The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.
This has been the wettest Summer in a long time. The recent rains have resulted in flooding in areas not previously affected and, unfortunately, in deaths in the Hill Country. While there are a number of possible reasons, highway expansion, construction of new homes/subdivisions, silt buildup in area lakes and creeks, the resulting flooded areas can’t be ignored. This reminded me that it is a good practice to review your insurance policies and discuss your coverages with your agents to make sure your property is adequately protected.
Using your residential property for a business reminds me of the importance of knowing the coverage your homeowners policy provides and the importance of business premises insurance. Reading and understanding all of the language in a homeowner’s or business liability insurance policy is not a formality to be skipped over while searching for the signature line. As with any contract, the fine print can have real and lasting consequences, and its contents will prevail over any contradictory verbal assurances. Taking the time to understand the terms of their policies might have headed off bad outcomes for homeowners in two recent cases.
Joan bought property consisting of a home, two barns, and other outbuildings. She also purchased a homeowners’ insurance policy that excluded coverage for any nondwelling structure that was rented out “unless used solely as a private garage.” Joan rented the barns to a commercial marina, which used them for the storage of customers’ boats. When one of the barns collapsed due to a storm, Joan submitted a claim for the loss of the barn.
The insurer denied coverage, prompting Joan to point out that the rental exclusion should not apply because the marina was using the barn as a “private garage.” Her point made sense as far as it went, but the insurer won because of a separate exclusion from coverage for any nondwelling “used in whole or in part for business purposes.” Joan’s main occupation was a financial analyst, and she brought in only a few thousand dollars by renting out the barn. But all that was necessary for the business purposes exclusion to apply was that the insured regularly engaged in the conduct with an intent to profit.
It was significant for the court that, by failing to disclose her conduct, Joan had prevented the insurer from knowing the risks it was insuring. The purpose of a business pursuits exclusion, after all, is to rule out coverage for a whole set of risks and liabilities flowing from business activity. It did not matter that the damage to the barn was not caused by the boats that were stored there for profit.
Many of you may have seen or received advertisements for identity theft coverage. However, if you review your homeowners insurance policy, you may find that it contains coverage for identity fraud expenses. Depending on your specific policy, this could cover credit card and identity fraud related to the title to your property. Before signing up for identity theft, sit down and read your current homeowners' policy.
You may be surprised to find that you have coverage for loss of refrigerated products as well. With some of our weather events, we lose power. When this loss of power is extended, then you may lose the deer meat you harvested or the calf you had butchered. If you have the right kind of coverage in your homeowners policy, you will be covered for these losses.
Before a storm affects you, sit down with your insurance agent to discuss and make sure you have the coverage you want. When entering a contract, particularly one prepared or furnished by another, it is a good idea to review the document carefully. A better practice would be to have your attorney review the document for you. Do not put yourself in the position of reviewing your contract after a problem or claim has arisen. It may be too late.
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas. www.moakandmoak.com ©