Checklists, coverage gaps and preparation were discussed in the previous post: Gaps That Sell. As discussed, there are two classes of coverage/exposure gaps: 1) those that will almost certainly result in the winning of the client when presented; and 2) those that don't necessarily win the client but serve rather to cement the agent/client relationship.

In homeowners', there are three "type 1.A." coverage gaps common enough to apply to a majority of homeowners' insurance clients.

Homeowners' Policy Gaps Likely to get the Agent Hired (Type "1.A." Gaps)

Skillful introduction and explanation of the following three "common" coverage gaps will likely result in the addition of a new client. Further, each of the three listed gaps is easily closed and, as an added bonus, with minimal increases in premium:

1. Personal Injury Coverage;
2. Water Backup from Sewers and Drains/Sump Overflow;and
3. "Miniature" Recreational Vehicles (i.e. Barbie Jeeps and other battery power vehicle).

Personal Injury Coverage. Ever gotten into an argument with someone and called them something in public not exactly suitable for printing? What about the neighborhood rumor mill, ever passed along a juicy piece of information without first checking the facts? These are examples of "personal injury" as defined in insurance terms. Libel, slander and defamation of character are the best known of the "personal injury" offenses.

The Internet has upped the ante on the need for personal injury protection. Posting an opinion to a website, blogging about an individual or business or simply forwarding a damaging email could result in a personal injury suit. The problem is personal injury is not covered in the unendorsed homeowners' policy. An endorsement is required to gain the needed protection.

Personal injury protection is garnered by attachment of the HO 24 82 (or equivalent state-specific or proprietary) endorsement. Coverage is not limited to libel, slander and defamation of character, but is also extended to any offense commonly considered personal injury (in insurance terms) including: invasion of privacy, wrongful entry into or wrongful eviction from a premises (all three could be useful if the insured is a lessor or landlord), false arrest, false imprisonment or malicious prosecution.

How important is personal injury protection? In January 2008, a real estate developer sued a blogger for $25 million because of something he said on his blog. A three-part series on blogs and insurance appeared on www.mynewmarkets.com in December 2008. Click here to link to the series.

People seem to be easily offended and more than willing to air their "hurt" feelings in court; most clients will readily admit this to be true. Simply pointing out this obvious, yet not covered loss exposure along with its easy fix can win a new client.

Water Backup from Sewers or Drains/Sump Discharge or Overflow. Most insureds assume that damage caused by water backing up in a drain or caused by the breakdown of a sump pump is covered by the "standard" homeowners' policy; and they are upset when they find otherwise - usually when it's too late.

My neighbor woke one morning to find that his downstairs guest bath had backed up during the night, spilling out into the hall - ruining several square feet of hardwood and some furniture. Seeing the devastation from the top of the stairs, my neighbor tore down the stairs, slipped and slid across the wet floor putting his foot through the drywall. He wasn't hurt, but he was mad when his claim was denied under the "Water Damage" exclusion. Luckily, the reason for the backup was improper work done by a plumbing contractor so at least there was coverage under the contractor's liability policy for the property damage.

A second class of insureds subject to the standard water damage exclusion is those using sumps and sump pumps. Any insureds that depend on a sump pump to keep their basement living areas dry have a specific exposure to an excluded hazard.

Filling this gap is as easy as attaching an endorsement. All that is required is the attachment of the HO 04 95 (or applicable state-specific form).

Miniature Recreational Vehicles. Insureds with young children likely have a miniature recreational vehicle or two of some kind; a "Barbie Jeep" or some other battery-powered vehicle used to cruise the backyard, and sometimes the street, with their friends. Both of my daughters have them as do all the kids with whom they play; it's fun watching them race and play, until they turn them into bumper cars.

As long as the insured's children are on the "insured location" (as defined by the policy), liability coverage is extended from the homeowners' policy for any bodily injury or property damage the kids cause. However, once the Barbie Jeep leaves the insured location, liability protection ceases. Exclusion "A.2.d." of Insurance Services Office's (ISO's) homeowners' policy specifically excludes from protection the use of any self-propelled motor vehicle owned by the insured when it is being operated off the insured location.

Once my daughter leaves our yard, any injury or damages she causes with her new battery-powered, three wheel "go-cart" (for lack of a better term) are excluded. This little vehicle races along at about 10 miles an hour and could really do some damage if she ran over the neighbors or their kids. If sued for these injuries, not to mention the parental "emotional distress" suit that would certainly accompany it, an unendorsed homeowners' policy would provide no protection.

ISO created the HO 24 13 (Incidental Low Power Recreational Motor Vehicle) endorsement for just this exposure. This endorsement alters the homeowners' policy to extend protection when these miniature recreational vehicles are being used off the insured location, subject to a few conditions. However, the promulgation and availability of the endorsement does not guarantee its use (just like any endorsement); some carriers do not offer this form, leaving the insured without the availability of protection. Knowing which carriers will and will not offer the endorsement could, itself, be a great selling point and path to a new client.

More Homeowners' Gaps

Beyond these three "type 1" coverage gaps are a myriad of "type 1.B." and "type 2" gaps (as defined in the previous post). Exploiting gaps in protection demonstrate to the client the agent's expertise and professionalism; it also builds trust on the part of the client.