How the Insurance Grinch Stole Christmas

Winston-Salem, NC 12/23/2014

 

Every major event or activity that involves a family will usually have some impact on their insurance. Christmas is no exception. Many of the gifts given to kids these days have insurance implications that the family should be aware of. A partial list includes bicycles, tricycles, scooters, roller blades, skateboards, battery-powered “kiddie cars,” ATVs, radio-controlled vehicles, watercraft and aircraft, mopeds, motor scooters, motor bikes, go-carts, golf carts, kayaks, canoes, surf boards, “boogie boards,” wind surfers, inflatable rafts, jet-skis, gliders and kites.

 
Are you aware of the insurance implications of these “toys”? Read more below regarding some of the most common gifts for kids, with a discussion of the insurance issues surrounding both Property and Liability coverage.
 
Land vehicles - Non-motorized. Bicycles and tricycles are among the most common Christmas gifts year in and year out. Also included in this category would be push-scooters, roller blades, skateboards, and so forth. As Property, all of these types of devices would be eligible for Coverage C, Personal Property, with no specific dollar limitations. However, some of the more exotic bicycles can cost several thousand dollars, so consideration should be given to scheduling these. For Liability, the Homeowners policy excludes motorized vehicles, thus there would be coverage under Section II. While the likelihood of a lawsuit arising from these types of vehicles is probably remote, two liability issues bear analysis:  First, a lawsuit directly against a young child may not be permitted in most instances, depending on the age of the child. However, parents are frequently named in such suits. The legal liability of a parent for the acts of their minor children is primarily governed by state law and jurisprudence. In  North Carolina, there is virtually strict or absolute parental liability. In other states, parents are subject to various standards of common negligence.
 
As an example, in a case involving a 6-year-old who injured a woman with his bicycle, the Louisiana Supreme Court ruled in Turner v. Bucher, 308 So.2d 270 (La. 1975), that the parents were legally liable, based on the standard of strict liability, citing Louisiana Civil Code Article 2318.  The second liability issue involves intentional acts by children. As is often the case, childhood spats can result in one kid intentionally injuring another. Where parents are also named in the lawsuit, the intentional acts exclusion, while applicable to the child, is not applicable to the parent, under the Severability of Insurance provision found in Section II Conditions.
 
Land vehicles - Motorized. There is an astonishing variety of vehicles with motors that are given to kids, and they run the gamut from small, battery powered "kiddie cars" to gas-powered two and four wheel vehicles whose speed can cause any parent to turn prematurely gray.  Of the "kiddie car" type, Power Wheels is one of the most common styles, coming in various models designed to look like Jeeps, pickup trucks, a Harley-Davidson motorcycle, a Caterpillar front-end loader, and even a model called "The Eliminator." They are powered by a 12-volt battery, and can go 2-5 mph. Advertising materials suggest that these are suitable for kids "age 3 and up."  Other battery-powered vehicles include electric scooters and electric skateboards with names like "Bad Dog," "CityBug," and "Street Jammer." Some can travel in excess of 15 mph.  Leaving battery-powered types and looking at the gas-powered vehicles, there are scooters like "Go-Peds," and an endless variety of go-cart-type models such as "The Lawn Rocket," "The Intimidator," and even a semi-tractor trailer version made by one manufacturer.
 
Moving on to even more powerful gas-powered models are vehicles in the all-terrain vehicle (ATV) category, which were first used by hunters, but now come in a wide variety of sizes and uses. Some are aimed specifically at the youth market, with small 50 cc engines, and recommended by manufacturers "for use by ages 6-11." At the other extreme are heavy-duty, 6-wheel-drive utility/work vehicles. In between are numerous types frequently driven by kids down dirt roads, in the woods, on the shoulders of busy highways, and seemingly almost everyplace else imaginable.
As Property, Coverage C does not apply to any "motorized land conveyance"  or "motor vehicle", except service or handicap-assist vehicles.
 
For Liability, there is very limited coverage, part of which is provided through interpretative analysis of certain definitions, a speculative and uncertain way to provide propert coverage. Clearly covered, however, is the operation of motorized vehicles that are non-owned, so long as the vehicle is not subject to registration.
For owned vehicles, the HO-91 endorsement provides coverage if the vehicles are on an "insured location," which is defined in the policy to include eight locations (see Definitions, 4.a. through 4.h.).
 
Another issue relating to motorized vehicles is the treatment of liability arising from negligent entrustment, negligent supervision, and vicarious parental liability. These torts are included only if there is coverage for the occurrence caused by a covered vehicle. That is, if the operation of the vehicle is covered, there is also coverage for these ancillary torts, which usually grant coverage for a parent brought into the lawsuit. However, if there is no underlying coverage for the operation of the vehicle, then there is also no coverage for these related torts.
 
One last category of motorized vehicles that bears analysis are the small, radio-controlled cars, which can be battery-powered or propelled by a small engine, using a fuel called "nitro fuel." While seemingly harmless toys at first glance, some of the more powerful racing models can go 50 m.p.h., according to the manufacturer.
In the HO-91 program, Coverage C - Property Not Covered, as well as the Liability exclusion, uses the description "motor vehicles or all other motorized land conveyances." Neither term is defined, so it is unclear whether or not these vehicles are covered as property, or for liability.
 
For Homeowners liability coverage, H0-91 endorsement HO 24 13 04 91 - Incidental Motorized Land Conveyances, (titled Incidental Low Power Recreational Motor Vehicle endorsement in HO-2000) can be used for some vehicles. However, the endorsement states that it does not apply to a motorized bicycle, moped or motorized golf cart, nor any other type of conveyance which attains speeds more than 15 m.p.h., or is subject to registration. For vehicles that are eligible, the only coverages afforded apply only to Section II - there is no property coverage provided by the endorsement. Under Personal Auto, endorsement PP 03 23 06 98 - Miscellaneous Type Vehicle Endorsement allows mopeds, motor scooters, motor bikes, go-carts and similar vehicles, golf carts, all-terrain vehicles, and dune buggies to be added. Coverage options include Liability, Medical Payments, UM, and Physical Damage.
 
Watercraft - Non-Motorized. Popular gifts in this category include kayaks, canoes, surf boards, skim boards ("boogie boards"), wind surfers, and inflatable rafts. As Property, under Special Limits for Coverage C, $1,000 for "watercraft, including their trailers, furnishings, equipment and outboard engines or motors." In HO-2000, the Coverage C limit is $1,500 for "watercraft of all types, including their trailers, furnishings, equipment, and outboard engines or motors."  For Liability, the exclusion only applies to certain watercraft that are powered by inboard, inboard-outboard, outboard, or sail power. Assuming no motor is added to the above watercraft, unless it is an outboard engine of 25 h.p. or less, liability coverage should apply. For wind surfers, the "sail boat" exclusion does not apply to sailing vessels less than 26 feet.
 
Watercraft - Motorized. From the standpoint of watercraft gifts for kids, one of the most popular types is jet-skis and WaveRunners, known as "personal watercraft," most of which are powered by water jet pump engines, which are considered a type of inboard engine. A few types use standard outboard engines.

For Liability coverage, HO-91 excludes owned inboards of any horsepower. While water jet pump engines are not specifically mentioned, the industry consensus has been that jet-ski types are considered inboards. For those that use outboard engines, only those of 25 h.p. or less are covered. In HO-2000, the analysis is the same as in HO-91, although "water jet pump" is added to the listed types of inboard engines excluded. Endorsement HO 24 75 can be added to provide Liability coverage for excluded watercraft. For Property coverage, a specific hull policy refering the serial number of the jet-ski should be written.
 
Aircraft - Non-Motorized. Balsa wood or Styrofoam gliders, kites, and even paper airplanes are perennial toys for young kids. As Property, their value is so insignificant that a claim would be highly unlikely. However, under both HO-91 and HO-2000, there is coverage under Coverage C, with no dollar limit. The Property Not Covered provision excluding coverage for "aircraft" exempts hobby aircraft.
The Liability exclusion for "aircraft" in HO-91 and HO-2000 does not apply to model or hobby aircraft.
 
Aircraft - Motorized. Radio-controlled aircraft are a very popular gift for kids, and there are many types and models available. In fixed wing aircraft, planes with a 6 ft. wingspan are not uncommon. Other models include helicopters of many sizes, as well as rockets, which range from the small 12-inch size to many models that are five or six feet in length.
 
Most importantly, please contact our agency so that we can help you analyze these complex coverage issues for your household. It’s always best to double check your specific situation and coverage needs.
 
Author: Mike Edwards, Independent Insurance Agents of America
 

 

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