Is a Homeowners Policy Inadequate to Cover a College Student?

Toward the end of the school year, a thief enters a college student’s room through a suitemate’s room and bathroom, and steals a computer the school had signed out to the student. The student’s parent receives a letter stating she owes the school $1,600 before she will be allowed to resume her education.

Q: "Is a computer provided by my daughter's school for use while she is attending covered for theft from her locked room while she is out of the room? Does homeowner's insurance normally pay for such losses? Do you have any idea why my agent would say this was not covered?”

A: “After reviewing the pertinent policy provisions, which is not identical to the ISO form in language but features the same coverages, we're unable to explain why the agent would have said there was no coverage. This is clearly a covered loss.

Although this company's policy form is not identical to its ISO counterpart, we'll use the applicable ISO HO 00 03 04 91 form to follow along with the coverages.

The homeowner's policy covers any personal property ‘owned or used by’ an insured if it is damaged or lost due to a covered peril. The student was certainly using the property, and theft is a covered peril. The term ‘insured’ includes a resident relative, and courts have determined consistently that a dependent child away at school is still a resident of the named insured's household.

One limitation does apply: For personal property ‘usually located at’ an insured's ‘residence’ other than the residence premises, only 10% of the Coverage C limit (or $1,000, if greater) is available for losses. But in this case, 10% of the Coverage C limit is more than adequate for the loss of the computer. In addition, policy conditions require that theft losses be reported to the police. Although ‘police’ is not defined, notice to the campus police could suffice. That being done, this appears to be a clearly covered claim.

But before we leave this issue, let's examine how students away at school may be impacted by the ISO HO2000 program. Under HO 00 03 10 00the definition of ‘an insured’ has changed. It still includes the person named, resident family members and those under 21 in the insured’s care, but also contains a new item:

‘a student enrolled in school full time, as defined by the school, who was a resident of your household before moving out to attend school, provided the student is under the age of:

(1) 24 and your relative; or

(2) 21 and in your care or the care of a person described...above.’

This new definition presents several potential problems. First, the person must be a ‘full-time’ student. We polled five universities and all said 12 hours was a full-time load per their standards. So what happens if the student can't get into a class and gets only nine hours? What about a child staying on campus for summer school with only six hours? A literal reading of the form says he or she is no longer an insured.

Another problem is the age restriction. An agent called me just today saying his ‘kid’ was 23 and in grad school. Mom and dad support him 100%. The student will be away at school out of state for at least another year, so he will soon be above the age 24 cutoff. At that point, a literal reading of the policy makes him uninsured, necessitating his own HO4 and umbrella.

To remedy the problem ISO created in this new definition, they have introduced a new endorsement, HO 05 27 10 00 - Additional Insured - Student Away At School, for use when a student is not full time or is under the age limit. With the endorsement, you simply list the student and the address at which he/she resides. But the endorsement seems to me to be a fix to a phantom problem. Every scholarly insurance publication states college students are covered for 10% of the Coverage C limit and qualify as ‘an insured’ for all coverages, including liability. The student has liability because he or she is a family member and the place they are living—dorm, frat house, apartment, rental house—is a location not owned by an insured but where an insured is temporarily residing. I've never heard of any company having a problem with children away at college. As an agent for more than years and an instructor for the last four, I've seen numerous claims paid for college students and nary a one denied. 

I feel there is still coverage under the policy without the endorsement, even if the student is part-time and/or 24 years or older, because the child is still a family member and nothing has changed from the 1991 HO Program. I'll look for coverage under the definition of ‘family member’—the resident relative reference in the ‘insured’ definition. I don't think it matters that ISO has added a new definition of ‘insured,’ because the student fits the old definition. If ISO intended that a part-time student or 24-year-old not be covered, the definition could have said ‘residents of your household who are your relatives, but not your children away at college unless described in item 3.C. below.’

For a more detailed analysis of personal lines exposures for college students, check out these two articles in the Big “I” Virtual University (log-in required):

David Thompson is a full-time instructor for the Florida Association of Insurance Agents and one of the top personal lines technical experts in the country.

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