The Commonwealth of Kentucky and the Village of Pinehurst, North Carolina each enacted legislation and ordinances in the last few months governing the use of golf carts on public roads. Kentucky relaxed its statutory position and joined the majority of states allowing the restricted use of golf carts on public roads (only a few states remain that forbid the presence of golf carts on public roads). Conversely, the Village of Pinehurst tightened its golf cart usage regulations, more narrowly defining areas where golf carts are allowed.

Although Kentucky and Pinehurst moved in statutorily opposite directions, both jurisdictions, like most which allow golf carts on public streets, require golf carts driven on public roads to be "street legal." Street legal necessitates headlights, turn signals, rear view mirrors, at least a front windshield with working wipers, seat belts for all occupants, a horn and department of transportation-approved tires.

Regulatory control of golf carts goes beyond satisfying equipment requirements. Statutory wording generally mandate that the cart be properly registered and tagged, inspected annually and require the driver to be in physical possession of a valid driver's license when operating the vehicle. Finally, proof of proper liability insurance protecting the golf cart is also required for "street legal" status.

Complying with the last requirement may be the most difficult task. Finding liability coverage is difficult in many states. The following paragraphs will explore how the homeowners' and personal auto policy respond to the ownership, maintenance or use of a golf cart.

Homeowners' Policy

Owned golf carts meeting specific design requirements and non-owned golf carts are extended a limited breadth of liability protection in the Insurance Services Office's (ISO's) homeowners' policy. Coverage extends to injuries occurring: 1) on the golf course; 2) on other parts of the golfing facility (driving range, parking lot or the club house); or 3) while crossing public roads at designated points necessary to access other parts of the facility. Protection is extended via exceptions to the "motor vehicle liability" exclusion (Exclusion "A").

ISO offers an additional coverage extension applying only to owned golf carts; but the coverage provision is somewhat ambiguous. Exclusion "A," paragraph "2.," sub-paragraph "e.," sub-sub-paragraph "(2)" (A.2.e.(2)) extends coverage to owned golf carts "…within the legal boundaries of: (2) A private residential community, including its public roads upon which a motorized golf cart can legally travel, which is subject to the authority of a property owners association and contains an "insured's" residence."

To qualify for coverage, the golf cart must be: 1) in a private residential community containing an insured's residence; 2) able to legally travel the community's "public" roads; and 3) on roads subject to the authority of a property owners association. All three requirements must be met; and when each component requirement is analyzed, very few insured-owned carts (if any) will ever qualify for coverage under this exception.
• Private residential community: This term is not defined in the policy, neither is there an absolute definition available. Conversations with an underwriter for a large national carrier indicate that this likely equates to a private, gated community responsible for the maintenance and upkeep of its own roads (use of the roads is still governed by the local jurisdiction);
• Subject to the authority of a property owners association: If the community is a private residential community as described above, the roads are likely under the authority of the property owners association. This is, to some extent, a non-qualifier; and
• Able to legally travel the community's "public" roads: Most, if not all, golf carts are disqualified from coverage with the application of this requirement. To qualify for use on a "public" road, state law must allow such use. State laws most often stipulate that the golf cart be "street legal" as defined previously; part of "street legal" requires the cart be registered for use on public roads. Once the cart is registered or required to be registered for use on public roads, it is subject to the "A.1.a." or "A.1.b." exclusions and is no longer eligible for coverage under this exception. If state law prohibits the use of golf carts on public roads, a cart cannot qualify because it cannot "legally" travel on public roads. This "catch-22" wording renders this coverage extension essentially useless.

Non-owned golf carts are extended broader liability protection but in narrowly defined circumstances; namely, the cart cannot be owned by the golf course or any other entity providing them as part of their business. The "Motor Vehicle Liability" exclusionary wording removes liability protection for any motor vehicle (which includes golf carts) used for any "business" purpose unless it is a motorized golf cart on the golfing facility.

Liability protection provided by the homeowners' policy ends when a course-owned golf cart deviates from designated paths of travel or is otherwise removed from the golf facility's premises. Protection is also excluded for golf carts rented from any entity whose business involves golf cart rental (such as renting a golf cart while on vacation). Golf cart rental qualifies as a "business" purpose and subjects the cart to the exclusion.

Golf carts 1) not owned by the insured, the golf course or any rental facility; and 2) not registered or required to be registered for use on public roads are extended liability protection under the homeowners' policy. By exception to the "Motor Vehicle Liability" exclusion coverage extends to "motor vehicles" designed for use off public roads and not owned by an insured. Liability for injuries resulting from the use of a golf cart borrowed from a neighbor appears to be covered regardless of the location of the incident provided all other conditions are met.

Homeowners' policies provide very limited protection for the use of golf carts. Any insured with a golf cart exposure should look to other policies to finance potential liabilities.

Personal Auto Policy

Golf carts, whether owned or non-owned, do not qualify for liability protection in the unendorsed personal auto policy (PAP). Only autos are eligible for personal auto policy protection, not "motor vehicles" as in the homeowners' policy. "Auto" is not specifically defined, but PAP underwriting guidelines classify it as a private passenger type, a pick-up truck or van or any other vehicle designed and intended primarily for use on public roads subject to limitations and conditions based on the vehicle type and use. Even "street legal" golf carts do not meet the underwriting definition of an "auto" and are ineligible for coverage.

To garner any personal auto policy protection for the use of golf carts, the Miscellaneous Type Vehicle Endorsement (PP 03 23 or applicable state-specific equivalent) must be attached to the policy. The endorsement expands the definition of auto to include golf carts scheduled in the endorsement. Without the endorsement, the PAP does not extend coverage to any use of golf carts.

Premium for the Miscellaneous Type Vehicle endorsement is 25 percent of the auto policy's liability premium (Rule 19.D.). But coverage availability does not guarantee the underwriter will allow its use.

Underwriters are hesitant to attach the Miscellaneous Type Vehicle endorsement. One underwriter stated that his company "prefers not to write golf carts at all." Many underwriters and insurance carriers feel the same, greatly limiting the circumstances under which the endorsement's use is granted (guidelines vary by company).

Where To Find Coverage

Homeowners' policies do not extend necessary liability protection for golf cart removed from the golf facility; and the personal auto policy excludes coverage completely unless the underwriter can be convinced to attach the Miscellaneous Type Vehicle endorsement.

Insureds with owned golf cart exposures often have limited market options. Many find themselves trapped, consigned to placing a separate golf cart-only policy in either their state's high-risk plan (such as an assigned risk program, reinsurance facility, or other state mandated risk pool) or a non-standard auto market. Maximum liability limits available from a state high-risk program may be lower than the insured's primary liability policy limits and the breadth of coverage may be compromised with the use of a non-standard auto market. Both options create problems if the insured has an umbrella/excess policy.

However, insurance carriers in some states (Florida for one) expect the presence of a large number of golf carts. Carriers in such states usually make some provisions for extending coverage at very reasonable premiums. But this is not the case in every state or with every carrier.

The End of Golf Carts

Statutory requirements, safety issues and increased usage of golf carts combine to create an insurance exposure that may not be easily handled. Standard homeowners' and unendorsed personal auto policies will not adequately respond to all golf cart exposures.