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inside man
45 Posts |
 Posted - 02/13/2003 : 10:57:59
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The insured lives in his house with his sister and she pays him $300 month in rent.
She lives with him for a year. Insured converts his detached garage which is on his property into an apartment and furnsihes same. Little sister moves into it. One day sis is cooking fried chicken on top of the stove and the phone rings. She goes to answer the phone and leaves the chicken unattented. A grease fire ensues and burns the garage down to the ground.
Is there coverage for the insured's garage?
Is there coverage for the insured's contents?
Is there subro against the sister?
*Clayton and Jim -- belay those responses. Let's give the other "students" a crack at this one before you guys jump all over it
[;)] |
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ShermaninCO
USA
40 Posts |
Posted - 02/13/2003 : 11:11:11
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I believe that since the 'garage' is a detached structure and converted to a seperate residence.
The answers would probably be:
No, would require a seperate policy as a seperate residence.
No, because property was out for rental.
No because of no coverage.
But, I would have to research it a little and I have to run. |
Bill Sherman
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Newt
USA
657 Posts |
Posted - 02/13/2003 : 12:19:36
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A detached garage is not covered if it is NOT rented to others for the sole purpose as a private garage. Therefore the garage being rented by a family It would be up to the carrier , I think they would deny the claim. It was not rented for the sole purpose as a garage. No Subro, not intentional.Where there is no coverage there is no subrogation.
HO3 SECI B. Coverage B -Other structures par 2 We do not cover par b |
Edited by - Newt on 02/13/2003 17:12:46 |
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Newt
USA
657 Posts |
Posted - 02/13/2003 : 13:12:33
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Had it not been rented there would have been covereage. She was a family member.
No subro. not intentional
10% of property cov limit unless an ext. then add 10% of ext |
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ShermaninCO
USA
40 Posts |
Posted - 02/13/2003 : 15:41:50
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| Newt, I'm sure someone will correct me if I am wrong but I don't believe that intent has anything to do with subrogation, only liability. |
Bill Sherman
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olderthendirt
USA
370 Posts |
Posted - 02/13/2003 : 16:26:00
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| using Texas HOB, The defination of the insured includes your relatives who are members of your household. Cover A does cover detatched structures for 10% but excludes "wholly rented to any person unless used solely as a private garage". The ionsureds contents are still on the insured premises and covered. As to the building, is she a member of the household? If she is, then she is covered and no subrogation, if she isn't then subrogation. If she has been with the named insuired ofr a year, I would think that she would meet the qualification of being a member of the house hold, If it had been his daughter or mother in law, would that change anything? |
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ShermaninCO
USA
40 Posts |
Posted - 02/13/2003 : 16:44:49
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Is insured entitled to loss of rental income?
I think not as it is not a covered loss. |
Bill Sherman
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Edited by - ShermaninCO on 02/13/2003 17:08:06 |
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ShermaninCO
USA
40 Posts |
Posted - 02/13/2003 : 17:06:24
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Because the structure was originally a garage is immaterial it is now an apartment. Exclusions to coverage A Dwelling Extentions include 1.)structures designed in whole or in part for business. or 2.) Structures rented or held for rental to other than a tenant in your dwelling, unless used solely as a private garage. Structure is no longer a garage and is rented to other than a tenant in your dwelling.
No coverage.
Coverage B excudes property rented
No Coverage
No Coverage therefore no subrogation. |
Bill Sherman
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Newt
USA
657 Posts |
Posted - 02/13/2003 : 17:08:12
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The subrogation rights entitles the insurer to "stand in the shoes" of the insured, and if there was damage to property through negligence, workmanship or materials the insurer can seek restitution from the sister. Since there is no coverage there could be no subrogation.
If there had been no lease agreement the sister would not be liable because she was part of the family and cosidered an insured resident and it would be considered accidental damage.
Subrogations rights can apply to all except damage to property of others Sec.II.
Sec I&II Conditions HO3 Hope this is clear, I may be wrong. If I am maybe I'll get corrected here.
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CCarr
Canada
1200 Posts |
Posted - 02/14/2003 : 10:18:51
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'Inside', this is a great puzzle you have come up with. But, I don't think it is the 'pop' type, as there is no quick answer; primarily because the picture presented is missing a few 'puzzle pieces' which if present would allow for a quicker conclusion.
I'll give my thoughts, likely focused more on how the carrier would consider this, after receiving the investigation report and any recommendations from the handling adjuster.
But lets start and see where it takes us. I'll consider the risk as written on my well worn HO3 (0491) policy form.
Lets start at the front of the policy and get the 'sister' properly pegged. "Defintions, #3 Insured means you and residents of your household who are: (a) your relatives ....". Right from the start there is slippery mud under foot. All that is simple here, is that sis is a relative. You have provided info to establish that there were two households at the time of the loss. First, "your household", as per the definition, and clearly meant to be the insured's household in - as per "residence premises" definition - the one family dwelling. The second household, is that which is occupied by sis in the converted detached garage. Therefore, sis is not a resident of the insured's household at the time of the crisped chicken. Therefore, sis is not an "insured" in this claim.
Next thing to explore is the 'converted garage'. The information presented says, 'the insured converted his detached garage into an apartment and furnished it, and sis while paying $300 per month, moved into it'.
Now, before you can study the policy wording further regarding the 'converted garage' and its use and occupancy at the time of the loss, you must become aware of what the underwriting file may disclose relative to this 'change'. Here is where the "Y" in the road occurs. I'll take the 'dark trail' and add to your scenario, by saying that there is absolutely no mention in the policy / underwriting file, regarding this 'change'.
Looking then at Coverage B - Other Structures - ".... we do not cover other structures .... (2) rented or held for rental to any person not a tenant of the dwelling ....". That is clear, therefore, the converted detached garage would not be covered. If the insured is not satisfied with that - and after being a squeeky wheel and jumping up and down and still getting nothing (rightly so) - and decides to litigate, I refer you to "Section I and II - Conditions, #2 Concealment and Fraud", where the defense of that litigation will be focused (as well as sis being brought as a third party to the action, if the insured did not). "The entire policy will be void if, whether before or after a loss, an 'insured' has: (a) intentionally concealed or misrepresented any material fact or circumstance .... relating to this insurance".
This type of claim you presented, is not uncommon, whether it is a converted garage or a converted basement into rental tenancy space. If the policy was written, and the premium charged, based on this being a single family occupied dwelling; the 'change' in use and occupancy of the "residence premises" is then a 'change' that is a fact material to the risk, and by the absence of any notice to underwriting; will be considered as an intentional concealment or misrepresentation before the loss.
Now we have to consider the furnishings owned by the insured and placed in the rented apartment that is the converted garage. Under "Additional Coverages (of Section I) #10 Landlord Furnishings", we see there is coverage available for household furnishings, ".... in an apartment on the 'residence premises' .... for loss covered .... by .... fire". In a concealment or misrepresentation claim where "the entire policy is void", you can not 'slap and stroke' at the same time. The entire policy is void. If the converted garage is not covered for the reasons provided, no element of the claim is covered, for the reasons provided.
There has been a 'change' in the use and occupancy of this risk from known facts and that concealment or misrepresentation would apply to all elements. Therefore, there is no coverage for the insured's contents placed as furnishings in the converted garage occupied by a rental tenant.
Last question was if there was any subro against the sister. No, the insurer has to pay a loss before they can gain the rights to subro from the insured. |
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JimF
USA
1014 Posts |
Posted - 02/14/2003 : 10:24:46
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Nice response Clayton, and your points are well taken.
But: What happens under the posted scenario, when the insured makes the changes to the garage AFTER the policy is issued or between policy periods, and there is no fraud, concealment or misrepresentation in the insurance application, intended or otherwise?
Suppose a father in law died between policy periods, and the changes to the garage were made by the insured to provide accommodations and family caring and support for the ailing mother in law? What then? (And suppose the living space was provided at no cost to MIL with no rent being charged) |
Edited by - JimF on 02/14/2003 10:37:52 |
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CCarr
Canada
1200 Posts |
Posted - 02/14/2003 : 10:58:34
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Okay, the other "Y" in the road, i.e. the insured advised his agent that he was converting the garage to rental tenancy space, and provided the details of that, then the agent conveyed that to the carrier underwriter; then the underwriter chose to accept that risk (there is no obligation to do so), charged the appropriate premium and issued the necessary endoresement. We will assume for simplicity, that the limit was not changed and that it stayed at 10% of Coverage A.
So, the detached converted garage which at the time of the loss was a rental apartment, still comes under Coverage B, with no exceptions noted in that wording area. Therefore, the converted garage is covered for fire to the 10% limit stated.
Following that, the adjuster should have provided detail regarding "Coverage D - Loss of Use", relative to part (#2) of that section, and advanced calculations and recommendations for indemnity in this area.
Following that, the "Landlord Furnishings" should be considered with an indemnity recommendation subject to the $2500 limit.
So, with awareness and acceptance by underwriting prior to the loss, of the converted garage; there is coverage for - Other Structures, Loss of Use, Landlord Furnishings.
The investigation aspects of this claim should have encompassed statements from both the insured and the sister, and anyone else relevant; regarding the tenancy, details of the loss, and any other 'stone' noted and worth exploring. Plus, whatever detail could be acquired properly from Public Authorities. Generally, refer to the "Fire Scene Investigations - Tips & Techniques" thread, for review of this component.
Once the carrier has now paid under the three elements of coverage mentioned, and obtained a Proof of Loss in that regard; the carrier then has subrogation rights and would pursue the sister in that regard for the apparent negligence that caused this cooking fire. |
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CCarr
Canada
1200 Posts |
Posted - 02/14/2003 : 11:21:17
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Jim, I made my last response before you edited and added the last paragraph to your last post.
I suggest that the 'household' issue and the 'relative' issue, is still the same; that is, there are two households and the MIL is not an insured.
Then the consideration turns to the scenario you last provided, 'the living space was provided free'; and we are still within the context that underwriters were aware of and accepted the 'change' to the risk as noted.
Coverage B - Other Structures - remains covered
Coverage D - Loss of Use - part (#2) is not applicable as it is not rented to others for monetary considerations, there is no monetary loss to the insured (as the space is noted as being rented at the time of loss), to fit the intent of this specific piece of wording. This is a 'time element' coverage based on monetary loss of value, and none exists in this situation. The space is 'rented' at no cost, there is no rental loss. If it had been unoccupied and was being 'held for rental' then that would be different.
Landlord Furnishings - remains covered, this is a property specific coverage for household furnishings in an apartment.
Subrogation - would remain unchanged, and would be pursued. |
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Newt
USA
657 Posts |
Posted - 02/15/2003 : 06:16:34
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We know the claim would be denied and there would be no subrogation.
With the details provided, there would be no question.
Would the adjuster document the loss and in the naritive mention the circumstances under which caused the loss?
I would like a walk through on this, including the fee bill, also what documentation
of the loss you would need?
My opinion would be to document the loss as you would any other and then in the notes or narritive describe the circumstances, and recomendations if required. |
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ShermaninCO
USA
40 Posts |
Posted - 02/15/2003 : 06:38:33
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| Excelent question Newt, That Is the type of thing that we must learn from mentors here because book learning doesn't do it. |
Bill Sherman
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Newt
USA
657 Posts |
Posted - 02/15/2003 : 09:09:36
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| I have one more question: Since this is undoubtedly going to be a denial, would the adjuster get a non-waiver agreement signed, just in case? |
Edited by - Newt on 02/15/2003 09:14:14 |
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