Author: Mike Edwards
An HO client plans on renting two bedrooms in his house to college students. He is a “grandfatherly type” gentleman who lost his wife a year ago and probably would enjoy having the company in his home. And as a retired college professor, he would relish being around college students again. How will this impact his property and liability coverages? Also, would the college students have any coverages under his policy?
"One of my Homeowners clients plans on renting two bedrooms in his house to college students. He is a 'grandfatherly type' gentleman who lost his wife a year ago, and probably would enjoy having the company in his home. And as a retired college professor, he would relish being around college students again. How will this impact his property and liability coverages? Also, would the college students have any coverages under his policy?"
As to coverage issues you raised, let's assume the following: Jack is the owner of the home and has an HO-3 naming him as the Named Insured. Jill is one of the college students, who is not related to Jack. Here are the important issues.
1. Jack's Coverage C for Personal Property does not apply to Jill's personal property. While his Coverage C applies both to his personal property worldwide, as well as personal property of his guests, it does not apply to Jill’s personal property. he standard Homeowners Policy excludes “property of roomers, boarders, and other tenants,” unless they are relatives of the insured. (See the Property Not Covered provision under Coverage C.)
2. Jack is protected for his personal liability (Coverage E) under his Section II, should Jill bring a suit against him. While the Homeowners Policy excludes most rental exposures under the “Business” exclusion, there is an exception for rental of a part of the residence, so long as there are no more that two roomers or boarders.
3. Jill is NOT an "insured" under Jack's Coverage E - Liability, since she is not a resident relative. However, if she is legally responsible for Jack's animals or watercraft, she is an "insured" under those limited circumstances. For example, is she is waking Jack's dog, Jill is an "insured" in Jack's Coverage E should she be sued by the person bitten by the dog. The definition of "Insured" for Section II includes this small extension of coverage for those who otherwise would not be “insureds.”
4. Likewise, under this definition of "Insured" for Section II, Jill is also an "insured" for any vehicle covered by Jack's policy. For example, if she is operating his owned ATV on his premises, and injures a third party, Jill is an "insured."
Here is the policy wording for situations 3 and 4 above:
Definitions. ”Insured" means:
Under Section II:
(1) With respect to animals or watercraft to which
this policy applies, any person or organization
legally responsible for these animals or
watercraft which are owned by you or any person
included in a. or b. above. "Insured" does not
mean a person or organization using or having
custody of these animals or watercraft in the
course of any "business" or without consent of
the owner; or
(2) With respect to a "motor vehicle" to which this
(a) Persons while engaged in your employ or
that of any person included in a. or b.
(b) Other persons using the vehicle on an
"insured location" with your consent.
5. Now for more bad news. While Jill is an "insured" under Jack's HO policy as described above in scenarios 3 and 4 above, she would not be able to recover for her own injuries in either of these circumstances (walking the dog or using the ATV) under Jack's Coverage E – Liability, due to the Section II Exclusion for "Bodily injury" to you or an "insured" within the meaning of part a. or b. of "insured" as defined."
Note, however, that if Jill was injured by the dog while it was not in her custody, or by the ATV while she was not using it, Jack’s Section II – Liability would protect him in a suit brought by Jill.
6. More bad news for Jill. She would not be eligible to receive any Section II Medical Payments (Coverage F) under Jack's HO. For example, if she slipped on poorly maintained stairs or steps and was injured, Jack's Coverage F excludes the following: "To any person, other than a "residence employee" of an "insured," regularly residing on any part of the "insured location.”
7. Jill needs an HO-4 and health insurance.
8. If Jack gets a third roomer or boarder, he will probably need a commercial liability policy, so be sure and point this out to him (in writing). In addition, his Homeowners insurer might nonrenew, due to the increased liability exposure.