Is your insurance policy your only form of asset protection? If so, then a reality check is in order. Everyone knows accidents and injuries are a part of life. That is why most people purchase some form of insurance for their homes, vehicles and equipment. While we, as homeowners and property owners do what we can to protect ourselves from being liable for what happens on our property or with our equipment, it is not always possible.
It is fair to say, that part of the reason why we purchase insurance to begin with, is because we do not want to pay out of pocket if an accident or injury does occur. At the same time, our insurance carriers don’t want to pay either. This is where asset protection and knowing your coverage are key. Many times, claims that the average person would consider to be covered under their policy umbrella actually are not covered at all.
Protecting yourself when it comes to your insurance coverage is a two-fold process. First, you need to know what your plan covers in order protect yourself and to guarantee that your policy’s coverage is right for you. Secondly, you need to protect your assets. In the instance that an accident does occur on your property or with your equipment, you want to keep your assets beyond the reach of your opponent.
Many of us are led to believe that insurance is an inexpensive and less troublesome form of asset protection. Why create a limited liability company to protect your assets when you can purchase umbrella policies for a relatively small amount of money? The answer is simple – we hold a misguided belief that our insurance policy covers much more than it actually does. As evident in Arrowood Indemnity Co. v. King, a homeowner’s trust in their insurance policies was clearly tested and broken.
In Arrowood, the Kings’ son Junior and a friend, Conor, were riding the King’s ATV, which the Kings believed was overly insured under their THREE insurance policies. Conor was being pulled behind the ATV on a skateboard, at some point during their game, he fell off the skateboard into the street and was injured .
Conor’s family sought redress from the Kings for the injuries their son sustained and the Kings sought protection from their homeowner’s policy, one of their THREE insurance policies. However, the Kings’ insurance providers sought to avoid paying because the accident occurred in the street and the policy stated that, "[it] covers any person using a recreational vehicle ‘owned by an Insured and on an Insured [L]ocation.’" Basically, the ATV was only insured if the Kings used it while in their yard. Once the boys left the Kings’ property with the ATV to ride around the neighborhood, it was no longer covered by their insurance. Strike One for the Kings.
Okay, not a problem, the Kings can find help from their million-dollar Umbrella policy. Wrong. The provider of the Umbrella Policy also refused to protect them because the policy’s "coverage was not operative unless the recreational motor vehicle was covered by primary insurance (the homeowner’s policy) and was ‘described as being covered in the declarations.’" Because the first policy, the Homeowner’s Policy, did not cover the Kings as the vehicle was not being operated on an insured location, the Umbrella Policy also did not provide coverage. STRIKE TWO for the Kings.
Surely, the Kings’ third policy, an Excess Liability Policy, will protect the King family in this time of crisis. Well, a person is left to wonder if all three of the providers didn’t sit down together and strategize on how to sell the Kings insurance, but insure nothing. This provider denied protection due to the Kings’ failure to list one of the other two insurance policies in the declarations. STRIKE THREE for the Kings. The Court found them to be OUT!
The situation the Kings found themselves in could happen to anyone. Precautions were taken by the Kings to assure that they were covered in every aspect when it came to their ATV. However, due to a loophole in which the neighborhood street was not considered an insured location, they were left fully exposed. I hope this serves as a reminder to everyone that insurance companies are in the business of protecting their own assets, not yours. By not taking steps to protect our assets, we make recovery of money for the opposing side an easy task.