ABA Insurance Coverage Litigation Committee Annual Conference
Tucson, Arizona
March 1-4, 2017
THE SHARING ECONOMY
AND OTHER HOT TOPICS
IN PERSONAL LINES
POLICIES
Authors:
Seth M. Friedman1
Eric Choi2
Eric Gold3
1
Seth Friedman is a partner in the Insurance Coverage practice group of Lewis Brisbois Bisgaard and Smith, LLP in
Atlanta, Georgia. He can be reached at [email protected] or (404) 991-2184.
2
Eric Choi is an attorney in the Litigation practice group of Neal Gerber Eisenberg in Chicago, IL. He can be
reached at [email protected] or (312) 827-1053.
3
Eric Gold is an attorney in the Washington, D.C., office of Pillsbury Winthrop Shaw Pittman LLP. He can be
reached at [email protected] or (202) 663-8476.
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I.
Introduction
Almost everyone has either a homeowners insurance policy, automobile insurance policy
or both. However, most people are not familiar with the potential scope of coverage under those
policies and may mistakenly believe that they are covered for certain activities when in fact, they
are not. With the rise of home based businesses and the sharing economy with the likes of AirBnB,
Uber, Lyft, etc., new coverage issues are arising by the day under the typical homeowners and/or
auto policies. This paper will discuss those coverage issues as well as some of the more typical
issues that arise under a homeowners and/or auto policy.
II.
Who is an insured?
One of the biggest issues which arises under homeowners and auto policies is who qualifies
as an insured, other than the named insured listed in the policies. Virtually all standard
homeowners and auto policies provide that relatives who are residents of the named insured’s
household qualify as “insureds” for purposes of liability coverage. For auto policies, this can also
extend to the uninsured/underinsured motorist coverage.
The typical language in a homeowners liability insuring agreement provides in relevant
part4:
We will pay all sums, up to our limits of liability shown in the Declarations Page
for this coverage, arising out of any one loss for which an “insured” becomes
legally obligated to pay as damages because of “bodily injury” or “property
damage,” caused by an “occurrence” covered by this policy.
The typical language in an auto liability insuring agreement provides in relevant part:
We will pay damages for “bodily injury” or “property damage” for which any
“insured” becomes legally responsible because of an auto accident.
A typical definition of “insured” for the liability coverage in both auto and homeowners
4
All of the policy provisions cited in this paper are sample language and policy provisions in any particular policy may vary.
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policies provide:
“Insured” means you and the following residents of your household:
a. your relatives;
b. any other person under the age of 21 who is in the care of any person
named above.
Another typical definition is:
“Insured” as used in the Part means: 1. You or any “family member” for the
ownership, maintenance or use of any auto or “trailer”…
****
The term “family member” is defined as: a person related to you by blood, marriage
or adoption who is a resident of your household. This includes a ward or foster
child.
One of the most litigated phrases in the definition of “insured” is what constitutes “a resident
of your household.” Typical situations that arise involve adult children or other relatives who do
not solely reside in the named insured’s home. The West Virginia Supreme Court in Farmers Mut.
Ins. Co. v. Tucker, 213 W. Va. 16, 21-24, 576 S.E.2d 261, 266-69 (2002), provided an overview of
the challenges courts face in interpreting this policy provision:
Courts considering whether a person has met the residence requirements of an
insurance policy have usually concluded that the question is one of fact, not law.
As one court stated:
. . . "to reside" and its corresponding noun residence are chameleon-like
expressions, which take their color of meaning from the context in which they are
found. The word "residence" has been described as being "like a slippery eel, and
the definition which fits one situation will wriggle out of our hands when used in
another context or in a different sense."
Amco Ins. Co. v. Norton, 243 Neb. 444, 447, 500 N.W.2d 542, 545 (1993) (citations
omitted).
"The word 'resident' certainly may include more than one place." Aetna Cas. & Sur.
Co. v. Shambaugh, 747 F. Supp. 1203, 1205 (N.D.W.Va. 1990). This conclusion is
apparent from the definition of "residence" contained in Black's Law Dictionary,
which states that residence must be distinguished from domicile:
As "domicile" and "residence" are usually in the same place, they are frequently
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used as if they had the same meaning, but they are not identical terms, for a person
may have two places of residence, as in the city and country, but only one domicile.
Residence means living in a particular locality, but domicile means living in that
locality with intent to make it a fixed and permanent home.
Black's Law Dictionary 1309 (6th Ed. 1990). This Court has acknowledged the
flexible, fact-intensive nature of the word "residence," and held that while a person
may have only one true domicile, he or she may have more than one "residence."
As we stated, in Lotz v. Atamaniuk, 172 W.Va. 116, 118, 304 S.E.2d 20, 23 (1983),
that "domicile and residence are not synonymous. A man may have several
residences, but only one domicile."
Similarly, courts analyzing the word "household" in insurance policies have usually
concluded that the question of whether a household exists is one of fact, not law.
One court found the term "household" to be "a chameleon like word," Cobb v. State
Security Ins. Co., 576 S.W.2d 726, 738 (Mo. 1979), while another found that the
"terms have no absolute meaning. Their meaning may vary according to the
circumstances." Cal-Farm Ins. Co. v. Boisseranc, 151 Cal. App. 2d 775, 781, 312
P.2d 401, 404 (Cal.App. 1957). A New Jersey court stated:
Household is not a word of art. Its meaning is not confined within certain commonly
known and universally accepted limits. True, it is frequently used to designate
persons related by marriage or blood, who dwell together as a family under a single
roof. . . . But it has been said also that members of a family need not in all cases
reside under a common roof in order to be deemed a part of the household.
Mazzilli v. Acc. & Cas. Ins. Co. of Winterthur, Switzerland, 35 N.J. 1, 8, 170 A.2d
800, 804 (1961).
Combining these two terms, the phrase "resident of your household" has been found
by most courts to have a variety of meanings in an insurance policy, depending
upon the facts to which the phrase is to be applied. See, e.g., Rathbun v. Aetna Cas.
& Sur. Co., 144 Conn. 165, 168, 128 A.2d 327, 329 (1956) (the meaning "depends
on the circumstances in which it is used as well as on the nature of the matter in
which its interpretation is required.") "The phrase 'resident of the household' has no
fixed meaning. The reasonable interpretation of the phrase requires a case-specific
analysis of intent, physical presence, and permanency of abode." Farmers
Automobile Ins. Assoc. v. Williams, 321 Ill. App. 3d 310, 254 Ill. Dec. 231, 234,
746 N.E.2d 1279, 1282 (2001) (citations omitted). Courts have often held that the
phrase "cannot be so limited and strait-jacketed as always to mean, regardless of
facts and circumstances, a collective body of persons who live in one house under
one common head or manager." Johnson v. State Farm Mut. Auto. Ins. Co., 252
F.2d 158, 161 (8th Cir. 1958). It is true that the word "household" is frequently used
to designate persons related by blood or marriage dwelling together as a family
under a single roof. But numerous cases have held that members of a family need
not actually reside under a common roof in order to be deemed part of the same
household.
For example, in Mazzilli v. Acc. & Cas. Ins. Co. of Winterthur, Switzerland, 35 N.J.
1, 170 A.2d 800 (1961) the insured owned a piece of property on which two houses
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were located. The insured lived in one house, which was covered by a homeowner's
policy, and his wife - from whom he was separated - and son lived in an adjacent
cottage on the property. When the wife sought indemnification under the
homeowner's policy for a judgment against her in a tort action, the court held that
the wife was a member of the insured's "household" because the facts supported the
insured's belief that the premises "was all one place where the entire family was
living." 35 N.J. at 15, 170 A.2d at 808.
Numerous other cases have found a child of divorced or separated parents - even
though living primarily under the roof of only one parent - was a "resident" of both
parents' "households" for purposes of insurance coverage. Courts note that children
often leave belongings at both homes, have a room or area of their "own" in each
home, and until the child expresses another intent, generally hold that the child is a
resident of both homes. See, e.g., Simmons v. Insurance Co. of North America, 17
P.3d 56 (Alaska 2001); Aetna Cas. & Sur. Co. v. Shambaugh, 747 F. Supp. 1203
(N.D.W.Va. 1990); Mutual Service Cas. Ins. Co. v. Olson, 402 N.W.2d 621
(Minn.App. 1987); Alava v. Allstate Ins. Co., 497 So. 2d 1286 (Fla.App. 1986);
Cal-Farm Ins. Co. v. Boisseranc, 151 Cal. App. 2d 775, 312 P.2d 401 (1957). See
also, Annotation, Who is "Resident" or "Member" of Same "Household" or
"Family" as Named Insureds, Within Liability Insurance Provision Defining
Additional Insureds, 93 A.L.R.3d 420 (1979).
Another common class of cases where courts usually find coverage involves
children who have temporarily left their parents' insured house to pursue an
education, a job, extensive medical treatment, or to join the armed forces. These
individuals often establish a residence a substantial distance from the insured house,
and maintain that residence for an extended period. When the facts establish that
the child continues to call and treat their parents' house as "home," leaving their
belongings there and returning when possible, courts usually find that the child is
an insured "resident" of their parents' "household." See, e.g., Atlanta Cas. Co. v.
Powell, 83 F. Supp. 2d 749 (N.D.Miss. 1999) (minor child of divorced named
insured resided in insured's household at time of occurrence, even though child was
undergoing residential chemical dependency treatment, and even though named
insured expressed an intent to send child to live with ex-spouse upon completion of
treatment). Wood v. Mutual Service Casualty Ins. Co., 415 N.W.2d 748 (Minn.App.
1987) (son was a resident of his parents' household and covered under automobile
policy, even though son [***20] joined Army at age 17); Row v. United Services
Automobile Assoc., 474 So. 2d 348 (Fla.App. 1985) (son with mental illness lived
alone in apartment in complex owned by insured father, but was a member of
father's household because he paid no rent or security deposit, signed no lease, had
a key to father's apartment, socialized, ate, cooked, did laundry and bathed in
father's apartment, and received money from father); Crossett v. St. Louis Fire &
Marine Ins. Co., 289 Ala. 598, 269 So. 2d 869 (1972) (college student living in a
dormitory was a resident of his parents' household, because he kept a room in the
family home, came home on breaks, stored personal belongings there, listed his
parents' address on his driver's license, and registered for the draft near his parents'
home); State Farm Mut. Auto Ins. Co. v. Elkins, 52 Cal. App. 3d 534, 125 Cal.Rptr.
139 (1975) (nineteen-year-old daughter lived in a separate apartment as a temporary
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experiment to test her independence; she still maintained a bedroom in the family
house; saw her parents daily; ran errands for her parents and used the family car;
and was therefore a resident of her [***21] father's household). See also,
Annotation, Who is "Resident" or "Member" of Same "Household" or "Family" as
Named Insureds, Within Liability Insurance Provision Defining Additional
Insureds, 93 A.L.R.3d 420 (1979).
"In determining whether there is a common household, our courts often consider
whether the insured and the relative seeking coverage share a substantially
integrated family relationship." Gibson v. Callaghan, 158 N.J. 662, 673, 730 A.2d
1278, 1284 (1999). According to Black's Law Dictionary 740 (6th Ed. 1990), a
household is a "family living together," and the "term 'household' is generally
synonymous with 'family' for insurance purposes, and includes those who dwell
together as a family under the same roof" (emphasis added).
Dwelling together under the same roof is only one of the considerations in the
analysis for determining whether a person is a resident of a household or family,
and courts have repeatedly held that a person may prove that he or she is a member
of a household or family even though the person does not live under the same roof
as the other members…
…We therefore hold that, in a homeowners' insurance policy that does not
otherwise define the phrase "resident of your household," the phrase means a person
who dwells - though not necessarily under a common roof - with other individuals
who are named insureds in a manner and for a sufficient length of time so that they
could be considered to be a family living together. The factors to be considered in
determining whether that standard has been met include, but are not limited to, the
intent of the parties, the formality of the relationship between the person in question
and the other members of the named insureds' household, the permanence or
transient nature of that person's residence therein, the absence or existence of
another place of lodging for that person, and the age and self-sufficiency of that
person.
Most states have set out various standards they consider when determining whether a
person qualifies as a “resident” of the named insured’s household. For example, in Wisconsin
courts have held that the "controlling test of whether persons are members of a household at a
particular time is not solely whether they are then residing together under one roof." Pamperin v.
Milwaukee Mut. Ins. Co., 55 Wis.2d 27, 36, 197 N.W.2d 783, 788 (1972). Rather, the Court stated
that an examination should be made of whether the relative and the named insured are:
(1) Living under the same roof; (2) in a close, intimate and informal relationship;
and (3) where the intended duration is likely to be substantial, where it is consistent
with the informality of the relationship, and from which it is reasonable to conclude
that the parties would consider the relationship ". . . in contracting about such
4837-6656-2880.1
matters as insurance or in their conduct in reliance thereon."
Minnesota considers other factors in addition to those considered in Wisconsin, such as:
the age of the person; whether the person establishes a separate residence; the self-sufficiency of
the person; the frequency and duration of the person's stay in the family home; and the person's
expressed intent to return to the family home. Mutual Service Cas. Ins. Co. v. Olson, 402 N.W.2d
621 (Minn.App. 1987); Wood v. Mutual Service Cas. Ins. Co., 415 N.W.2d 748 (Minn.App. 1987).
In Washington, courts look at the expressed intent of the person in question, the formality or
informality of the relationship between that person and the members of the household at issue, the
relative propinquity of the dwelling units, and existence of another place of lodging for the person
in question. General Motors Acceptance Corp. v. Grange Ins. Ass'n, 38 Wn. App. 6, 684 P.2d 744
(1984); Pierce v. Aetna Cas. and Sur. Co., 29 Wn. App. 32, 627 P.2d 152 (1981).
In Colorado, courts consider the subjective or declared intent of the person; the formality
or informality of the relationship between the person and the members of the household; the
existence of another place of lodging by the alleged resident; and the relative permanence or
transient nature of the individual's residence in the insured's home. Iowa Nat'l Mutual Ins. v.
Boatright, 33 Colo.App. 124, 516 P.2d 439 (1973). Arizona considers similar factors, such as the
living arrangements of the person prior to the accident; the person's absence or presence from the
insured's home on the date of the occurrence; the reasons or circumstances relating to the absence
or presence; and the individual's subjective or declared intent with respect to a place of residence.
State Farm Mut. Auto. Ins. Co. v. Johnson, 151 Ariz. 591, 729 P.2d 945 (Ariz.App. 1986); MidCentury Ins. Co. v. Duzykowski, 131 Ariz. 428, 641 P.2d 1272 (1982).
However, Georgia courts have consistently held that the term “household” means “a
domestic establishment including the members of a family and others who live under the same
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roof” and as a “family living together.” McCollough v. Reyes, 651 S.E.2d 810, 814-15 (Ga. Ct.
App. 2007) (quoting State Farm Fire & Cas. Co. v. Goodman, 576 S.E.2d 49 (2002); Keene v.
State Farm Mut. Auto. Ins. Co., 152 S.E.2d 577 (Ga. Ct. App. 1966)). Likewise, Georgia courts
have defined a “family” in this context as “a collective body of persons who live in one house or
within the same curtilage and under one head or management.” McCollough, 651 S.E.2d at 815
(quoting Keene, 152 S.E.2d 577).
Determining whether someone is a resident of the household is very fact intensive, and will
generally require some detailed information from the purported insured. As a practical matter it is
very important to get a handle on the applicable jurisdiction’s laws to appropriately tailor any
discovery requests or information requests. Often times it will be necessary to ask for utility bills,
cell phone bills, voting records, or even records of where mail was sent. Finally, many homeowners
and auto policies will require insureds to sit for examinations under oath, upon request. This can
be a valuable tool for insurers to use as the insurer’s ability to obtain sworn testimony may be
helpful in avoiding unnecessary declaratory judgment actions.
III.
Introduction to the Sharing Economy
The sharing economy has experienced explosive growth over the last decade. Companies
like Uber and Airbnb have led the charge, popularizing electronic peer-to-peer commercial
exchanges (e.g., the Uber app) that allow everyday people to seamlessly “share” their excess goods
or services, whether it’s cars, homes, or expertise. In recent years, the concept of the sharing
economy has gained tremendous momentum as consumers have become more willing to share and
monetize their under-utilized assets in search of additional sources of income. According to
research by Nielsen Media, 68% of global online consumers are willing to share or rent their
personal items in share communities for payment and 66% are likely to use the products and
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services from others in a share community.5 Between 2012 and 2015, an estimated 10.3 million
Americans earned income through web-based platforms like Uber and Airbnb.6
Companies associated with the peer-to-peer sharing model, such as Uber and Airbnb, have
grown at staggering rates. Uber has been valued at close to $68 billion7, making it the most
valuable private company in the world.8 Airbnb has been valued at $30 billion, making it the
second most valuable private company in the US and third most valuable in the world.9
Other ride- and home-sharing companies, such as Lyft and VRBO, respectively, are
carving out their own piece of the marketplace, as are other peer-to-peer companies, including
those that allow you to rent out your car (Turo), your bicycle or snowboard (Spinlister), household
goods (Neighbor-Goods), and even your WiFi (Fon), to name a few.
The nature of the sharing economy requires “micropreneurs” to frequently transition their
assets between personal and commercial use, blurring the line between personal and commercial
activity, often the difference-maker to personal lines insurers deciding whether to provide
coverage. In this fast-moving environment, micropreneurs and the companies that leverage them,
as well as insurers and policymakers must rapidly adjust to meet the evolving insurance demands.
A. Increased Risks Associated With The Sharing Economy
Increased sharing means increased levels of uncertainty and risk.
1. Ridesharing
Ridesharing companies—also known as Transportation Network Companies (“TNCs”)—
5
http://www.nielsen.com/apac/en/press-room/2014/global-consumers-embrace-the-share-economy.html
6
http://www.insurancejournal.com/news/national/2016/02/22/399306.htm
7
http://www.wsj.com/articles/uber-raises-3-5-billion-from-saudi-fund-1464816529
8
http://www.businessinsider.com/most-valuable-us-startups-2016-12/
9
http://www.businessinsider.com/most-valuable-us-startups-2016-12/
4837-6656-2880.1
provide the connection infrastructure, payment processing, and branding that TNC drivers rely on
to interact with their passengers. The increased risk associated with TNC drivers arises principally
from their increased time on the road, often in unfamiliar locations and neighborhoods, giving rise
to a proportional increase in liability and collision risk.10 TNC drivers are subject to much of the
same risks and require the same kinds of associated coverage as ordinary drivers, including: (1)
liability to third-parties, including the passenger; (2) medical payment coverage for injury to the
driver, family members, or passengers; (3) uninsured/underinsured motorist coverage when an
uninsured or underinsured motorist (other than the driver) causes a loss; and (4) collision/damage
to the driver’s vehicle.
2. Homesharing
Homesharing companies also provide the connection infrastructure, payment processing
(sometimes), and branding that homeowners (aka “hosts”) rely on to attract and interact with their
guests. The increased risk associated with homesharing arises, not necessarily from increased use
of the property, but from having guests, who are inherently unpredictable, occupy and use the
property, often without the owner’s supervision.11 Guests may be more prone to accidents, or
perhaps more careless with property that is not their own, or intentionally mischievous. As a result,
hosts sharing their homes are subject to increased first-party and/or third-party losses. For
example, a host may incur accidental property damage to his home, or be the victim of theft or
vandalism (first-party loss). Alternatively, a host may be liable for bodily injury or property
damage to the guest or some other third-party arising from the sharing of his home (third-party
loss, i.e., liability coverage).
10
http://www.casact.org/pubs/forum/15sumforum/Oryzak-Verma.pdf
11
http://www.casact.org/pubs/forum/15sumforum/Oryzak-Verma.pdf
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B. Personal Lines Insurance – What Does It Cover?
Personal lines policies generally will not pay claims if the asset was being used for
commercial purposes at the time a claim is incurred.
1. Ridesharing
Auto policies typically exclude claims arising from the use of the car for commercial
activities. For example, the ISO personal auto policy excludes liability coverage for the insured’s
“liability arising out of the ownership or operation, of a vehicle while it is being used as a public
or livery conveyance.”12 Other common livery exclusions exclude damages arising out of the use
of a vehicle while it is being used: (1) to carry persons for a charge; (2) for commercial purposes;
(3) for compensation; (4) for a fee; or (5) for hire.13
While most personal auto policies will exclude coverage for use of a vehicle as a public taxi
or dedicated delivery service, it is less clear whether such policies will exclude the occasional or
part-time use of the vehicle for delivery (e.g., pizza delivery in the evenings) and when, if
occasionally used as a taxi (e.g., Uber), the vehicle technically is being used for commercial
purposes. As to this latter point, a TNC ride commonly is described as consisting of three phases,
each of which may have different insurance implications:

Phase 1. The driver has opened the TNC app and is awaiting a ride request.

Phase 2. The driver has accepted a ride request and is en route to pick up the passenger.

Phase 3. The driver has picked up the passenger and is transporting the passenger.
Absent a special endorsement addressing business or commercial use, a personal lines insurer
likely will argue that in all phases, even Phase 1 (when the TNC app is merely activated), the
12
http://www.naic.org/documents/committees_c_sharing_econ_wg_exposure_adopted_tnc_white_paper_150331.pdf
13
http://www.naic.org/documents/committees_c_sharing_econ_wg_exposure_adopted_tnc_white_paper_150331.pdf
4837-6656-2880.1
vehicle is being used for commercial purposes and deny coverage for losses occurring during those
phases.
Insurers are taking steps to fill these gaps and the options they offer vary dramatically between
states. For instance, Erie provides business use coverage for TNC drivers for between $9 and $15
extra per month. Geico does the same for an estimated $25 extra per month with restrictions on
annual mileage. Farmers Insurance covers only Period 1 at an estimated 8% increase in rates.14
2. Homesharing
Similarly, homeowners policies typically exclude claims arising from the rental of any part
of the insured premises or for losses to “business property.” For example, the ISO homeowners
policy excludes coverage for property of “roomers, boarders and other tenants” (as opposed to
“guests”), as well as the insured’s personal property from that part of a residence that is “regularly
rented” to others.15 It also does not provide liability coverage for a business, which generally
includes rentals conducted from the insured location, with exceptions for occasional rentals, like a
one-time stay for a Super Bowl weekend.16 It will, however, provide some limited coverage for
certain “landlord furnishings,” i.e., up to $2,500 for appliances, carpeting, and other household
furnishings, if rental does occur on a “regular” basis.
In particular, ISO form HO 00 03 05 11 provides as follows:
SECTION I – PROPERTY COVERAGES
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. After a loss and at your
request, we will cover personal property owned by:
a. Others while the property is on the part of the
“residence premises” occupied by an “insured”; or
b. A guest or a “residence employee”, while the
property is in any residence occupied by an
“insured”.
4. Property Not Covered
Covers the property of guests while the property is
located in the residence of the insured. “Guest” is not
defined, but is distinct from…
14
For ridesharing insurance coverage by state and insurance company, visit: http://www.insurance.com/auto-insurance/coverage/insurancerideshare-uber-lyft.html
15
http://www.naic.org/documents/committees_c_sharing_econ_wg_exposure_adopted_tnc_white_paper_150331.pdf
16
http://www.naic.org/documents/committees_c_sharing_econ_wg_exposure_adopted_tnc_white_paper_150331.pdf
4837-6656-2880.1
We do not cover:
f. Property of roomers, boarders and other tenants,
except property of roomers and boarders related to
an “insured”;
g. Property in an apartment regularly rented or held
for rental to others by an “insured”, except as
provided in E.10. Landlord’s Furnishings under
Section I – Property Coverages;
E. Additional Coverages
10. Landlord’s Furnishings
We will pay up to $2,500 for your appliances, carpeting
and other household furnishings, in each apartment on the
“residence premises” regularly rented or held for rental to
others by an “insured”, for loss caused by a Peril Insured
Against in Coverage C, other than Theft.
“…roomers, boarders and other tenants,” whose
property is not covered. The general consensus is no
coverage for people who pay to stay at the residence.
The insured’s property also is not covered if located in
an area “regularly rented.” “Regularly” also is not
defined, leading to some ambiguity.
However, if rental does occur on a “regular” basis,
there is limited coverage for certain “landlord
furnishings.”
SECTION II – LIABILITY COVERAGES
A. Coverage E – Personal Liability
B. Coverage F – Medical Payments To Others
SECTION II – EXCLUSIONS
E. Coverage E – Personal Liability And Coverage F
Medical Payments To Others
Coverages E and F do not apply to the following:
2. “Business”
a. “Bodily injury” or “property damage” arising out of or
in connection with a “business” conducted from an
“insured location” or engaged in by an “insured”,
whether or not the “business” is owned or operated
by an “insured” or employs an “insured”.
b. This Exclusion E.2. does not apply to:
(1) The rental or holding for rental of an “insured
location”;
(a) On an occasional basis if used only as a
residence; (b) In part for use only as a
residence, unless a single-family unit is
intended for use by the occupying family to
lodge more than two roomers or boarders; or
(c) In part, as an office, school, studio or private
garage;
Liability coverage is excluded for those engaged in
“business.”
Business is defined as:
a. A trade, profession or occupation engaged in on a
full-time, part-time or occasional basis; or
b. Any other activity engaged in for money or other
compensation over $2,000 in the 12 months prior
to beginning of the policy period (with exceptions
for volunteer and day care activities).
Liability coverage is available for “occasional” rentals
or rentals for office, school, studio, or private garage
use. Coverage also is available for partial-home
rentals to one or two roomers/boarders, but not more.
C. The Sharing Company’s Insurance – What do Uber and Airbnb Offer?
Companies in the sharing economy and policymakers arguably have been more proactive
in addressing coverage gaps than insurers themselves. Today, Uber and Airbnb provide fairly
comprehensive insurance in their respective markets.
1. Ridesharing, e.g., Uber
Since its start in 2009, Uber has provided commercial coverage for drivers who are
“providing services.”17 Uber’s interpretation of “providing services” was put to a very public test
when an Uber driver, who was awaiting a ride request, struck and killed a 6-year-old girl on New
17
https://www.nytimes.com/2014/09/06/your-money/auto-insurance/offloading-the-risk-in-renting-a-car-ride.html;
https://newsroom.uber.com/56463/
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Year’s Eve 2013. Uber denied liability, stating that the driver “was not providing services on the
Uber system during the time of the accident,”18 i.e., the accident did not occur during Period 3
when the driver was transporting a passenger. Uber ultimately settled with the family of the 6year-old girl, but not before provoking vigorous discussion regarding insurance requirements for
TNC drivers.
After the fatal accident, the California legislature proposed (and later signed into law) a
bill that would require TNCs to ensure there is appropriate coverage during Periods 1, 2, and 3.19
This led Uber to modify its insurance coverage in July 2014 by providing primary coverage of $1
million per incident for Periods 2 and 3 (i.e., from accepting a request through transportation of
the passenger) and contingent coverage in Period 1, only if the driver lacks applicable coverage.20
Today, Uber’s insurance covers the following losses during Periods 2 and 3, or in Uber’s words,
coverage for “each and every incident that occurs between accepting a trip and reaching the rider’s
destination”21:

$1 million in liability coverage; primary to driver’s personal auto insurance;

$1 million in uninsured/underinsured motorist injury for accidents caused by other
motorists; and

Contingent collision and comprehensive coverage “as long as a rideshare driver has
personal collision or comprehensive insurance.”
During Period 1 (when the app is on, but no match has been made), Uber provides:

Contingent liability coverage (primary in California), covering bodily injury up to
18
https://techcrunch.com/2014/01/02/should-car-services-provide-insurance-whenever-their-driver-app-is-open/
19
https://www.nytimes.com/2014/09/06/your-money/auto-insurance/offloading-the-risk-in-renting-a-car-ride.html
20
https://www.nytimes.com/2014/09/06/your-money/auto-insurance/offloading-the-risk-in-renting-a-car-ride.html
21
https://www.uber.com/drive/insurance/
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$50,000/individual/accident with a total of $100,000/accident and up to $25,000 for
property damage.22
Uber provides no collision/comprehensive coverage or uninsured/underinsured coverage
during Period 1. Uber drivers should look to fill these gaps with their personal lines insurers.23
2. Homesharing, e.g., Airbnb
When Airbnb first launched in 2008, it offered no coverage for its hosts. In response to an
incident where a host using Airbnb found her home vandalized and ransacked, Airbnb announced
in 2011 what it dubbed the “Airbnb Guarantee” to protect the property of hosts from damage by
Airbnb guests up to $50,000.24 Less than a year later, Airbnb upped that guarantee to $1 million
and changed the name to the “Airbnb Host Guarantee.”25 In January 2015, Airbnb also unveiled
its own liability insurance policy for third-party claims against the host.
Today, Airbnb’s insurance and guarantee packages cover the following:
1. Host Protection Insurance. Provides primary liability coverage for hosts (in certain
countries) against third party claims of property damage or bodily injury up to $1 million
per occurrence, $1 million per location, and $10 million in the aggregate. 26 Illinois and
New York are not subject to the aggregate $10 million cap.
a. Key exclusions for which coverage is not provided under the policy include liability
arising from: (1) Intentional Acts including: (i) Assault and Battery or (ii) Sexual
Abuse or Molestation - (by the host or any other insured party); (2) Loss of
22
Uber will provide additional coverage where required by state and local law. https://www.uber.com/driver-jobs/
23
Notably, UberBLACK/SUV/LUX drivers (i.e., luxury vehicles) must carry limousine licenses and commercial insurance in Los Angeles and
most other cities. https://www.uber.com/drive/los-angeles/vehicle-requirements/
24
http://latimesblogs.latimes.com/technology/2011/08/airbnb-insurance-guarantee.html; http://blog.airbnb.com/our-commitment-to-trust-andsafety/
25
http://blog.airbnb.com/whats-your-peace-of-mind-worth-how-about-1000/
26
https://www.airbnb.com/help/article/937/what-is-host-protection-insurance
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Earnings; (3) Personal and Advertising Injury; (4) Fungi or Bacteria; (5) Chinese
Drywall; (6) Communicable Diseases; (7) Acts of Terrorism; (8) Product Liability;
(9) Pollution; and (10) Asbestos, Lead or Silica.27
b. The coverage is limited to an actual stay. If a loss occurs prior to or after the
scheduled booking (e.g., during an informal extension of the stay), there will be no
coverage.28
2. Host Guarantee. The Host Guarantee provides protection for up to $1 million to a host
for damages to covered property. But, as Airbnb explains, the Host Guarantee “isn’t
insurance and doesn’t replace your homeowners or renters insurance.”29
a. Among other things, the Host Guarantee does not protect: (1) cash and securities;
(2) pets; (3) vehicles; (4) personal liability; (4) shared or common areas; (5)
ordinary wear and tear; and (6) damage caused by insects and vermin.
b. The coverage also is limited to the booking period. If loss occurs during early
check-in or extended stay, there will be no coverage.
c. Certain types of property–such as jewelry, collectibles, and artwork–have more
limited protections.30
d. To be eligible for the Host Guarantee, the host must attempt to resolve the dispute
with the guest or its personal lines insurer before approaching Airbnb for
reimbursement, but also report the damage to Airbnb within 14 days of the incident
27
https://www.airbnb.com/help/article/937/what-is-host-protection-insurance
28
https://www.airbnb.com/attachment/download/621968
29
https://www.airbnb.com/help/article/279/what-is-the-airbnb-host-guarantee
30
https://www.airbnb.com/guarantee
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or before the next guest arrives, whichever is earlier.31 If the damage or loss is the
result of criminal misconduct, the host must file a police report. The host must
deliver a signed and sworn proof of loss within 30 days of the loss.
Insurance companies have responded to what some argue are overly strict requirements32 or
“empty” promises33 in Airbnb’s Host Guarantee program by offering their own homesharingspecific coverage. For instance, Allstate recently began offering HostAdvantage to cover hosts’
personal property up to $10,000 per rental period.34 Other insurers provide on-demand insurance
for homesharers (Slice) or insurance packages tailored specifically to occasional, as well as more
frequent renters (Peers and CBIZ35).
D. Regulatory Response
California, home to both Uber and Airbnb, pioneered TNC regulation and is now weighing in
on homesharing, as well. In September 2013, the California Public Utilities Commission passed
a law, coining the term very term “Transportation Network Companies” to describe ridesharing
companies, and requiring all drivers of TNCs in California to carry insurance for all phases of a
TNC ride.36
Presently, all but four states in the US have pending or enacted legislation concerning
31
https://www.airbnb.com/help/article/279/what-is-the-airbnb-host-guarantee
32
One host received $78 for damages exceeding $10,000 when Airbnb denied coverage under the Host Guarantee on the basis that another guest
had used the premises before the loss was reported (the host learned of the loss after the next guest arrived) and because the damage extended to
common areas of the host’s condo. http://www.businessinsider.com/airbnb-guest-caused-10000-of-damage-2014-10
33
https://www.tnooz.com/article/homeaway-thinks-1m-airbnb-host-guarantee-is-as-empty-as-a-vacant-apartment/;
http://www.airbnbhell.com/airbnb-host-stories/
34
http://www.insurancejournal.com/news/national/2016/11/16/432335.htm
35
HomeAway, an online classifieds for rental owners (but not a company that facilitates the ultimate transaction like Airbnb), urges hosts to buy
more comprehensive coverage elsewhere and recommends CBIZ, for which it earns a marketing fee. https://www.nytimes.com/2015/11/14/yourmoney/death-in-airbnb-rental-raises-liability-questions.html
36
https://nextcity.org/daily/entry/the-very-big-thing-that-uber-lyft-and-sidecar-didnt-get-from-california
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ridesharing.37 Legislative momentum for these laws picked up in the Spring of 2015 when Uber
and multiple personal lines insurers and trade associations developed a TNC Insurance
Compromise Model Bill released to the public on March 26, 2015.38
The Model Bill “outlines a plan to create coordination of coverage between personal
coverage carried by TNC drivers and commercial coverage carried by TNCs.”39 The Model Bill
calls for mandatory primary coverage by the TNC, TNC driver, or a combination of the two during
Period 1 with limits of $50,000 per person, $100,000 per occurrence, and $25,000 or $30,000 for
property damage depending on the state. The Model Bill also requires primary coverage during
Period 2 and Period 3 with liability limits of at least $1 million.
Illinois, for example, requires liability coverage for all phases of a rideshare interaction
consistent with that which Uber presently offers and the Model Bill. See 625 ILCS 57/10. Though
Illinois’ ridesharing legislation, like the Model Bill, requires either the TNC or the driver (or a
combination of both) to carry the requisite insurance, Uber provides all that is statutorily required.
If it didn’t, it presumably would lose market share in Illinois due to drivers failing to carry the
requisite insurance through their own carriers.
With respect to homesharing, in October 2014, San Francisco passed an ordinance
legalizing property rentals for less than 90 days, but requiring a minimum $500k liability insurance
coverage.40 Meanwhile, in New York, Airbnb’s largest U.S. market, Governor Andrew Cuomo
signed a bill into law in the fall of 2016 that will impose steep fines upon residents who advertise
their apartments online for illegal short-terms stays (i.e., stays of less than 30 days if the tenant is
37
http://www.rstreet.org/tnc-map/
38
http://www.naic.org/cipr_topics/topic_commercial_ride_sharing.htm
39
http://www.naic.org/documents/committees_c_sharing_econ_wg_exposure_adopted_tnc_white_paper_150331.pdf
40
http://www.bizjournals.com/sanfrancisco/blog/2014/10/san-francisco-supervisors-give-okay-to-airbnb.html
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not present, which New York has already declared are unlawful).41 Airbnb responded with a
lawsuit in Manhattan federal court. This follows lawsuits that Airbnb has filed against its
hometown San Francisco and in Santa Monica, both of which have moved to fine the company for
illegal listings.42 Similar fights are occurring in Amsterdam and Barcelona, as well as in Berlin,
which has banned most short-term rentals.
In the meantime, absent legislation in a host’s location of residence, hosts should consider
what coverage gaps it should proactively seek to fill.
IV.
Coverage Issues for Home Businesses
As ride-sharing, AirBnB, and other internet-based businesses have grown in popularity,
millions of individuals have become self-employed, starting small businesses from their homes
that make up some portion (if not all) of their annual income. According to the U.S. Small
Business Administration, there were 28.8 million small businesses in the US in 2013,
approximately fifty percent of which were home based.43
Over 22 million of these small
businesses were “nonemployers,”or self-employed businesses with no additional payroll or
employees, and had average annual revenue of $47,000.44
In 2004, a study conducted by the Independent Insurance Agents & Brokers of America
indicated that nearly 60 percent of home-based businesses were without business insurance and
that 40 percent of individuals believed their homeowners policy would provide coverage if they
41
http://www.businessinsider.com/gov-cuomo-signed-new-york-airbnb-bill-2016-10
42
https://www.nytimes.com/2016/10/22/technology/new-york-passes-law-airbnb.html
43
The Small Business Administration defines a small business as having fewer than 500 employees. See U.S. Small Business Administration
Office of Advocacy “Frequently Asked Questions,” June 2016, available at https://www.sba.gov/sites/default/files/advocacy/SB-FAQ2016_WEB.pdf
44
Id.
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needed it.45 Nearly 87 percent of respondents did not understand why separate insurance for the
business is necessary.46
Given the number of individuals currently operating home businesses, these statistics are
alarming.
They indicate that a large percentage of home-business owners are woefully
underinsured, incorrectly believing that businesses run out of their homes are covered under their
homeowners policy. In reality, however, homeowners policies generally provide extremely
limited coverage for home businesses, and many policies provide no coverage at all for businessrelated claims and liabilities.
The unendorsed Insurance Service Office (ISO) homeowners 2011 program, for example,
provides $2,500 for business property on the premises and $500 for business property away from
the residence premises. Insureds have a number of options to increase these limits, as discussed
below, but still must be mindful of definitions and exclusions that may restrict coverage.
A. What Is A “Business”
A threshold question for business property coverage under a homeowners policy is what
constitutes a “business.” Some homeowners policies provide coverage for business property if it
is “owned or used by” the insured in “business.” Many policies also include specific exclusions
for structures, property, or liability arising from business activities.
In a seminal case dealing with this issue, the court in Home Ins. Co. v. Aurigemma, 45
Misc. 2d 875 (N.Y. Sup. 1965) construed an exclusion for “any business pursuit” and found that
“business pursuit” encompassed two elements: continuity and profit motive. With respect to the
first element, the court found that there must be a “customary engagement” or a “stated
45
Independent Insurance Agents & Brokers of America, "New National Survey Finds Nearly 60 Percent of Home-Based Business Owners
Without Insurance," Press Release: February 25, 2004.
46
Id.
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occupation.” Id. at 879. With respect to profit motive, the court held that it must be shown that
the activity was a “means of livelihood,” “gainful employment,” or a “means of earning a living”
and could be evidenced by “commercial transactions or engagements.” Subsequent cases have
confirmed that to be a “business,” the insured need not engage in the business as a sole occupation.
See, e.g., Shapiro v. Glen Falls Ins. Co., 365 N.Y.S.2d 892, 897 (1975).
When making a claim for coverage under a homeowners policy for losses that are
potentially business related, it is important to understand whether the activities will be construed
as a “business,” especially as it relates to policy exclusions for business property/structures used
for business purposes, or liability arising out of a “business pursuit” or activities “engaged in for
money.” Under the construction of “business pursuit” articulated above, renting a home for short
periods of time on an ongoing basis through AirBnB, for example, will likely be considered a
“business,” requiring the purchase of specific business insurance. In this scenario, the standard
homeowners policy should not be relied on to cover theft of the homeowners property, the personal
property of a paying guest, or injuries caused by a guest to other property or individuals. Insurers
will very likely deny any claim involving a paying guest under well-articulated exclusions in a
homeowners policy.
B. Protecting A Small Home-Based Business
Though coverage for business losses is generally limited or excluded under standard form
homeowners policies, insureds have a number of options to insure their business. There are three
basic types of insurance that either add limits to an existing policy, or provide an alternate form of
coverage for business-related losses. These options are discussed in detail below, but the right
choice for any insured depends on the nature of the business, annual revenues, and the amount of
coverage necessary to properly insure the business.
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1. Endorsement to Homeowners Policy
The simplest – and cheapest – option is to simply purchase an endorsement to a current
homeowners policy that adds additional property and liability limits to the existing coverage. For
example, many insurers will double the standard policy limits for business equipment from $2,500
to $5,000, often for as little as $20 a year. This option is appropriate for “nonemployer” businesses
that operate with minimal use of valuable equipment and do not have many business-related
visitors. While this option may provide enough coverage for a delivery-person that is injured while
delivering business-related goods, it will not provide enough coverage for large liability claims or
major losses if the business is unable to operate as a result of fire or natural disaster, and likely
will not provide any professional liability coverage.
It is important to note that insurers typically do not offer this endorsement for businesses
that generate more than $5,000 in annual receipts.
2. In-Home Business Policy
Another option is to purchase a separate in-home business policy that provides a broader
range of coverage, including for loss of documents, recovery of lost computer data, theft, and
additional business liability, including lost income if the business is shut down due to fire or other
damage to the home. However, these policies rarely include errors and omissions coverage.
In-home business policies can insure business property up to $10,000 in losses, and can provide
$300,000 to $1 million in liability coverage.
3. Business Owners Package Policy (BOP)
For home-based businesses ineligible for other types of business-related coverage,
including businesses with annual receipts in excess of $250,000, the BOP is another potential
option. The ISO BOP is a package policy designed to offer an off-the-shelf product to small and
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medium sized business. The BOP provides both property and general liability coverage, written
on a specific form approved in nearly all states and the District of Columbia. A BOP is only
available for businesses that do not exceed 25,000 square feet and $3 million in annual gross sales.
The BOP generally covers damage to or loss of business equipment and other assets,
business income, extra expenses, valuable papers and records, liability for customer injuries, and
malpractice or professional liability claims.
Though the BOP is designed for small businesses, it is more specifically geared towards
businesses with commercial locations and may not be the best way to cover the types of exposures
usually faced by smaller, internet-based home businesses.
V.
Liability Coverage for Motorized Vehicles other than Autos
In addition to the sharing economy and home based businesses, another common area of
coverage issues under personal lines policies is for pleasure or otherwise, many people own golf
carts and/or all-terrain vehicles (“ATV”) which they may use at their house or elsewhere. As with
any type of vehicle, there are accidents, and the owners of the vehicles usually seek coverage for
any claims they face under their auto and/or homeowners policy. Often times these claims can be
for very serious injury and an insured will look to his/her personal lines policies to protect them.
Unless the golf cart and/or ATV is specifically insured under an auto policy, then liability
coverage arising from their use would likely be excluded under a standard auto policy. Almost all
standard auto policies have an exclusion which provides:
We do not provide Liability Coverage for the ownership, maintenance or use of:
1. Any motorized vehicle having fewer than four wheels.
2. Any vehicle, other than 'your covered auto,' which is:
a. owned by you; or
b. furnished or available for your regular use.
Barring any exceptions or other provisions in the auto policy, a golf cart and/or ATV would
4837-6656-2880.1
fall directly within this exclusion. As one court has held: “It is axiomatic that one may not obtain
coverage from an insurer for every automobile titled to him by procuring insurance on fewer than
all vehicles.” Ramsdell v. State Auto Mut. Ins. Co., 206 Ga. App. 357, 360, 425 S.E.2d 661, 665
(1992).
However, under homeowners policies, the answer is not always so clear. Homeowners
policies generally exclude from coverage “bodily injury” arising out of the “ownership,
maintenance, use, loading or unloading” of any “motor vehicle” owned by an insured. When
analyzing a particular claim, it is important to review the applicable state’s law to see if the vehicle
at issue qualifies as a “motor vehicle.” For example, in Georgia, a golf cart is considered a “motor
vehicle” under the state’s traffic codes. Coker v. State, 583 S.E.2d 498 (Ga.App. 2003).
However, many of those exclusions contain an exception which re-instates coverage where
the “motor vehicle” is “used to service” the insured’s residence. What is considered “used to
service” has been met with different results and is determined on a very fact specific case by case
basis. For example, in Ga. Farm Bur. Mut. Ins. Co. v. Huncke, 524 S.E.2d 302 (Ga.App. 1999),
the court held that a four-wheel drive ATV was not “used to service” the homeowners’ residence,
where it was “used for children’s recreation” and to “scout” the insured’s agricultural fields. In
Huncke, an accident occurred when the insured allowed a 14-year-old girl to operate the ATV for
her recreation. She lost control of the vehicle in a field next to the insured’s home and crashed
into a parked car. The court stated that “[t]he children’s recreational use of the ATV is not service
of [the insured’s] residence,” and that while “[r]ecreational use may be a benefit to the insured,”
for the exception to apply “the recreational benefit must be related to the residence.” The court
held that under the facts the 14-year-old’s use was not related to the residence, and the use of the
ATV to service the insured’s agricultural fields did not “have a nexus to his residence.” The court
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therefore held the exception did not apply, and the exclusion applied to bar coverage.
However, in Lightning Rod Mutual Ins. Co. v. Dickerson, 1994 WL 66862 (Ohio.App.),
the plaintiff was injured while riding as a passenger on an ATV operated by the insured’s son. The
court stated that the policy “does not qualify or quantify the use necessary to trigger the limitation
on the exclusion,” but “[m]erely provides that the vehicle must be used to service the residence.”
The court held that “[c]onstruing the language in favor of the insured, we conclude that some
evidence that the vehicle was used to service the residence is sufficient to bring the vehicle within
the limitation on the exclusion.” The court found that evidence showing that the insureds had “used
the three-wheeler to pull shrubs and tree stumps, to retrieve mail, to relay messages on the property,
and to dispose of leaves and trash to be burned,” brought the loss back within coverage. See also
Bumgardner v. Terra Nova Ins. Co. Lmtd., 806 So.2d 945 (La.App. 2002)(“used in service”
exception did not apply where insured testified that he used tractor to service his residence.).
Another potential exclusion which may apply is the Motorized Land Conveyance
Exclusion. The standard provision excludes from coverage a “motorized land conveyance” with
either (1) a maximum attainable speed of more than 15 mph; (2) subject to motor vehicle
registration; (3) used to carry persons for a charge; (4) used for business purposes, or (5) rented to
others. This exclusion also contains the following exceptions:
This exclusion does not apply to a motorized land conveyance that is designed for
recreational use and not subject to motor vehicle registration and:
(1)
(2)
Not owned by an “insured”; or
Owned by an “insured” and on an “insured location”.
It also does not apply to a motorized land conveyance that is not subject to motor vehicle
registration and:
(1)
Used to service an “insured’s” residence;
Once again it will be important to analyze the state law on whether the vehicle at issue falls
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within the exclusion, especially whether the vehicle is subject to the state’s motor vehicle
registration laws. One of the exceptions that has been the subject of court decisions is the “insured
location” exception. In the typical homeowners policy, “insured location” is defined in relevant
part as: a) the resident premises; and b) any premises used by the named insured in connection
with the resident premises. The resident premises is generally the property listed on the
homeowners policy. The coverage issue arises when courts must determine whether the location
of the incident give rise to the claim is used in connection with the resident premises.
For example, in Mason v. Allstate Ins. Co., 680 S.E.2d 168 (Ga. Ct. App. 2009), the court
held that a field in which the insureds had no ownership interest and was located approximately
15 miles from their residence was not a “premises used by an insured person in connection with
the residence premises,” even though they had permission to use it for their daughter’s birthday
party. The insureds argued that they were using the field ‘in connection with’ their home because
they were holding their daughter’s birthday party at the field so family members and guests could
do activities that they were unable to do at the house. In rejecting that argument the Court held:
Applying that logic would extend the policy’s definition of ‘insured premises’ to
cover almost any family outing or celebration at almost any location – a friend’s
pool, a neighborhood school, a public or private park, etc. – regardless of the
distance from or any actual connection with the insured’s residence. Further, if the
policy were construed as suggested, insurers would be subjected to virtually endless
liability, liability for which neither it nor the insureds could have reasonably
expected or intended to be covered by the insurance policy. Under such
circumstances, how could any insurer possibly draft a policy that would anticipate
each and every hobby, interest or future travel decision of each and every insured,
weigh the risks thereof, and set premiums accordingly?
Id. at 173
Several other courts around the country have considered similar language and found it does
not apply in various situations. For example, Nationwide Mut. Fire Ins. Co. v. Jones, 695
F.Supp.2d 978 (D.Ariz. 2010) the court held that a cul-de-sac in front of the insured’s home was
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not a premises that was used within the meaning of a homeowners policy's definition of an “insured
location,” and therefore injuries sustained by a passenger while driving an ATV in the cul-de-sac
were not covered under policy.
In Ill. Farmers Ins. Co. v. Coppa, 494 N.W.2d 503 (Minn. App. 1992), an insured
homeowner allowed a teenager to ride an ATV in a hayfield adjacent to his property, and the
teenager was injured when the ATV overturned. The Court held that, under the circumstances
presented, the policy did not cover the teenager's injuries because "the neighbor's hayfield was not
used in connection with the residence premises." Id. at 506. In Safeco Ins. Co. v. Clifford, 896 F.
Supp 1032, 1034 (Or. 1995), there was no coverage for the insured's son while driving the family's
ATV on the property adjacent to the family's home and pulling his cousin on a sled attached to the
back of the ATV, which resulted in injuries to the cousin. The insureds argued that, although one
of their relatives owned the adjacent property, their family used the relative's yard "in connection
with" their residence because they used the property for recreation, storing furniture and firewood,
burning garbage, loading and unloading livestock and equipment, and other chores. However, the
court held those facts were insufficient to make the property an “insured location.”
In Mass. Prop. Ins. Underwriting Ass'n v. Wynn, 806 N.E.2d 447 (Mass. Ct. App. 2004),
there was no coverage where the insured was riding his ATV on a beach less than 500 feet from
his home when he collided with another ATV rider, injuring the second rider. The court held that,
even though the insured's family regularly rode the ATV on the beach, the beach was not an
"insured location" that was used "in connection with" the insured's residence. Finally, in Jones v.
Horace Mann Ins. Co., 937 P.2d 1360 (Alaska 1997), the Court held there was no coverage where
the insured's child struck another child while operating a snowmobile on a public road, four-tenths
of a mile from the insured's residence. The injured child's parents argued that the accident occurred
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on property the insured used "in connection with" his residence because the insured's family
regularly used the land immediately adjacent to the accident scene for snowmobiling, and the
snowmobiling always started and ended at the insured's house. The Court held that if the child's
parents' arguments were accepted, “there would be no “logical geographical limit” to coverage
under the homeowners' policy.” Id. at 1363-1364.
Just as determining whether a person qualifies as an insured is a fact intensive exercise, so
is determining what constitutes a premises “used in connection” with the resident premises. Both
sides will have to use all the facts available to them to show their case. As noted by the cases
above, it is often hard to obtain coverage for ATVs/golf carts if they are not specifically listed in
an auto policy. As a practical matter, anyone who owns a golf cart, ATV or any other type of
motorized vehicle that is not an automobile should check their policy carefully to ensure coverage
is specifically provided for such vehicles. Otherwise, it may be a very tough coverage fight ahead.
VI.
Conclusion
Coverage under personal lines policies can potentially arise in various circumstances that
most people do not anticipate. It is always important to know the scope of your policy’s coverage.
If there is a question regarding coverage after a loss, be sure to gather all of the relevant facts and
if you represent the carrier, consider all options available to you to obtain the facts needed to make
a coverage determination, including but not limited to an EUO. And as always, read the policy.
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