Coverage Corner

“THAT THERE IS AN RV, CLARK”

By Kevin C. Amrhein, CIC, CBIA

Your personal lines insured decides to purchase a recreational vehicle. Rather than taking your advice and securing specific coverage, he assumes his homeowners’ policy is sufficient. Should the vehicle be damaged, break something, or hurt someone, is he correct? Or will this assumption prove unfortunate?

The answer is … it depends. (You knew I was going to say that. *cues sad trombone*)

RECREATIONAL VEHICLES AND THE ISO HOMEOWNERS’ POLICY

RVs such as ATVs, golf carts, and go-karts (aka all the things that make life worth living) are addressed in the policy by the broadly defined term “motor vehicle.” The congregation will now rise for the reading of language from the ISO form:

“Motor vehicle” means:

a. A land or amphibious vehicle that is self-propelled or capable of being self-propelled; or

b. Any trailer or semitrailer which is being carried on, towed by or hitched for towing by a vehicle described in 11.a. above.

The form does not define the term “recreational.” Generally, this term is used to describe vehicles used for recreational (aka fun!) purposes mainly off public roads. In terms of the policy reaching coverage, this bolded principle is crucial.

DAMAGE TO THE RV ITSELF

Regarding Section I – Property, “Motor vehicles” appear in the list of Property Not Covered. Two exceptions allow a “motor vehicle” to be covered. The exceptions are for service purposes; many vehicles designed for recreational purposes would not trigger either exception:

“Motor vehicles” not required to be registered for use on public roads or property which are:

(a) Used solely to service a residence; or

(b) Designed to assist the handicapped;

IF USE OF THE RV BREAKS SOMETHING OR HURTS SOMEONE

Regarding Section II – Liability, the relevant wording is contained within a bulky exclusion for “motor vehicle liability.” Due to its length, the text of the exclusion does not appear in this article. Generally, the following items will assist in determining liability coverage (or lack thereof):

▲ Is the RV registered or required to be registered for use on public roads or property? If the answer is yes, stop reading. Such a vehicle is not covered for liability, and no exception contained within the exclusion is applicable.

▲ Is the RV engaged in any of the specifically listed activities? If the answer is yes, stop reading. Such a vehicle is not covered for liability, and no exception contained within the exclusion is applicable. In summary, the activities listed are related to racing, rental of the vehicle to others, using the vehicle to carry people or cargo for a charge, or using the vehicle for any “business” purpose (with exception for golf cart used on a golfing facility).

If you’ve managed to dodge the exclusion so far … don’t get excited. Regarding RVs, we’re not out of the woods yet….

▲ Is the RV owned by an “insured”? If the answer is yes, the location where it is being used is essential to determining coverage. The policy definition of “insured location” describes several locations, many (but not all) of which trigger an exception to the exclusion (thus making liability coverage available) should the accident occur there. If in use off of an “insured location,” the policy restricts coverage to only RVs which are a children’s toy vehicle or motorized golf cart. Toy vehicles and golf carts must meet specific characteristics described in the policy. Regarding golf carts, coverage is further restricted to specified locations.

▲ Is the RV owned by someone who is not an “insured”? If the answer is yes, an exception to the exclusion is triggered (thus making liability coverage available), and the insured’s use of the nonowned RV is not restricted to a specified location.

That’s all for now. Until the next round…cheers!

Kevin C Amrhein, CIC, CBIA is IA&B's education consultant. He works with our CISR and CIC programs, as well as our special topic seminars and live webinars. Catch him at one of our upcoming professional training offerings: IABforME.com/education