massachusetts site—at least until the construction is complete. If they are building it to sell or rent, then there would be no liability coverage.

If the insured is building the home for their family to reside in, albeit acting as their own general contractor, the policy's business and professional services exclusions would not apply.

The home being in a different state has no bearing on coverage, according to the ISO HO3.

Response 2: I do not understand why the Connecticut agent is asserting that the HO3 does not apply. Ask them to obtain a letter from the carrier of record specifying why coverage does not apply.

You are purchasing a CGL policy for the construction and I would suggest you purchase an excess liability policy that is not a following form, with zero retention, if available. Don't forget to offer a builders risk policy with all the appropriate additional coverages, focusing on “soft costs," and a workers compensation, as well.

Although it's a good idea to request additional insured status, the insured should not rely on this. They should also have a construction agreement with a hold-harmless or indemnity provision.

Response 3: I have to say I'm a little confused. A CGL was purchased in the name of the insured, who I assume is an individual. If someone gets injured on the premises where the new home is being built, which is owned by the named insured on the CGL policy, why wouldn't there be coverage under the CGL?

Under an ISO HO3 policy, liability coverage for an insured building a single-family home where they intend to reside is covered under the definition of “insured location." The ISO policy has no definition of coverage territory, so liability coverage is worldwide.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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