Many assume that coverage for garages, fences and other outdoor property is automatically included in their insurance policy as these items are located on the same land as the main house. Coverage for “Other Structures” is usually always included in standard Homeowner’s policies. However, coverage for investment properties operates differently, and some “detached structures”, or “outdoor fixtures” may not be included unless your client specifically requests coverage for those items. In other cases, coverage may simply not be available at all.
What types of damage could be excluded?
Coverage on a garage is usually included with the coverage for the main structure IF it is attached. The word “attached” may have different meanings depending upon the policy. Some policies may include coverage for a garage attached to the main structure by a breezeway, while others may still define that garage as “detached.” Detached garages, on the other hand, usually fall under the category of “Other Structures.” If your investor client’s Declarations page or Evidence of Insurance does not list a limit for Other Structures, their detached garage is likely NOT covered.
Aside from garages and fences, other “outdoor fixtures” such as outdoor furniture are typically not covered. However, some commercial policies do allow coverage for outdoor furniture if it is used to maintain or service the building. Some Builders Risk policies do offer coverage for materials, equipment, supplies and “temporary structures” on or within 100 feet of the premises during construction. It is best for your investor client to check their policy for language to see what specific coverage is offered or excluded for their property.
What happens if the investor client doesn’t have coverage for “Other Structures” included in their policy?
If your investor client doesn’t have Other Structures coverage and their detached garage is damaged, by a fire for example, the insurance company will not pay to repair or rebuild it. As mentioned previously, one should not assume that Other Structures coverage is automatically included. The investor should look for a line item on their Declarations page or Evidence of Insurance labeled “Other Structures.” It may simply say “included”, “excluded” or may give a specific coverage amount. Some properties have very nice “mother-in-law suites” on the top floor of a detached garage, so if your investor client has a significant secondary structure on their property, they should be sure to ask you, the agent, how to adequately protect it.
Can the investor client be held responsible if one of their trees damages a tenant’s belongings that are stored outdoors?
It depends on the circumstances of the loss. If the investor client’s tree falls on their tenant’s lawn mower and the incident is determined to be an “act of God,” that tenant will then need to rely upon their renters insurance to reimburse the loss of the mower. The key to the definition of an “act of God” is that it is an “injury due directly and exclusively to natural causes which could not have been prevented by the exercise of reasonable care and foresight.”
However, if the investor client’s tenant had sent them a written notice warning of the condition of the tree in the backyard, but the investor did not attempt to remedy the hazard, they may be responsible to replace their tenant’s damaged mower. The investor client’s liability coverage may kick in to cover the damage but bear in mind that a deductible still may be applied, leaving them to pay for that mower out of their own pocket. Replacing a mower is one thing, but if that same tree were to injure a tenant as they were mowing the backyard, it may be much more costly to your investor client and their tenant, financially, physically, and psychologically.
Is there a way to add coverage for “Other Structures,” and does it cost extra?
Yes, if coverage for Other Structures isn’t already included in your investor client’s policy, it can typically be added as a separate amount of coverage for those items. Whether or not coverage for fences and other outdoor property can be added may depend upon the type of building being insured and what policy format is being used to insure the property. If Other Structures coverage is available to your investor client, it typically does cost extra and will depend upon how much coverage is being requested. For example, adding $10,000 worth of coverage will not cause a significant increase in cost; however, insuring another structure that is equivalent in function to the primary building could double the cost.
What does the technical lingo for this exclusion look like in the investor client’s policy?
Sample policy language may look similar to this:
Other Structures Coverage as Listed on a Declarations Page:
A. DWELLING $100,000
OTHER STRUCTURES $10,000 (or EXCLUDED)
B. PERSONAL PROPERTY EXCLUDED
C. LOSS OF USE ACTUAL LOSS SUSTAINED
Language excluding Fences and other Outdoor Property:
“Covered Property does not include the following property while outside of buildings:
Fences, radio or television antennas (including satellite dishes) and their lead-in wiring, masts or towers, signs (other than signs attached to buildings), trees, shrubs, or plants (other than “stock” of trees, shrubs or plants), all except as provided in the Coverage Extensions.”
Outdoor Fixtures and Furniture Exclusion Endorsement:
“This Policy does not insure any loss or damage, cost or expense or any increase in insured loss, damage, cost or expense which arises from loss or damage to outdoor furniture or fixtures, whether or not directly or indirectly caused by or resulting from any peril otherwise insured under this Policy.”
If Coverage for “outdoor fixtures” or “uninstalled materials” is Included in a Commercial Policy:
“Covered Property
Building, meaning the building or structure described in the Declarations including:
(1) Completed additions;
(2) Fixtures, including outdoor fixtures;
(3) Permanently installed:
(a) Machinery and
(b) Equipment
(4) Personal property owned by you that is used to maintain or service the building or structure or its premises, including:
(a) Fire extinguishing equipment;
(b) Outdoor furniture;
(c) Floor coverings; and
(d) Appliances used for refrigerating, ventilating, cooking, dish washing or laundering;
(5) If not covered by other insurance:
(a) Additions under construction, alterations and repairs to the building or structure;
(b) Materials, equipment, supplies and temporary structures, on or within 100 feet of the described premises…”
*As insurance policies may vary, investors should check their own policy for language specific to the covered property.
What can this type of damage cost the investor client?
Damage to small items, such as the lawn mower mentioned above may only cost a couple hundred dollars. That stated, if a detached garage goes uninsured the investor client’s out-of-pocket cost could start at anywhere around $5000 and go up from there, depending upon the complexity of the structure. One of the most painful instances we witnessed was where a secondary living structure on the same plot was assumed to be insured. When it burned to the ground in an electrical fire, the investor ended up having to foot the entire ~$70,000 bill to tear it down and rebuild. The real kicker is the investor could have added coverage for the building under Other Structures and his out-of-pocket expense may have been reserved to the deductible.
How can investors protect themselves?
First, they should know what is in their policy: It is important that investors read the sections of their policy that addresses Other Structures, fences and other “outdoor fixtures.” They should know what they are and are not covered for. Investors should make you (the agent) aware of any additional structures located on the property so they can be covered in the appropriate manner. If you and your investor client don’t understand something or have questions, don’t hesitate to contact your Sales Manager who would be happy to help!
Investors should maintain their lawn and trees so they are less likely to damage other property stored outdoors: Sometimes there’s nothing that can be done to prevent a healthy tree from falling as a result of high winds during a storm. However, making sure trees stay healthy can keep your investor clients from the unnecessary risks of damaging their own garage, someone else’s property or even keep someone from being injured!
Only a licensed and insured arborist should be hired to correct any large tree issues: Any arborist the investor client hires should be certified by an organization such as the International Society of Arboriculture or the Tree Care Industry Association. They will also need to have the appropriate liability insurance. Your investor clients can find an arborist in their area, by calling TCIA at 800-733-2622 or running a Zip Code Search on www.treecaretips.org. ISA-certified arborists can be found through a search tool at www.isa-arbor.com .
Investors should make sure their tenant understands that their personal property isn’t covered by the investor’s insurance: Investors should require their tenants to carry renters insurance in the lease and enforce it. Investors must inform tenants that any insurance carried on the property by the investor does not apply to their personal belongings. Investors should Impress upon tenants the importance of reporting any hazardous conditions on the property to the investor or the property manager immediately. Your investor client may want to include a section in the lease where the tenant acknowledges their understanding of these items.
