Homeowner's Policies Can be Complex

Many people may try to run for an exit when the subject of insurance is raised, but everyone should have a basic understanding of their homeowner's, condominium, or renter's insurance policy.

Homeowner's insurance, like auto insurance, contains casualty coverage to pay the homeowner for losses to the property covered resulting from fire and flood.

There also is a liability component. The liability component is designed to cover the risks of home and property ownership and normal activities that are conducted in the home. The policy covers both liability for bodily injury as well as property damage. Usually the liability coverage extends not only to the owner of the home or condo, but also to his or her family members, even for injury caused by your home pets living on the property.

Our firm has handled homeowner-liability situations in almost every conceivable accident or injury that could happen around the house, including injuries from slip and falls, dog bites, falling objects, glass doors, altercations, collapsing furniture and swimming-pool accidents.

The liability coverage under a homeowners, renters or condo policy also may extend beyond injuries suffered on the property. In fact, we have seen homeowner's policies cover altercations on a golf course that resulted in physical injuries. There was the "friendly" foursome who got into a physical confrontation over the placement of a ball on the 11th hole, which ended up being covered under a homeowner's "comprehensive personal liability" section.

Like all insurance policies, there are a number of exclusions that are listed in most homeowner's policies. The most common exclusions include liability for accidents involving motor vehicles or water craft, damages resulting from a business, or damages arising from a contract, and damage to the house itself.

Under California law, there can be no insurance coverage for willful acts. If you shoot someone and intend to harm them, do not expect your insurance company to provide coverage. Additionally, most intentional sexual acts are excluded under coverage.

In addition to liability coverage, most homeowner's policies contain property casualty insurance. This insurance covers the house and its contents from a variety of risks.

There are two kinds of policies: One is an all-risk policy, which includes coverage of all risks of physical loss to the property unless the loss is explicitly excluded; the other is a policy of "named" perils, which provides coverage for only those perils specifically listed in the policy.

The most common coverage in a homeowner's insurance policy includes losses due to theft, fire, lightning, wind and rain. Most homeowner's policies exclude damages due to earth movement. This is a particularly important exclusion for those living in California because of the earthquake risk. To obtain earthquake insurance, you must pay additional premiums.

Insurance policies do not generally include coverage for damages caused by normal wear and tear or gradual deterioration of the property.

Many renters do not know they must obtain insurance for their own possessions because they are not generally covered under the landlord's policy. Our office has seen cases where tenants lost their possessions because they had no insurance and as the result of a fire, their property was not covered under the landlord's policy.

Homeowner's policies also contain very limited worker's compensation coverage. This coverage extends, in some cases, to people such as babysitters, gardeners, and other occasional laborers. This type of coverage is extremely limited, however. If you have any questions about the applicability of worker's compensation to your particular needs, you should talk it over with your attorney or insurance agent.

While most banks or lenders require homeowners to obtain both liability and property insurance, we know of people who unknowingly only had property insurance and no liability coverage. This can be extremely risky and could expose you to substantial costs.

Your attorney and/or insurance agent should be able to explain the various coverage points in detail as it relates to your particular needs.

Jim A. Testa is senior partner of the San Marcos-based law firm of Testa & Associates, LLP, and can be reached at 760-891-0490.