COVERAGE CORNER the Personal Liability coverage in the homeowner’s policy will act as the funding mechanism for a claim. For the purpose of reviewing coverage, consider the ISO Homeowner’s 3 – Special Form. (Activities involving the monetization of vehicle use – like ridesharing or package delivery – is a different story for a different day….) You already knew that the word ISO uses to describe monetized activities is “business.” You already knew that the HO-3 has an exclusion for “business” activities. However, some agents don’t know that some claims resulting from monetized activities are covered under Section II – Liability Coverages. The key to finding coverage – or enforcing the exclusion – is understanding the two-part definition of “business.” First, Part a. of the definition includes a “trade, profession, or occupation engaged in on a full-time, part-time or occasional basis.” Is cutting grass on weekends a “trade”? Is babysitting a child once per week an “occupation”? Is cleaning a friend’s office monthly a “profession”? It’s clear that this part of the definition does not adequately address the side-hustle exposure.
PUZZLING OVER SIDE HUSTLES How to Piece Together Coverage By Kevin C. Amrhein, CIC
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f you owned a home in Kissimmee, FL in the late 1990s, I probably cleaned your swimming pool. And no, I didn’t enjoy it. I just did it for the money. I teach a class about insurance concerns for people who engage in various activities for money. During the intro, I ask the students to share about work experiences from their pre-insurance-agent days. In addition to hilarity (you’d be shocked at what some people share), this serves as an effective
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reminder to a group of insurance folks that we haven’t always been this way; e.g. trained to see the risk in anything and everything. We did what we did for the same reason our insureds do: because we wanted/needed money. And the honest folks in the group admit that, like our insureds, the thought “do I have insurance for this?” never crossed their minds. Not once.
of traditional employment. Nearly four in 10 of us have a side hustle, earning an average of $686/month, according to bankrate.com.
Yard care. House care. Pet care. Child care. Adult care. These and other “side hustles” are pervasive among Americans looking to earn money outside the scope
It’s not hard to imagine how such activities could (easily?) cause injury or damage property. If so, folks with no protection afforded elsewhere hope
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It is without question that you have insureds (and their household residents) who are doing this stuff and often without a license, training, or access to a general liability policy.
Part b. says, “Any other activity engaged in for money or other compensation, except…” and then lists four exceptions. The first is worth noting, and I’ll paraphrase it: “One or more activities … for which no “insured” receives more than $2,000 in total compensation for the 12 months before the beginning of the policy period.” This is where the HO-3 addresses the side-hustle exposure in a way that creates confusion for some agents in my classes. By connecting the income threshold to the 12-months prior to the policy period,
it seems ISO is concerned more with continuity than an absolute elimination of coverage for any compensated activity. For example, if the side hustle is lawn care and it started during the current policy year, there’s no compensation during the 12-months prior to the policy period. Unless the lawn care efforts are considered by the Adjuster to be a “trade, profession or occupation,” claims arising from this side hustle are not subject to the “business” exclusion due to that first exception in Part b. There’s further evidence to suggest that ISO is not completely unappreciative of the personal monetization efforts of insureds. For example, even if their activity triggers the definition of “business,” the exclusion has an exception if an insured is “under 21 and involved in a part-time or occasional, self-employed ‘business’ with no employees.” By reviewing the HO-3, you’ve given your insured essential info they need to decide what they should do next. Concerns about coverage may be addressed by adding an endorsement to the HO-3 or quoting a commercial policy. In some cases, injury or property damage caused by the performance
of such activities may be covered by a third-party’s insurance. For example, check out TaskRabbit.com, where folks can download an app, create a profile, and charge customers an hourly rate for numerous tasks ranging from home repair to moving furniture to waiting in line (yes, you read that correctly). According to the website, there is coverage for some claims caused by “taskers.” As an agent, it’s unwise to offer coverage counsel on any insurance policy that you don’t have direct control or knowledge of. Should your insured use such a platform to connect with customers, caution him/her to carefully review any insurance provided. That’s all for now. Until the next round … cheers!
Kevin C Amrhein, CIC, is IA&B‘s newest 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.
LEARN MORE ABOUT COVERING SIDE HUSTLES ATTEND OUR special topic seminar to discover coverage concerns with side jobs and self-employment, as well as what's new with the ISO Personal Auto policy. Coverage for Uber, AirBnB & Other Gig Economy Trends April 16 | Newark, DE July 9 | Mechanicsburg, PA Aug. 13 | Philadelphia, PA Aug. 22 | Pittsburgh, PA Register today. 800-998-9644, option 1 | IABforME.com/education
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