Principles of Risk and Management Insurance (12 ed) Ch 21 Case Application James

Question

Principles of Risk and Management Insurance (12 ed)

Ch 21 Case Application

James and Megan Webb recently purchased a home for $300,000. The home is insured under an HO-3 policy for $250,000 with no endorsements attached. Megan collects antiques for a hobby. James has a stamp collection that contains several rare stamps. The couple also owns a 30-foot sailboat that they use on weekends.

A.) For each of the following losses, indicate whether Section II of the homeowners policy would provide full coverage for the loss. If full coverage would not be provided, explain why.
1. Megan entertains members of a local garden club in her home and serves the guests a buffet luncheon. Two guests become seriously ill and sue Megan, alleging she had served them contaminated food. The court awards each guest damages of $60,000.
2. James is an architect. The roof of a new addition to a client's home collapses. The client alleges that the roof collapsed because of faulty design. The cost of rebuilding is $40,000. The client seeks to recover that amount from James.
3. During a visit to a friend's home, Megan accidentally breaks a figurine that she picked up to admire. The figurine has a value of $475. The friend is seeking damages from Megan.

Explanation / Answer

(1)

According to the section II, the HO-3 policy does not provide any award to the guests. It is the liability of Megan to pay for the damages to the guest. Since, the court completely considers that the mistake or carelessness in serving the contaminated food to the guest is done by Megan. Though, the house was insured under the HO-3 policy for $ 250,000, it would not provide any recovery.

(2)

In this case, James would be responsible for the loss occurred to the client due to collapsing of the house. The HO-3 policy would not be applicable for the coverage of the loss because of faulty design of the house made by James.

(3)

The damages caused outside of the house would not be considered in the coverage of the HO-3 policy. Under this case, Megan would be responsible for breaking the figurine whether intentionally or unintentionally at the friend’s house.

Thus, the HO-3 policy is not applicable in the above cases.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.