“Don’t Fumble
These Coverages”
David Thompson, CPCU, AAI, API
Dthompson@faia.com
TODAY’S SPECIAL GUEST
Fred Kelly
Special Thanks To…
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DFS Rule # 69B-228.060(5)(c) Prohibits…
• Sleeping;
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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”
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– 1-800-342-2762
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200+ Articles
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Subjects Today
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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.
Kid’s Cars
“The insurance
went up HOW
much?”
29
Kid’s Cars
• No matter how you slice the banana, it’s going to cost
you a ton to insure kids.
Before we go any
• To quote a student:
further, how will
this affect our
– “When my customers complain
insurance in 16
years?
about the cost to insure kids
I tell them they should
have considered that in
the heat of passion
16 years earlier.”
30
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
31
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???
32
A Word On Statutes
• What is FS 322.09?
33
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
34
by marriage.
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.
35
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.
38
In the Ohio case of Prudential v. Koby a 32year 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.
41
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 nonowned autos. Also has access to medpay, UM, physical damage in nonowned 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 Summary
For the “Rest of the Story…”
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Kid’s Cars –Questions?
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Kids
Homeowners 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?
•
• 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 "nonowned 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 "nonowned 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, API
Dthompson@faia.com