“Don’t Fumble These Coverages”

David Thompson, CPCU, AAI, APIDthompson@faia.com

TODAY’S SPECIAL GUESTFred Kelly

Special Thanks To…

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HOUSEKEEPING INFO

• Class times: 9:00 a.m. to 11:00 a.m. • One Break – 11 Minutes

– For the Gators, 10 + 1 = 11• CE form information• Restrooms• Local information

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DFS Rule # 69B-228.060(5)(c) Prohibits…

• Sleeping;• Reading of non-course books, newspapers, or other

non-course material;• Using a cellular phone or other electronic device

except to take class notes or to complete mathematical exercises;

• Leaving the class other than during authorized breaks.

• Shouting out “Go Noles” or “Gators Suck”Go Noles!

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Unauthorized Entity Issues

• Verify with the DFS:– www.fldfs.com/www.myfloridacfo.com– 1-800-342-2762

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Our Web Site

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200+ Articles

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Florida Insurance Research Library

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Subjects Today

• Kid’s Cars• Kids – Homeowners Coverage Issues• Scooters, Segways, Other “Moving Toys”• Spring Break – Renting Condos & Hotels• Alcohol!• Renting Motor Homes to Visit the Kid• Rental Cars

The Kickoff Question

• Can a kid who is 16 years of age legally sign an application for personal auto insurance?

• 627.406 Power to contract; purchase of insurance by or for minor.-- • (1) Any person of competent legal capacity may contract for insurance.

• (2) Any minor of the age of 15 years or more, as determined by the nearest birthday, may, notwithstanding his or her minority, contract for annuities or for insurance on his or her own life, body, health, property, liabilities, or other interests or on the person of another in whom the minor has an insurable interest. Such a minor shall, notwithstanding such minority, be deemed competent to exercise all rights and powers with respect to or under any contract for annuity or for insurance upon his or her own life, body, or health or any contract such minor effected on his or her own property, liabilities, or other interests or on the person of another, as might be exercised by a person of full legal age. Such a minor shall not, by reason of his or her minority, be entitled to rescind, avoid, or repudiate the contract, nor to rescind, avoid, or repudiate any exercise of a right or privilege thereunder, except that such a minor, not otherwise emancipated, shall not be bound by any unperformed agreement to pay, by promissory note or otherwise, any premium on any such annuity or insurance contract.

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Kid’s Cars“The insurance went up HOW

much?”

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Kid’s Cars• No matter how you slice the banana, it’s going to cost

you a ton to insure kids.• To quote a student:

– “When my customers complain about the cost to insure kids I tell them they should have considered that in the heat of passion 16 years earlier.”

Before we go any further, how will

this affect our insurance in 16

years?

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Kid’s Cars – The Cost

• Pre-kid, two cars, high limits:–$750

• Kid turns 16:–$1250

• Kid gets boring car:–$1850

• Spouse has wreck:–$2450

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Kid’s Cars – The Options

• No car– Good risk management

• Car in parent’s name, driven by kid– Generally the least expensive way. No coverage

gaps.• Car in kid’s name

– Disaster waiting to happen• QUESTION: Why???

A Word On Statutes

• What is FS 322.09?

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322.09(1)(a) The application of any person under the age of 18 years for a driver's license must be signed and verified before a person authorized to administer oaths by the father, mother, or guardian, or, if there is no parent or guardian, by another responsible adult who is willing to assume the obligation imposed under this chapter upon a person signing the application of a minor. This section does not apply to a person under the age of 18 years who is emancipated by marriage.

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322.09(2) Any negligence or willful misconduct of a minor under the age of 18 years when driving a motor vehicle upon a highway shall be imputed to the person who has signed the application of such minor for a permit or license, which person shall be jointly and severally liable with such minor for any damages caused by such negligence or willful misconduct.

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Kid’s Cars – No Car

• List the kid as a driver for rating and underwriting reasons.–QUESTION: How does listing the kid as a

driver affect coverage? • As long as the kid is a family member, he/she

has all policy coverages• Separate policy needed once the kid is no

longer a resident.• What is “resident?”

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In the Oregon case of Waller v. Auto-Owners Insurance Company the 17-year old daughter of an insured moved from Florida to Oregon to attend college.  She rented an apartment in her name and her father’s name, represented she lived in Oregon for the purposes of getting an in-state tuition rate, opened a bank account in her name, obtained utilities in her name, and obtained an Oregon driver’s license.  The daughter also maintained a bedroom in her parent’s home in another state and some of her possessions remained there.  She had never expressed intent not to return to her parent’s home after college, being unsure of her plans after graduation.  After being injured in an auto accident she claimed residency with her parents, seeking $1,475,000 in underinsured motorist coverage from her parent’s policy.  While the trial court sided with the insurance company in denying the claim, the appeals court ruled the trial court had erred in its decision and the case was sent back to the trial court.

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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.”

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In the Florida case of Progressive v. Wesley a child, Taylor Wesley, 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.  Arguments were presented on both sides showing how the child lived with one parent.  The court said, “Either determination of Taylor’s residency would be reasonable.  We must accept the interpretation which would favor the insured.”  Coverage was afforded under the policies of both parents. 

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A Warning on Residency

• You’re an insurance nerd, not a lawyer.• Don’t commit that someone is or is not a

family member.• Simply explain coverage for family members.

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Car in Parents’ Name

• List kid as driver – underwriting & rating• Least expensive choice• No coverage gaps• Kid’s wreck = parents’ problem

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Car in Kid’s Name

• Huge potential problem• What limits do parents often want to carry on

the kid’s car?–Minimum limits

• Why?–Cost–“My neighbor said…”–“A lawyer said…”–“A Gator said…”

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Car in Kid’s Name

• There is an advantage:–QUESTION: What is it?

•Car not titled to parents•Car loaned by kid to someone else, parents may not be as likely to be sued

• QUESTION: If this option is selected what recommendation is there to the parents?–Same limits on all policies

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Car in Kid’s Name -- Dangers

• Exclusion in parents’ policy voids coverage for them while kid (or siblings) drives the kid’s car.–Liability–Med-pay–Physical damage

• UM and PIP affected too• QUESTION: What is the UM Statute #?

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Kids Cars -- Underwriting

• QUESTION: Why won’t some companies write a kid on a separate policy, or why won’t they write the parents if the kid has his own car and insurance:

–Kid is covered under parents’ policy while driving parents’ autos and non-owned autos. Also has access to med-pay, UM, physical damage in non-owned autos.

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Kid’s Cars – Bottom Line

• If the car and policy are in the kid’s name, assume the parents’ policy is worthless.

• Parents depend on kid’s limits if they are sued.

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Kid’s Cars

This is Just a SummaryFor the “Rest of the Story…”

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Kid’s Cars –Questions?

KidsHomeowners Insurance Issues

QUESTION Who is This?

QUESTION

• Why is she holding the sign?

Question

• Is a college kid “an insured” under Mom/Dad’s HO-3?

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• 5. "Insured" means:• a. You and residents of your household who are: • (1) Your relatives; or • (2) Other persons under the age of 21 and in the care of

any person named above; • b. 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

in a.(1) above; or

Question

• Is the personal property of a student who is an insured covered:– In a dorm?– In a fraternity/sorority house?– In a rented apartment?– In a rented house?

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• 2. Limit For Property At Other Residences

• Our limit of liability for personal property usually located at an "insured's" residence, other than the "residence premises", is 10% of the limit of liability for Coverage C, or $1,000, whichever is greater.

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Question:

• Does Section II (Liability/med-pay) extend to a student who is an insured:– In a dorm?– In a frat/sorority house?– In a rented apartment?– In a rented house?

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• 6. "Insured location" means: • • d. Any part of a premises:• (1) Not owned by an "insured"; and • (2) Where an "insured" is

temporarily residing;

Question

• Unique personal property items taken by college kids to school that could present coverage issues?

Pool Party

Question

• Jack’s roommate at college in the dorm is Ralph.

• Jack is using Ralph’s $1,300 laptop (walking across pool deck, laptop in hand) and drops it in the pool.

• Jack’s parents have an HO-5 policy.• With $500 deductible, does the policy respond

to this loss?

Analysis

• Section I: – Property used by an insured, subject to

deductible• Section II:

– Damage to property of others• No deductible

Question

• Jack’s parents have HO-3• Jack at pool• Jack has his laptop, iPhone & camera on chair

by pool• Jack becomes a “falling object” and does a

“cannon ball” off diving board• His belongings are soaked and ruined• Coverage?

Question

• Jack is a college student.• Parents have HO-3.• Jack has a waterbed. • Bed bursts, floods his apartment, and

damages the apartment below.• Any coverage?

Exclusion

• "Property damage" to property rented to, occupied or used by or in the care of an "insured". This exclusion does not apply to "property damage" caused by fire, smoke or explosion;

Section II Additional Coverages

• C. Damage To Property Of Others• 1. We will pay, at replacement cost, up to

$1,000 per "occurrence" for "property damage" to property of others caused by an "insured".

Question

• Jack rents this in Tallahassee:– He drives it into a lake– Any HO-3 coverage?

• C. Coverage C – Personal Property• 1. Covered Property• We cover personal property owned or used by

an "insured" while it is anywhere in the world.

• However….

• 4. Property Not Covered• c. "Motor vehicles".•• (2) We do cover "motor vehicles" not required to

be registered for use on public roads or property which are:

• (a) Used solely to service an "insured's" residence; or

• (b) Designed to assist the handicapped;»However….

Section II• C. Damage To Property Of Others• 1.We will pay, at replacement cost, up to $1,000 per "occurrence" for "property

damage" to property of others caused by an "insured". • 2.We will not pay for "property damage": • • (3) The ownership, maintenance, occupancy, operation, use, loading or unloading of

aircraft, hovercraft, watercraft or "motor vehicles". •

This exclusion e.(3) does not apply to a "motor vehicle" that:• (a) Is designed for recreational use off public roads; • (b) Is not owned by an "insured"; and • (c) At the time of the "occurrence", is not required by law, or regulation issued by a

government agency, to have been registered for it to be used on public roads or property.•  

Same Analysis For…

Question

• Jack rents this in Tallahassee:– He nails a pedestrian at the FSU/UF game in the parking lot.

Section II Coverage?

Hotel Room Rentals

Before

After

Question

• Kids knock a keg of beer over, ruins carpet & couch.

• Any HO coverage under parents policy?

Exclusion

• "Property damage" to property rented to, occupied or used by or in the care of an "insured". This exclusion does not apply to "property damage" caused by fire, smoke or explosion;

• However…

Section II Additional Coverages

• C. Damage To Property Of Others• 1. We will pay, at replacement cost, up to

$1,000 per "occurrence" for "property damage" to property of others caused by an "insured".

Question (Next slide)

Question

• Cancun, Mexico• Damage to rental car, hit pole. • Does the PAP respond in U.S. dollars or

Mexican pesos?

Another Question

• Cancun, spring break• Theft• $500 I-Phone, $500 Camera, $500 of beer,

$1,000 in jewelry stolen from hotel room. $500 HO-3 deductible.

• You are the adjuster…

Time To Go See The kid

You Rent This

16,000 lb. GVW

Question

• Does your PAP liability protect you when it’s a pleasure rental going to see your kid at college?

Analysis

Part A - Liability

• B. "Insured" as used in this Part means: • 1. You or any "family member" for the

ownership, maintenance or use of any auto or "trailer".

The 10,000 lb Wording

• K. "Newly acquired auto":• 1. "Newly acquired auto" means any of

the following types of vehicles you become the owner of during the policy period:

• a. A private passenger auto; or• b. A pickup or van, for which no other

insurance policy provides coverage, that:• (1) Has a Gross Vehicle Weight Rating of

10,000 lbs. or less

Question

• Does your PAP med-pay protect you when it’s a pleasure rental going to see your kid at college?

Question

• Does your PIP protect you when it’s a pleasure rental going to see your kid at college:– In Tallahassee?– In Atlanta?

Question

• Does your UM protect you when it’s a pleasure rental going to see your kid at college:– In Tallahassee?– In Atlanta?– If it’s non-stacked?

Question

• Does your physical damage protect you if you wreck the RV when it’s a pleasure rental going to see your kid at college?

Analysis

Part D Wording

• INSURING AGREEMENT • A. We will pay for direct and

accidental loss to "your covered auto" or any "non-owned auto", including their equipment, minus any applicable deductible shown in the Declarations.

• C. "Non-owned auto" means: • 1. Any private passenger auto, pickup, van or "trailer" not

owned by or furnished or available for the regular use of you or any "family member" while in the custody of or being operated by you or any "family member"; or

• 2. Any auto or "trailer" you do not own while used as a temporary substitute for "your covered auto" which is out of normal use because of its:

• a. Breakdown; • b. Repair; • c. Servicing;

d. Loss; or • e. Destruction.

Question

• How could the RV be covered for physical damage?

Questions?

Rental Cars

Question

• Rental of Chevy Impala to go see kid.• PAP has two cars, “full coverage”• Does liability coverage apply?

PAP - Liability

• B. "Insured" as used in this Part means: • 1. You or any "family member" for the

ownership, maintenance or use of any auto or "trailer".

Question

• Rental of Chevy Impala to go see kid.• PAP has two cars, “full coverage”• Does med-pay coverage apply?

PAP – Med-Pay

• B. "Insured" as used in this Part means: • 1. You or any "family member": • a. While "occupying"; or • b. As a pedestrian when struck by; • a motor vehicle designed for use mainly on

public roads or a trailer of any type. • 2. Any other person while "occupying"

"your covered auto".

Question

• Rental of Chevy Impala to go see kid.• PAP has two cars, “full coverage”• Does PIP coverage apply?

– For accident in Gainesville, FL?– For accident in Auburn, Alabama?

Question

• Rental of Chevy Impala to go see kid.• PAP has two cars, 250/500 UM• Does UM apply?

– If “stacked”– If “non-stacked”

Question

• Rental of Chevy Impala to go see kid.• PAP has two cars, one has comp/collision• Does PAP cover damage to rental car?

Part D

• INSURING AGREEMENT • A. We will pay for direct and

accidental loss to "your covered auto" or any "non-owned auto", including their equipment, minus any applicable deductible shown in the Declarations.

Non-Owned Auto

• C. "Non-owned auto" means: • 1. Any private passenger auto,

pickup, van or "trailer" not owned by or furnished or available for the regular use of you or any "family member" while in the custody of or being operated by you or any "family member";

Bonus Part D Question

• Bill backs his rental car into his own car• 100/300/100 liability• Comp/collision deductible: $500• $2,000 damage to each car• You are the adjuster….

Part D

• We will pay for direct and accidental loss to "your covered auto" or any "non-owned auto", including their equipment, minus any applicable deductible shown in the Declarations. If loss to more than one "your covered auto" or "non-owned auto" results from the same "collision", only the highest applicable deductible will apply.

Part D

• List four reasons to buy the Loss Damage Waiver at $29.99 per day.

Reasons To Buy LDW

• PAP deductible applies• PAP pays ACV

– Contract may say “full value”– Diminished value not covered

• Loss of use above $20 a day not covered• CLUE hit, future surcharges possible• “Hassle factor”

Death Valley Trip

Alcohol

Question

• Bill & Sharon tailgate at FSU, run out of beer• They give Sam (friend of their son, age 21)

$100 to go buy more beer. Sam has been served four beers by Bill/Sharon

• Sam, in his car, causes BI/PD• PAP Coverage for Sam, Bill, & Sharon?• HO coverage for Bill & Sharon?

PAP Analysis

• Sam’s PAP protects him, Bill, Sharon. Primary.– B. "Insured" as used in this Part means:

• 1. You or any "family member" for the ownership, maintenance or use of any auto or "trailer".

• 2. Any person using "your covered auto". • 3. For "your covered auto", any person or

organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part.

PAP Analysis

• Bill & Sharon’s PAP protects them, excess– B. "Insured" as used in this Part means:

• 1. You or any "family member" for the ownership, maintenance or use of any auto or "trailer".

• Note, it does not say “use by you.”• Some non-ISO forms say, “We cover you for

the use by you…”

HO Analysis for Bill/Sharon

• HO 91 vs HO-2000

HO-91

• Exclusion:• f. Arising out of: • (1) The ownership, maintenance, use,

loading or unloading of motor vehicles or all other motorized land conveyances, including trailers, owned or operated by or rented or loaned to an "insured";

HO-2000

• 1. "Aircraft Liability", "Hovercraft Liability", "Motor Vehicle Liability" and "Watercraft Liability", subject to the provisions in b. below, mean the following:

• a. Liability for "bodily injury" or "property damage" arising out of the:

• (1) Ownership of such vehicle or craft by an "insured";

• (2) Maintenance, occupancy, operation, use, loading or unloading of such vehicle or craft by any person;

Enjoy the Game!

“Don’t Fumble These Coverages”

David Thompson, CPCU, AAI, APIDthompson@faia.com