Insurers to Make Customers Pay if Italy Defaults

Hunting Leases

VU Faculty

Abstract It’s as certain as the hunting seasons: When the seasons begin, hunters ask their insurance agents about liability coverage on owned and leased hunting land, and landowners ask about liability insurance on property leased to hunters. Is this a Homeowners or a CGL exposure? Well, it depends….

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“A personal insured leases land and allows operation of a hunt club. There is a $3,000,000 liability policy covering third party claims arising from the hunt club operation. The Insured has a personal umbrella. If a claim arises from vacant land the insured leases in his name, would his personal umbrella respond? Also, if a member of the hunt club were injured, would the umbrella respond even though there would be no underlying liability coverage?”

“One of our personal lines customers purchased some land with his partner and formed it as an LLC. On occasions he will bring a guest to hunt. Since it was formed as an LLC, we could not extend liability from the homeowners or umbrella. Our question pertains to if coverage extends from the umbrella should the insured be sued as an individual and not as a corporate officer of the LLC?”

“Homeowners policy:  Can we extend liability from a homeowners policy to cover an estate property left to 12 individual parties/50 acres of land/with a hunting cabin on it? Or is the appropriate way to do this under a GL policy? Our particular carrier stated that they would not allow us to do it because there are too many individuals involved.”

“I have been asked to write a personal liability policy for four individuals who lease a dwelling from the state solely for the purpose of occupying it during hunting and fishing seasons throughout the year. They do not lease any set amount of land, just the dwelling. The state is requiring them to carry at least $100,000 per person or $300,000 personal liability coverage. Would this risk be covered under their individual homeowners policies?Also, is it possible to write a separate liability policy for each individual? I have spoken to a couple of E&S markets which will not touch the risk because the hunting and fishing exposure. I have been told this would need to be written under a Hunt Club policy.”

“We have an insured whose homeowners policy is an HO-3 2000. He has asked if there is coverage under his policy for property that he leases from someone else for hunting purposes. He pays a fee each hunting season for the right to hunt on the property.”

“Seven individuals covered by homeowners policies (four from our agency) have formed a hunt club as an LLC and bought land under the hunt club’s name. The land will be used only by these individuals and their guests, none of them for business. Can we cover them with a homeowners policy or do we need a special form? What about the LLC?”

“Our insured, a corporation, has leased some hunting land. The CGL carrier has said that they will not pick up this exposure, so we got another CGL from a specialty company. Do you see any problems?”

“Our insured has joined with three other duck hunters to rent a soy bean field from a farmer near a river. The farmer has harvested most of the beans and they intend to flood the field. They have built one duck blind on it. It is not fenced. They have a water control device and possibly will employ a pump to flood the field from the river. It is 25 acres. The farmer is asking for certificates of liability, from each of the four of them, showing $1,000,000 liability under their homeowner’s policies. The insured’s policy only has $500,000 limits and the carrier says they won’t offer more except under an umbrella. Is this a standard underwriting attitude among personal lines carriers?

“After researching it, I have advised the insured that the homeowner’s policy will not extend liability coverage to this ‘Farm Property’ as it is an exception to the ‘Vacant Land’ definition. He counters that they are not farming it. If hunting is not encompassed in the legal definition of ‘farming’ then he has a point. If the other three get their agents to issue certificates (assuming they are likewise covered under the same policy form), will it protect them from liability arising out of the use of this field they have rented and flooded and hunt over? Our carrier has refused to even issue the certificate. Is this proper/normal? I have advised my cousin that they may get certificates from the other three carriers, but the HO-3 policy form will not protect them. Am I correct?

“I have discovered some great repugnance among standard lines underwriters to even consider adding any type of liability endorsement that might offer any remote hint of extra coverage under the HO-3 policy for hunting. The only way to get it covered seems to be a rather expensive specialty lines policy. Is it necessary? Is there any coverage at all under the HO-3?”

If land is truly vacant, liability coverage may be found under individuals’ homeowners policies as long as there are no business activities. However, such property often contains a duck blind, deer stand, fence or other type of structures (click here for more info on this issue). An LLC might be coverable as an additional insured, though that could be an underwriting challenge. If the situation doesn’t qualify for an HO policy or the underwriter waivers, the exposure might have to be insured commercially or on a specialty product…visit www.insurancemarketplace.com and search for “Hunt Clubs” or check out this NRA-endorsed program.

Below are two treatises of the hunting exposure, related issues, and possible solutions from our Texas and Florida associations.

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Hunting Leases
by the Independent Insurance Agents of Texas

(Note: This article may include information specific to Texas.)

Introduction

It’s as certain as the hunting seasons: When the seasons begin, hunters ask their insurance agents about liability coverage on owned and leased hunting land, and landowners ask about liability insurance on property leased to hunters.

Liability Coverage for Hunters

Whether a person hunts for free on a family farm, pays a daily fee to a farmer for the privilege, or leases acreage for the season or year-round, the homeowners policy generally provides liability coverage for hunting activities. However, if your policyholder leases the land and is responsible for upkeep of the land or any buildings on it, liability coverage for incidents arising out of a condition of the land or the buildings is not provided unless the location is added to the policy.

The homeowners liability insuring agreement obligates the insurer to pay up to the limit of liability “if a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage caused by an occurrence to which this coverage applies.”

In other words, if no exclusion applies to the occurrence that results in bodily injury or property damage, coverage exists for the insured.

Injury or Damage Arising Out of a Premises

The liability in the homeowners for the insured is not limited to any particular location. However, exclusion “e” eliminates coverage for bodily injury or property damage arising out of a premises that is owned by the insured or rented to the insured if the premises does not meet the definition of an “insured location.”

Let’s first consider what “arising out of a premises” means. It does not mean that any injury or damage that occurs on premises is excluded. In order to be excluded, the injury or damage must arise out of some condition of the premises itself, such as a slip and fall. Texas court decisions have made it clear that the exclusion requires a causal connection between the injury and the premises before coverage can be denied. Courts have ruled that if the accident in question could have happened anywhere, the fact that it happened on rented premises did not bring the injuries within the scope of the exclusion, even if the rented premises was not an “insured location.” Based on these decisions, an accidental shooting on a hunting lease is covered regardless of the premises’ status as an insured location.

“Insured Locations” Defined

Due to the expansive definition of “insured location,” there may also be coverage for occurrences arising out of the hunting lease premises. The definition includes 8 kinds of premises that qualify for coverage. If a hunting lease falls under any one of these (and remember, any ambiguity in the policy wording is interpreted in the insured’s favor), it is an insured location. In addition to the residence premises described in the declarations, the definition of “insured location” includes:

“The part of other premises and grounds which you acquire during the policy period for your use as a residence.”

A hunting lease with a cabin, or the insured’s own mobile home, or travel trailer, could satisfy this definition even if the same location is leased for a short term year after year.

“Any premises you use in connection with a residence premises.”

(probably not applicable).

“Any part of a premises not owned by an insured and where an insured is temporarily residing.”

This definition could apply to a hunting lease with a cabin, mobile home, or travel trailer during the time the insured is present on the premises.

“Vacant land, other than farm land, owned by or rented to an insured.”

This definition might not apply to hunting situations since “vacant” implies the premises is unoccupied or not used for any purpose.

“Land owned by or rented to an insured on which a 1 or 2 family dwelling is being built as a residence for an insured.”

(probably not applicable).

“Individual or family cemetery plots or burial vaults of an insured.”

(not applicable).

“Any part of a premises occasionally rented to an insured for other than business use.”

The definition of “occasionally” is the key here, generally referring to something that occurs at irregular or infrequent intervals. Premises leased year after year, even for a short term, would not qualify.

Gray Areas Require Adding Lease to Policy

Having found coverage for most situations involving hunting leases, under what circumstances, then, do we still have a potential problem covering a hunting lease on an unmodified homeowners policy? Coverage is questionable for any occurrence that causes injury or damage arising out of some condition of the premises (but not the insured’s activities on the premises) when the premises is leased on an annual basis or for a short term year after year, either

·         Without a cabin, mobile home, or travel trailer or

·         When the insured is not residing on the premises at the time of the occurrence.

Because of these gray areas, the leased location should be added to the policy.

The homeowners policy requires the location address and additional premium charge to be shown on the declaration for other residential premises; once shown, the location becomes an “insured location.”

Why Do Companies Refuse to Add Hunting Lease Premises?

Our recommendation to add hunting lease premises to the homeowners policy sometimes meets resistance from insurance company underwriters. The above review of the insuring agreement, exclusions, and definitions, however, supports the idea that coverage for hunting activities and most hunting premises is found in the policy without adding the premises as an additional location. The analysis should help convince underwriters that they might as well add the location, collect a premium, and make it perfectly clear that coverage does apply, to avoid any controversy at the time of a claim.

Hunting Clubs or Groups

Another question arises when a group of hunters form a “club” or other informal association to purchase or lease land for hunting purposes. The land is for the club members and guests. Such an informal arrangement does not separate the individual from liability arising out of the premises or out of hunting activities on the premises. Neither does it preclude liability coverage under the individual homeowners policy. The homeowners policy for each individual would apply for each of their individual interests.

If the club is incorporated, however, and the property is owned by the corporation, it is a separate legal entity apart from the stockholder members. The liability coverage of the individual homeowners policies would not protect the assets of the corporation, and a separate commercial general liability policy would be needed. A CGL is also needed if the property is used for anything other than for the personal activities of the members. If the members charge others a fee for hunting privileges, the business pursuits exclusion (“b”) and the rented property exclusion (“c”) in the homeowners policy apply.

Liability Coverage for Landowners

Most landowners who lease or rent their premises to hunters are insured under a farm and ranchowners policy. Unfortunately, coverage under the FRO is not clear and may be subject to interpretation by companies or the courts. In our opinion, however, coverage does exist.

There are two potentially troublesome exclusions in the FRO policy. The business pursuits exclusion (“b”) does not apply to farming or ranching activities or to activities that are ordinarily incidental to farming or ranching pursuits. In our opinion, the leasing of premises for hunting is incidental to the farming or ranching operation and therefore not subject to the exclusion. The exclusion for premises rented to others (“c”) can be handled by declaring the leased premises on endorsement FRO-500 and charging the applicable additional premium.

Company underwriters interpret these FRO exclusions differently. Therefore, ask the underwriter. If he or she agrees that the leased property is covered, get it in writing or at least confirm the oral agreement by memo. If the underwriter does not agree, try another company or obtain a separate commercial general liability policy.

Legal Limitations on Liability

Chapter 75 of the Civil Remedies and Practices Code limits the legal duties landowners owe to persons using their land for recreational purposes. The law applies to an owner, lessee, or occupant of real property either who does not charge for recreational use of the premises or who charges for such use but the charges do not exceed more than twice the amount of ad valorem taxes (four times the amount for agricultural land). Regardless of the amount charged for use, the law limits the monetary damages that can be collected if injury arises out of the land’s use. Damages are limited to a maximum of $500,000 per person/$1 million per occurrence for bodily injury and $100,000 for property damage (or $1 million combined single limit). The limitation applies only if the landowner has liability insurance in effect with the same or greater limits. This does not eliminate the need for higher limits of liability because of exceptions in the law for gross negligence and because of the possible exhaustion of aggregate limits.

Copyright © 2001, Independent Insurance Agents of Texas. All rights reserved.
Reprinted with premission.

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Hunting Leases and the Homeowners Policy
by David Thompson, CPCU, Florida Association of Insurance Agents

With the desire to “escape to the woods” many people enter into a lease arrangement whereby they lease (or even purchase) acreage, either as an individual or as part of a group, for the purpose of hunting.  Few individuals consider the insurance implications of such lease.  This article examines how the Insurance Services Office (ISO) homeowners program responds to a hunting lease.  The homeowners 2000 program is used as the basis for discussion.  Where coverage is different under the homeowners 1991 program it will be so noted.

In a hunting lease arrangement there are several exposures faced:

·         Other structures may be present or later added

·         Personal property may be left at a structure on the leased premises

·         Various motor vehicles (owned or non-owned) may be used on the leased premises

·         Premises liability issues are present

·         Contractual liability issues may exist due to the language found in the lease

·         The purpose of the lease arrangement may be to entertain business clients

Business vs. personal concerns.  Individuals often lease the premises to entertain business clients or to conduct business activities while hunting.  In such situations the homeowners policy provides very little coverage.  Under Section I of the policy any personal property used primarily for business purposes would be covered only up to $500 since it is away from the residence premises.  (HO-91 limits to $250 and the limitation applies if the personal property is ever used for business, no matter how infrequently.)  Under Section II there would be no liability or medical payments coverage due to the business exclusions.  While there are numerous endorsements available under the homeowners program geared towards business exposures, there is no endorsement that would properly cover such an exposure.  Other options such as an “in-home business policy” or commercial insurance will likely be needed.  The remainder of this article will assume there is no business exposure.

Ownership.  Of key concern is “Who owns the land?”  It’s quite common for a group of individuals to form a hunting club, incorporate, and then purchase land.  An LLC or LLP may be formed for the same purpose if a corporation isn’t formed.  In such situation the entity needs its own policy to provide coverage since the homeowners policy would not provide protection.  If the group does not form an entity but instead simply purchases the land as a group of four to five individuals there could be coverage under the homeowners policy, but it’s very likely that the location of the land needs to be shown on the homeowners declarations page as an additional insured location in order for coverage to apply. See the discussion below concerning “insured locations” for more information concerning coverage in purchase vs. lease situations.

Other structures.  Coverage B under the unendorsed homeowners policy responds for other structures located only “on the residence premises.”  Therefore, any structure located on the hunting land would not be covered.  Individuals will often construct tree stands or sleeping facilities on the hunting land and may at times relocate a small mobile home to the property.  Short of endorsing the policy, none of these structures is covered.  The HO 04 91 and HO 04 92 endorsements are available to cover other structures located away from the residence premises and their use should be encouraged in order to properly protect the other structures.

Personal property.  The homeowners policy covers, “…personal property owned or used by an insured while it is anywhere in the world.”  The full limit of Coverage C is available anywhere in the world, except for “…personal property usually located at an ‘insured’s’ residence, other than the ‘residence premises,’ is 10% of the limit of liability for Coverage C…”  Therefore, unless the individual leaves personal property at a cabin located on the hunting property this 10% limit would not apply.  For example, if the individual’s vehicle happened to be “crammed full” of personal property such as firearms and clothing the full Coverage C limit would be available.  Remember though the internal limit of $2,500 ($2,000 in the HO-91 program) for firearms and related equipment.  Some companies offer endorsements to increase this limit.

Various motor vehicles may be used in connection with the leased premises.  Under Section I of the policy it’s best to assume there is no coverage at all for any motorized land conveyance such as a four-wheeler, hunt buggy, dirt bike, or swamp buggy.  The only coverage is for vehicles; 1> Used solely to service the insured’s residence, or 2> Designed to assist a handicapped person.  Recreational vehicle policies should be considered for motorized land conveyances used on the hunting land.

Premises liability.  This is a difficult exposure to analyze since policy language is not clear.  Section II of the policy excludes the following:

“Bodily injury” or “property damage” arising out of a premises:
a. Owned by an “insured”;
b. Rented to an “insured”; or 
c. Rented to others by an “insured”;
that is not an “insured location”;

Of key importance here are the words, “arising out of a premises.”  Here is an excellent explanation of the wording in an article authored by the Independent Insurance Agents of Texas:

Let’s first consider what “arising out of a premises” means. It does not mean that any injury or damage that occurs on premises is excluded. In order to be excluded, the injury or damage must arise out of some condition of the premises itself, such as a slip and fall. Texas court decisions have made it clear that the exclusion requires a causal connection between the injury and the premises before coverage can be denied. Courts have ruled that if the accident in question could have happened anywhere, the fact that it happened on rented premises did not bring the injuries within the scope of the exclusion, even if the rented premises was not an “insured location.” Based on these decisions, an accidental shooting on a hunting lease is covered regardless of the premises’ status as an insured location. (Copyright Independent Insurance Agents of Texas, used with permission.)

While an accidental shooting would typically be covered, the individual is left with an exposure such as someone being injured on the premises due to a hazard of the land or structure on that land.  For example, falling down an abandoned well or having a tree stand fall and injure someone would likely be viewed as arising out of the premises. 

“Insured location” issues.  Contained in the liability exclusion in an exception stating that coverage applies if the land fits the definition of “insured location.”  The policy defines “insured location” to include eight different locations.  Each of the eight is presented below with commentary about the applicability of each.  If the land fits one or more definitions of “insured location” then the policy provides liability coverage.  Without fitting any definition, there is no liability coverage.

One important point first though.  The whole issue of, “is the land an insured location” can be avoided by simply adding it to the declarations page as an “additional insured location.”  The premium charge to do this is typically around $20, and the fact that coverage is so inexpensive and coverage so broad may cause underwriters to resist or refuse to make the change.  If the location is shown there is no question that liability coverage responds for claims on the land.  This of course is the preferred option to take. Now to the policy analysis.

The “residence premises”;

This is the individual’s home and thus is not applicable to the leased property.

The part of other premises, other structures and grounds used by you as a residence; and
     (1)  Which is shown in the Declarations; or
     (2)  Which is acquired by you during the policy period for your use as a residence;

If the land has a cabin or other living space where the individual stays it’s possible to find coverage from this policy wording.  For land without a living facility this would not apply.  Clearly under item (1) if the underwriter can be convinced to add the land to the policy as an additional insured location the issue is solved.  Under item (2) there would be coverage until policy renewal for a newly acquired hunt club, but only if there were a living facility present where the individual resided while hunting.  After the policy renewal date there would be no coverage.

Any premises used by you in connection with a premises described in a. and b. above;

The language contained here is quite nebulous and relying on this for coverage is not advised.  This language would provide coverage in situations such as an individual who purchased a home in an association and as part of the purchase was deeded a boat dock across the lake.  The dock would qualify as an insured location based on this wording.  Other examples that fit here would be the rental of a mini-warehouse or the use of a city-owned path adjoining a house as a beach access route.

Any part of a premises:
(1) Not owned by an “insured”; and
(2) Where an “insured” is temporarily residing;

If the land is owned this wording is of no help.  However, for leased property this could provide coverage in situations where the leased property had a cabin, cottage, or mobile home.   While the individual was actually present at the premises coverage would apply.  However, coverage would apply only for the cabin premises, not the full acreage. 

Vacant land, other than farm land, owned by or rented to an “insured”;

For land to be vacant it must be totally free of any man-made structure.  A tree stand, cabin, mobile home, duck blind, or fence will render the land not vacant.  One court ruled that an abandoned man-made water well rendered land not vacant while another court ruled that a dirt road rendered land not vacant.  Also the “farm land” wording is of concern since coverage would not apply if any part of the land were used for farming.  For a discussion of vacant land and the homeowners policy click here.

Land owned by or rented to an “insured” on which a one, two, three or four family dwelling is being built as a residence for an “insured”;

Not applicable to a hunt lease situation.

Individual or family cemetery plots or burial vaults of an “insured”;

Not applicable to a hunt lease situation.  Perhaps though the individual could bury his/her deceased spouse on the land and claim all of the land is a cemetery plot.  (Editor’s note:  We’re just kidding!)

Any part of a premises occasionally rented to an “insured” for other than “business” use.

The word “occasionally” is key here.  While not defined in the policy The American Heritage Dictionary as defines the occasional as:  “Now and then; from time to time; sometimes.”  If the individual leased the land only on a one-time basis for a few weeks or perhaps even months an argument can be made that this definition provides coverage.  However, leasing for a few weeks each year or on an annual basis should not be considered as occasional.  Another issue is present in this wording too.  Is there a difference in “leased” and “rented?”  The policy provides no definition of the terms but American Heritage defines lease as, “A contract granting use or occupation of land or holdings during a specified period in exchange for rent” while rent is defined as “To obtain occupancy or use of another’s property in return for regular payments.”  Whether the issue of lease vs. rent is of significance is beyond our scope of analysis here.

Motorized land conveyances – liability issues.  Individuals may use motorized vehicles such as four-wheelers or hunting buggies on the hunting land.  If the conveyance is owned the homeowners policy provides no coverage since it’s not used solely to service the insured’s residence nor is it a vehicle designed to assist the handicapped.  The use of a non-owned motorized land conveyance that fits all of the following characteristics would be covered: 

·         The land conveyance is not licensed, registered, or required to be licensed or registered for use on public roads or property; and

·         The land conveyance is designed for recreational use off public roads; and

·         The land conveyance is not owned by “an insured.” 

For example, an individual borrowing a four-wheeler that is not required to be registered would be covered for bodily injury or property damage on the hunting land, as well as anywhere in the world.  Coverage for damage to the non-owned motorized land conveyance itself is limited to $1,000 ($500 in the HO-91 program) under the Additional Coverage portion of Section II.  No deductible applies to this Additional Coverage coverage and losses are settled on a replacement cost basis.

Hunting clubs.  Often several individuals will “join forces” and lease or purchase the land as a group.  As long as the group is not incorporated (or some other entity such as a LLC or LLP) coverage is unchanged.  If the club were to charge others to use the premises though the business exclusion could come into play.  A commercial general liability policy may be required to cover a corporation, LLC, or LLP and also when there is a charge by the club to others for using the land.

Contractual liability issues.  In signing a contract to lease the land an individual may contractually agree to certain conditions.  Section II excludes contractual liability in the following manner:

Under any contract or agreement entered into by an “insured”. However, this exclusion does not apply to written contracts:
(1) That directly relate to the ownership, maintenance or use of an “insured location”; or
(2) Where the liability of others is assumed by you prior to an “occurrence”;
unless excluded in a. above or elsewhere in this policy;

As an example, if the lease signed by the individual requires him to indemnify the landowner the policy would respond as long as the lease was signed before the claim took place.  It should be noted though that the liability policy limit ($100,000 built in with higher limits available) applies to this coverage – it is not additional coverage above the policy limit.

Additional insured status.  Several situations have been posed to FAIA where an individual signing a lease was required to name the landowner as additional insured under an insurance policy.  The homeowners policy offers no coverage for the land owner as an insured, nor is an endorsement available.  While there is the HO 04 41 –Additional Insured endorsement it applies only for the “residence premises” and would not afford coverage for hunting land.  In such situation a commercial general liability policy may be required to fill the requirement for additional insured status.

Other possible sources of coverage.  It’s possible that some personal umbrella policies would cover this hunting land exposure.  Since insurance companies tend to use proprietary umbrella forms a careful reading of the policy is necessary.  Another option is a “hunt club policy.”  While there is no such ISO policy, a search of the Internet using “Hunt Club Insurance” and “Hunting Club Insurance” resulted in numerous hits for sources of coverage through organizations such as the National Rifle Association.

Summary

The exposures faced by individuals who lease or purchase land for hunting purposes (either individually or as a group) are significant.  The standard homeowners policy provides some coverage but significant gaps exist.  Careful risk analysis should be conducted, underwriters should be consulted for coverage interpretations, and a program of coverage should be established.  That insurance program may require a combination of personal and commercial insurance policies.

Copyright FAIA, 1/31/08, David Thompson.
Reprinted with permission.