Coffee Roaster Burns Down House?

[Mangrove]

Question for the seasoned pros...

Owner of a coffee roasting company wants to know if his home would be covered if his coffee roaster malfunctioned and burned the house down? His company is a LLC. He roasts the coffee in his garage under cottage law. He has a CGL policy for the LLC. He has HO3 for his house.

How/Is this exposure insurable? If so, on CGL or HO3?

 

[VolAgent]

I'm betting he falls through the cracks unless he has a business endorsement on his HO3. Clearly a business activity, so almost certainly excluded on his homeowners.

CGL is liability, liability towards others. You can't be liable to yourself, and since his actions roasting coffee caused his home to burn down, almost certainly no coverage there.

So he needs property coverage for his business as a tenant or an endorsement on his HO3 to cover his business activities, and to ensure the endorsement would cover roasting coffee.

Ultimately it will depend on the exact language of his policy, but until you show us his policy, I seriously doubt there would be coverage as is.

 

[djs]

Most home policies have a way to endorse a home based business onto them to cover these situations.

Not all home based businesses qualify to be endorsed onto a home policy though. It might take some work to find a carrier that is willing to accept this. Ironically, most commercial policies won't cover home based risk either. Like I said, it might take some work, or it might be simple. Not sure what is involved in coffee roasting and how it ranks for risk in a carriers eyes.

Dan

 

[adjusterjack]

Sorry, VolAgent and djs, but you've both got it a little backwards. The HO-3 doesn't need to endorse a business exposure on to the policy but it could attach an endorsement excluding the business exposure.

Owner of a coffee roasting company wants to know if his home would be covered if his coffee roaster malfunctioned and burned the house down?

Yes, it would be covered by his HO-3 because there is no Section I - Property exclusion that says otherwise.

You need only read his HO-3 policy to discover that.

There are, however, a couple of things that would limit coverage to some extent.

If the garage itself is a separate building, the garage building would not be covered because the Other Structures part excludes

"Other structures from which any "business" is conducted."

If it's an attached garage, no problem, it's covered for fire as part of the house.

The other thing is the limitation under Special Limits of Liability:

"$2,500 on property, on the "residence premises", used primarily for "business" purposes."

Homeowners insurance typically has no issue with home based businesses as long as the insurance company knows about the business and had the opportunity to underwrite the risk properly.

In fact, the two provisions that I quoted reveal that there IS property coverage for a home based business unless, for some reason, an endorsement specifically excludes the business operation.

Homeowners applications typically ask:

"Is there any business conducted on the premises (including day/child care)? If yes, explain."

The question is present on my homeowners application as well as on the ACORD homeowners application which is available by googling it.

If the insured failed to disclose his business operation to his homeowners carrier he could find himself in deep doodoo thanks to a provision like this that appears in every insurance policy:

Concealment Or Fraud
We provide coverage to no "insureds" under this
policy if, whether before or after a loss, an
"insured" has:
1. Intentionally concealed or misrepresented any
material fact or circumstance;
2. Engaged in fraudulent conduct; or
3. Made false statements;
relating to this insurance.

All of the above is based on the standard homeowners policy provided to the insurance industry by ISO (Insurance Services Office). There might be slight differences in wording from company to company or from edition to edition so a thorough reading of the insured's policy is necessary.

But I think you will find that the provisions I quoted are pretty standard.

 

[insurance1822]

^ Dude knows whats up.

When you were an adjuster...what carriers did you adjust for & was the culture to FIND coverage or GET OUT of coverage?