Here’s a solid (and sadly tragic) example of how serious losses revolve around policy basics. In this case, the basics include whether a person is a member of the household and how policy coverage is applied. A couple who lived in a residence protected by a homeowners policy were licensed foster parents. A child placed in their care by a state agency later drowned in the home’s hot tub.

The child’s relatives sued the homeowners as well as the state agency. The situation became tangled over who should bear responsibility to respond to the loss due to the homeowners’ status as policyholders and as state employees. The insurance company was adamant in its position.

It would be quite worthwhile to take a closer look at how the original and higher court addressed the loss. Resident status, like any other element upon which coverage may hinge, can de disputed.

Please click here for more details.

Most homeowner policies use language that is clear and quite broad to define who are considered household residents. So, the assumption that it is limited just to relatives would be far too narrow. The focus is not strictly based on blood relations, rather it depends more upon a valid connection to the owners of the home and who occupies the home on a full-time basis.

By applying the policy definition, it’s usually straightforward to determine if one is a household resident. That can be very important. However, a warning: that definition does not necessarily mean that coverage is available for any type of loss. In fact, you can have totally opposite results.

For a clearer view of how a policy may define key people, click on this information excerpted from The ISO Homeowners Section under PF&M that is available in Advantage Plus.

We just warned that having a clear definition of a household resident does not equate to coverage applying to any given loss. What happens under a policy depends upon the loss situation. For instance, if the loss is due to a cause that doesn’t qualify for coverage, then residency status is moot. But let’s consider situations where residency is relevant, for instance, whether a person is on first or third.

Okay, we’re attempting to be clever. This is not a baseball reference, rather it refers to a first person (property) or third person (liability) loss. Keep in mind that this is a generalization but being a household resident with regard to property losses equates to coverage. First parties benefit under property losses because protection applies to lost, destruction or damage to property owned by defined household residents. This is not the case with liability losses. Liability coverage protects against harm a household resident causes to entities outside of the insured household.

Click here to see a discussion of various aspects of personal liability found in a standard homeowner policy. It is from Gordis on Insurance found in Advantage Plus.

Sometimes, risk management is relegated to identification without an easy, clear or readily available solution. In the featured case, policy language leaned toward assigning resident status to the foster child. The possibility, after the case was reheard, was an affirmation, leaving the policyholders without insurer support to address their liability.

Insurance professionals prefer to be in a position to provide products that adequately protect their clients. Sometimes the best that may be achieved is to, at least, assist in identifying possible gaps and raise awareness. Knowing of gap exists in a coverage program does allow clients to seek other options to minimize, if not eliminate a gap, such as determining whether protection extended from coverage or resources held by the applicable state agency, or use of a hold harmless agreement. A final, possible, option may have been to terminate fostering.

Click here to see an excerpt of questions that assist in evaluating residential exposures. It is from the Personal Lines Survey, another valuable product that is found in Advantage Plus.