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Date Type Title
12/22/2006 Default Setting Liability Limits
12/22/2006 Default Umbrella Liability Proposal
12/22/2006 Default Vacancy Under the Homeowners Policy
12/22/2006 Default Vacant Land: What is on that land that God did not put there?
12/22/2006 Default Uncovering Business Activities in the Home
12/22/2006 Default What is occupancy?
12/22/2006 Default Is it a Business?
12/22/2006 Default Case Study: Vehicle Damage
12/22/2006 Default Case Study: Electronic Apparatus
12/22/2006 Default Case Study: Where You Reside
12/22/2006 Default Case Study: Electronic Apparatus
12/26/2006 Default Mold: EO pointers
12/26/2006 Default The Condominium: A Unique Form of Ownership
12/26/2006 Default Mold: The Industry Response
12/26/2006 Default Mold: The Exclusions
12/26/2006 Default Mold: Why Now?
12/26/2006 Default What is Mold?
12/26/2006 Default Mold Litigation
12/26/2006 Default Identity Theft: The New Endorsement
12/26/2006 Default The Mold Problem
12/26/2006 Default Unit Owners: Setting The Building Limit
12/26/2006 Default Unit Owners: Listing The Mortgage Holder
12/26/2006 Default The Trust and Personal Insurance
12/26/2006 Default Diminution in Value: The New Endorsement
12/26/2006 Default Insuring Golf Carts
12/26/2006 Default Newly Acquired Autos
12/26/2006 Default Homeowners 2000: The Business Liability Exclusion
12/26/2006 Default Homeowners 2000: Personal Property Used In "Business"
12/26/2006 Default Homeowners 2000: The Definition Of "Business"
12/26/2006 Default Homeowners 2000: Other Structures Used In "Business"
12/26/2006 Default Homeowners 2000: Changes In "Business"
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Last Updated: Friday, December 22, 2006
Type: Default
Keywords: What is occupancy?
What is occupancy?

What is Occupancy?

By Phyllis Van Wyhe, CPCU, CIC, CSP Printable Version

We all know the homeowners policy can be written to cover an owner-occupied duplex.  Many agents write the policy without asking the occupancy of the rental unit, simply assuming it is rented to a couple with one child and a small cat.  Closer evaluation reveals that occupancy can be a key factor in writing the coverage.


ELIGIBILITY IS THE FIRST ISSUE

ISO eligibility standards provide that a homeowners policy can be written on an owner-occupied dwelling that contains "not more than 2 families and with no more than 2 boarders or roomers per family."  Based on these standards an owner-occupied duplex in which the rental unit is occupied by four young professional women would not be eligible for coverage.  While some companies deviate, many adopt these industry standards.  This is important because of an agent’s obligation to do the front-line underwriting on a risk.

POLICY EXCLUSIONS ARE THE SECOND

It is not uncommon for occupancy to change after a homeowners policy is in place.  Because of this the second issue is the exclusions that may apply to the rental situation.  The contract has an exclusion for liability "arising out of the rental or holding for rental of any part of any premises."  This is an absolute exclusion.  It is followed by three exceptions.  Coverage applies only in these three rental situations:
  • Rental on an occasional basis as a residence
  • Rental 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
  • Rental "in part, as an office, school, studio, or private garage"

These are the only three rental situations in which liability will remain in force.  If the insured rents out the premises, or part of it, on any other basis there is no coverage.  These same restrictions apply when endorsing liability for the rental duplex across town.

Liability during a rental situation is provided only with certain specific occupancies.  The agent should always be asking the occupancy when insuring any dwelling that contains a rental unit.  And, on renewal it may be good to ask again who lives there.

This article is excerpted from the book Writing A Personal Umbrella, written by Phyllis Van Wyhe, CPCU, CIC.
Last Updated: Friday, December 22, 2006
Type: Default
Keywords: What is occupancy?

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