Kids Away At School This series of articles was presented in FAIA's Agents Education in 1999.

The 06/98 edition of ISO's personal auto policy and the 04/91 edition of the homeowners policy were used in coverage analysis. Information on coverage under the new homeowners 2000 policy appears at the end of this analysis. KIDS AWAY AT SCHOOL, PART 1: With the arrival of fall comes a waning of the hurricane season, football kick-off games, kids leaving for college, and calls from clients asking, "Is my child covered under my insurance while away at school?" Over the next few issues of Agent's Education we'll look at this issue and give you answers to some of the specific questions you're asked. A determining factor in the entire insurance analysis is, "Is the child an insured under the policy?" To be an insured we'd need to establish whether the child is a family member. Unfortunately, there are no hard and fast answers, and each situation will be different. Being a family member (and thus an insured) is a lot more than just physically residing in the same house as the parents. In one court case the child had his own apartment with an annual lease, yet had full access to the parent's home. The court held the child was a "family member" of the parents and granted PIP coverage. Another court ruled that a child can have a residence in more than one place, after the child moved out to "test the waters" but ate at his mother's house and received some support from her. Finally, two Florida courts ruled that military personnel (even one stationed in Germany) were still residents of their parent's household "absent of any manifest intention to change residence." Questions to consider in determining whether a child remains a family member include: 1. 2. 3. 4. 5. Do the parents provide any support for the child? Is the child claimed on the parent's tax return? Do the parents provide health insurance for the child? Does the child return to the parent's home over college breaks? Do the parents pay the college bills?

The more "yes" answers provided, the more likely it becomes that the child is a family member (and thus an insured) under the parent's auto and homeowners policies. Based on cases, we'd suspect that a vast majority of "kids away at school" situations result in the child remaining a family member, at least for insurance purposes.

Suppose however it's determined the child is not a family member -- he totally supports himself, receives nothing from the parents, seldom returns to the parents' home, and has set up his own residence at college. In this situation the parent's homeowners policy provides no coverage at all for the child and he needs his own homeowners policy -- typically an HO-4. If the child owns his own car in his own name the parent's auto policy provides no coverage and the child needs a Personal Auto Policy. We'd like to think the child would not have a car still titled to the parents, but if he did he would be covered under the parent's policy as a permissive user, but only while driving the insured automobile. There would be no coverage for the child under the parent's policy as a pedestrian, nor in any other automobile. In short, the child needs his own agent and own auto and homeowners policies if he is not a family member. But ... what if we concede (as is usually the case) that the child is a family member? Then what coverages apply under the parent's policy? Stay tuned for Part 2. KIDS AWAY AT SCHOOL, PART 2: Last issue we raised the issue of a child going away to college and assumed that the child was not a family member. This issue we will turn the tables and assume the child is a family member (and thus an insured) and examine what coverage is provided by the parent's homeowners policy. The homeowners policy refers to relatives as those related to the named insured that are residents of your household. As we saw last issue, passing both of those tests makes the child an insured under the policy. Since the child is an insured in this situation he takes most of the coverage under the parent's homeowners policy with him to college. Two issues would surface -- property and liability. Under Section I of the standard ISO homeowners policy personal property is covered "... while it is anywhere in the world." While some college campuses may seem "out of this world" at times (football weekends perhaps!) the personal belongings the child takes with him to college are covered under Coverage C of the parent's policy. However, since the college dorm or apartment or frat house is "... an insured's residence other than the residence premises" a limit of 10% of Coverage C applies to that property. With the items kids take to college today (computers, electronic equipment, costly clothing, etc) it's easy to see how this limit may not be adequate to cover a major loss. (FAIA was recently advised of a claim with a child away at school who suffered an $18,000 theft loss.) If the limit of Coverage C is not adequate two options exist. First is to increase coverage for property at another residence by way of the HO 04 50 endorsement. If the company does not offer such coverage then the child can be provided with an HO-4, policy which might not be a bad idea since property claims incurred by the child would not be reported under the parent's policy. The only unique exclusion states that there is theft coverage for a child away at school "...if the student has been there at any time during the 45 days immediately before the loss." So over a two-week Christmas break or spring break there is no problem with theft coverage. However, over an extended summer return home to mom and dad, theft coverage would cease after 45 days. Solutions are to write the child an HO-4, store the property in a mini-warehouse (where it would not be subject to the 10% limit), have the child return before 45 days had elapsed, or have the child take the belongings home to the parent's house. All other perils are covered beyond the 45-day limit - it's just theft that drops off. (Under the HO2000 program this 45-day limitation is extended to 60 days, resulting in a broadening of coverage.) Kids away at school also face (or create) liability concerns too - spring break activities, parties, sports, and the like. Under Section II liability coverage is provided for the child (and parents vicariously) since the child is "temporarily residing" at the college location. The word "temporary" is not defined and even over several years the college residence can be viewed as a temporary residence for the child. The policy defines "Any part of a

premises not owned by and insured and where an insured is temporarily residing" as an "insured location, thus liability coverage would apply without endorsement. If a company (incorrectly in our opinion) questions this, simply add the college location to the declarations page as an additional residence occupied by an insured, usually at a cost of about $10. Liability coverage will apply for the child regardless of whether the residence is a dormitory, apartment house, frat house, or rented house. Remember too, the policy territory for the homeowners policy (both Sections I and II) is worldwide, so when the child takes spring break in the Amazon there is coverage! Now that the homeowners issue had been licked, what about the automobile issue? Stay tuned for part 3. KIDS AWAY AT SCHOOL, PART 3: We previously addressed factors to help determine if a child was an insured under the parent's policies while away at college, and also looked at the homeowners coverage issues involved in college kids and their parent's homeowners policy. Now we will examine the personal automobile issues associated with a child going away to school, assuming that it's been determined the child is a family member. Since the child is a family member and is going to be provided with coverage under the parent's policy almost every company is going to require that the child be listed as driver, and thus charged for. Remember that listing as a driver does not affect status as "an insured or family member -- it's purely a rating issue. ISO rules state that a child away at school at least 100 miles from "home" be rated as married, regardless of the actual marital status. This is a benefit to the parents since a lower rate will be charged. As a "family member" the child is provided with all the coverages (liability, med-pay, PIP, uninsured motorist, and physical damage) that appear on the parent's auto policy, whether the child is driving the parent's car, a friend's car, or is a pedestrian. (Of course the usual in-state vs. out-of-state PIP limitations still apply.) For example, the child borrows a friend's car for the first time and is involved in an accident, injuring someone else, injuring himself, and damaging the borrowed automobile. The parent's policy provides liability coverage for them and the child, PIP applies for the injured child if the accident took place in Florida, medical payments responds, and the physical damage of the parent's policy responds to the borrowed automobile, paying on an excess basis after any other collectible insurance. Remember too, unlike the homeowners policy the Personal Auto Policy does have a territory limitation limited to the U.S., Canada, Puerto Rico, and U.S. territories/possessions. For example, kids going to Mexico or Europe for college related activities don't take any PAP coverage with them. Other auto issues surface too. First, is the question of if the child has a car should it be in his name or the parent's name? That's a subject in itself, but suffice it to say the cleanest (and usually the least expensive) way to provide the best coverage is to title the car in the parent's name and insure it on their policy. However, if the car is in the name of the child, the coverages should match those on the parent's policy to make certain there are no gaps in coverage. Secondly, is the issue of a child living with someone and having "regular use" of another automobile. If Pat has regular use of Chris' (roommate) automobile there would be an exclusion under Pat's parent's policy excluding coverage for liability, medical payments, and physical damage while Pat is driving Chris' automobile. (PIP and uninsured motorist coverage would apply.) The reason for this is the roommate's vehicle would be furnished or available for the regular use of a family member. Even the Extended Non-Owned Coverage (PP 03 06) would not help because it will not respond when people reside in the same household, which could easily be interpreted to be such in a roommate situation. The only course of action in this example would to be certain Chris's automobile is insured, and at limits considered to be adequate by Pat and Pat's parent's. Finally, the issue of risk management comes up with the loaning of an automobile by a child away at school. If the child loans the car to someone else, resulting in an accident, it's the vehicle owner's policy that responds on a primary basis.

That means mom and dad, hundreds of miles away perhaps, submit a claim under their own policy because their child loaned a vehicle to someone else. As kids leave for college it's not pure education that's involved. Other activities tend to pop up like part time work (business exclusions apply), renting jet skies (no coverage), alcohol (oh my gosh!), and skydiving (life insurance???). When children leave for college it's a bag of mixed emotions and there are a lot of things on the list to prepare for the big event. One of those items certainly should be a visit to the local insurance agent to discuss coverages. Getting a good grip on what's covered and what's not can help make the child's (and parent's) college experiences a bit less stressful. Coverage Under Homeowners 2000 In ISO's newest homeowners policy (10/00 edition date) there is new wording that seems to muddy the waters relating to students away at school. HO2000 defines insured as follows: 5. Insured means: a. You and residents of your household who are: (1) Your relatives; or (2) Other persons under the age of 21 and in the care of b. A student enrolled in school full time, as defined by the school, who was a resident of your household before moving out to attend school, provided the student is under the age of: (1) 24 and your relative; or (2) 21 and in your care or the care of a person described in a.(1) above; As can be seen, this new wording creates several problems. The student must be enrolled full time, but the policy does not define what a full time student is, instead relying on the school to define full time --- and that will vary from school to school. If a student can't get a full time load, perhaps due to a class being full, coverage may be jeopardized. Additionally, note the new age limitation that could affect students who continue their education for advanced degrees or attend school after serving in the armed forces. ISO has provided a fix for this new wording by way of a new endorsement, HO 05 27 - Additional Insured Student Living Away From The Residence Premises. The endorsement removes any full time enrollment requirement and also removes the age limitation, but it creates yet another problem. The endorsement states, The coverage provided to the person named in the Schedule only applies while that person is enrolled at the school and is residing at the address shown in the Schedule. Put in simple terms, if the endorsement is used there is no coverage if the student moves without advising the agent/company. So the question with HO2000 as we see it is, Has anything changed and do I need the endorsement when kids go away to school? It is evident that ISO has intended that coverage under HO2000 for students away at school be limited to full time students under the age of 24, but we are not so sure what the end result actually is. There is a good argument that even with the new wording, coverage under HO2000 remains the same as under the earlier 04/91 edition date. It can easily be argued that in the typical student away at school situation where the child is supported by the parents and returns home on a regular basis, coverage applies without adding the endorsement, even if the student is part time an/or age 24 or older. This argument is based on language shown in 5.a. of the

definition of insured. Numerous court cases support the concept that a student away at school is a resident of the parents' household. Numerous Florida court cases have demonstrated that a person can have more than one residence and physical presence alone is not the only determining factor in looking at residency. More important than physical presence is the intent to return or intent not to return. Assuming the student returns home on a regular basis and has not demonstrated an intent to permanently change residency away from the parents' home, one can easily assert that the student is still a resident of the parents' household and thus covered under the policy. In seeking to deny coverage for a part time or over age 23 student some may say, No, a student away at school is covered in item 5.b. of the insured definition. However, the policy wording doesn't state that a student away at school is not included in definition 5.a. If the intent of the form drafters was to cover students only in item 5.b. then the wording in 5.a. would have been along the lines of, Insured means: You and residents of your household who are your relatives, but a student away at school is covered only as outlined in 5.b. below. Since such language is clearly not present we believe that a student away at school is covered under 5.a. We further believe the endorsement is not needed, and if it used (at an additional premium by the way) it accomplishes nothing positive for the customer. All this being said, the safe course is to approach companies and document their interpretation of coverage under HO2000. The case can be presented for coverage without the endorsement, but the last thing a client or agency needs is a battle to get a claim covered. Nail the issue down before the student goes away to school and come claim time everyone will be thankful.