MOTOR VEHICLE LIABILITY EXCLUSION

This exclusion precludes coverage under both the liability and medical payments coverages for motor vehicle liability, if at the time of occurrence, the involved motor vehicle was either registered for use on public streets or was required to have been registered. In addition, this exclusion precludes coverage if, at the time of occurrence, the motor vehicle was being used in any prearranged, organized race, speed contest, or other competition. The motor vehicle liability exclusion also precludes coverage for occurrences arising out of motor vehicles that are: rented to others; used to carry persons Chapter 10 Liability Coverage Exclusions or cargo for charge; or used for any business purposes, except for motorized golf carts while on a golfing facility. There are some exceptions to this exclusion. Where none of these excluded categories applies, the motor vehicle liability exclusion does not apply if the motor vehicle out of which the claim arises is: ◆ in dead storage on an insured location; ◆ used solely to service an insured’s residence; ◆ designed to assist the handicapped and at the time of an occurrence is: ■ being used to assist a handicapped person or ■ is parked on an insured location; ◆ designed for recreational use off public roads and is: ■ not owned by an insured or ■ owned by an insured, provided the occurrence takes place on an insured location; or, ◆ a motorized golf cart as defined by policy language. These provisions are intended to highlight the distinctions between those forms of motor vehicle liability that should be the subject of an auto liability policy and those that fall within the scope of personal liability that is the subject of coverage of a homeowners policy. EXPECTED OR INTENDED INJURY This exclusion precludes liability for medical payments for bodily injury or property damage that is expected or intended by an insured. This is regardless of whether the bodily injury or property damage is of a different kind, quality, or degree than initially expected or is sustained by a different person, entity, or property than initially expected or intended. There are important points that you need to understand about the expected or intended exclusion. First, expected or intended losses are not insurable because they are not fortuitous. Many states have statutory willful 116 The Complete Book of Insurance acts exclusions that are implied by law into all policies. In many other states, there are not statutory willful acts exclusions per se, but the same result is implied as a matter of public policy. In some states, however, the exclusion must be expressly included. Second, coverage is excluded for bodily injury or property damage that is expected or intended by an insured. In a majority of states, the use of an or any rather than the insured is likely to have the result that no coverage will exist for a so-called innocent co-insured. This covers situations in which an injured party attempts to impose vicarious liability on one insured for the intentional acts of another insured. Third, excuses—for example, that you did not mean to hit someone as hard as you actually did—are not going to render this exclusion inapplicable. The expected or intended exclusion has an exception for bodily injury resulting from the use of reasonable force by an insured to protect persons or property. In this context, reasonable force to protect persons or property should be considered only that necessary for self-defense (or the defense of others) or to prevent a property crime, such as burglary, theft, or arson. In most states, a person may only use lethal force to protect him- or herself or another, when that person is objectively threatened by lethal force on the part of an assailant. In many if not most states, the use of lethal force is never permissible to prevent a property crime, except when the commission of a property crime threatens the lives of others (for example, arson, in certain limited circumstances). The amount of force that may be permissibly employed to protect persons or property is the minimum level necessary to meet the threat presented, judged on an objective, not a subjective, standard. If your use of force in response to a threat to yourself, to another person, or to property exceeds the permissible level, you will be deemed the aggressor. This gives rights on the part of the other person to use reasonable force to deter what is now, from a legal standpoint, your assault on him or her. Liability Coverage Exclusions 117 The lessons you need to take home from these admonitions are as follows. ◆ Keep your cool. ◆ Do not escalate confrontations. ◆ Do not enlist the assistance of a bunch of buddies to take matters into your own hands. ◆ If you go over the line, or even if it is a close call, you may jeopardize your right to insurance coverage, and should at minimum expect a defense subject to the insurer’s reservation of right to deny paying a resulting judgment against you. ◆ If you are subject to criminal prosecution, your insurer has absolutely no obligation to provide you with a defense counsel in your criminal case. ◆ A conviction in a criminal case can serve as a basis for denying coverage completely in a civil lawsuit arising from the same incident. BUSINESS EXCLUSION The business—or to use former terminology, business pursuits—exclusion, is one of the most important and long-standing exclusions to the liability coverages of homeowners policies. Until the recent past, the verbiage of the business definition was very simple and straightforward. If the activity in question had any business or profit motive, then no coverage existed. Things have changed. The lines between business activities and personal activities have become more complicated. As a result, the definition of business is more complex, as is the business exclusion. The definition of business now reads a trade, profession, or occupation engaged in on full-time, part-time, or occasional basis and any other activity engaged in for money or other compensation except the following:…There are four categories of exceptions. First, there are activities not falling within the following three categories, for which no insured receives more than $2,000 in total compensation for the 12-month period prior to the beginning of the policy. Second, volunteer activities for which no money is received other than reimbursement of expenses incurred to perform the activity are not deemed to be a business. Third, providing home day care services for which the insured receives no compensation other than mutual exchange of such services from others is not deemed a business. Fourth, the definition of business does not include providing home day care services to a relative of an insured. The business exclusion itself provides that the liability and medical payments coverages do not apply to 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. It does not matter whether or not the business is owned or operated by an insured or employs an insured. The business exclusion further states that it includes but is not limited to acts or omissions involving services or duties rendered and promises owed or implied to be provided because of the nature of the business. The use of the phrases arising out of, or in connection with, in the business exclusion renders it a very broad exclusion. These phrases require only a minimal, incidental relationship between bodily injury and an insured’s business activities to render the exclusion applicable. There are some exceptions to the business exclusion. The most common would involve renting part of the residence premises or using portions of it as an office, school, studio, or private garage. Finally, the business exclusion does not apply to an insured who is under the age of 21 and involved in a part-time or occasional, self-employed business without any employees. For example, your daughter’s baby-sitting for pay or your son’s mowing lawns, raking leaves, or shoveling snow for pay would not fall into the business exclusion. Liability Coverage Exclusions 119 PROFESSIONAL SERVICES The professional services exclusion is a close companion to the business exclusion and precludes coverage for bodily injury or property damage arising out of the rendering of or failure to render professional services. The various states differ in their interpretation of professional services. Some states interpret the phrase as meaning traditional, learned professions, such as medicine, law, accounting, and engineering. Other states interpret professional services far more broadly—including any activity conducted for compensation that requires any specialized skill or knowledge that is not possessed by the average person—and is not limited to traditional learned professions. Professional services exclusions also are standard exclusions in commercial liability policies. If you engage in or provide services for remuneration, you may have a professional services exposure that needs to be separately insured under an errors and omissions policy particular to the type of services you are rendering.

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