Coverage B (Other Structures) is just “out there.” It’s semi-ignored like your annoying second cousin.  Insureds assume everything is covered, and the HO3 policy throws some coverage at them and hopes it will all be OK.  On this subject a little attention could go a long way to making claim day a happy day, so let’s look at the Coverage B pitfalls.

Other Structures – wait, stop right there.  The generally accepted definition of structure is something attached to the land.  A structure could be a building (something you can walk into) but not necessarily.  It would also be a mail box, swing set (if anchored to the ground), driveway, satellite dish, well pump, and fence.  The policy says that Coverage B items include structures connected to the dwelling by only a fence or utility line.  That is why a well pump, which is connected to the dwelling by the buried water line, is Coverage B.  A fence, even if one part of it is bolted to the house, is Coverage B, and anything else the fence is attached to is Coverage B.

One question we often get is, what about the outside air conditioning compressor?  It is separated from the house and connected only by utility lines.  Well, the compressor is part of an entire system, and the majority of that system (duct work and air handler) is located inside the home.  So we consider all parts of the air conditioning system, including the compressor sitting outside, to be Coverage A.

Now that we know what the Coverage B items are, what about valuation?  If you need a higher Coverage B limit than the company will offer, then endorsement HO 0448 Other Structures – Increased Limits to the rescue! Use this to schedule the Other Structures you need a higher limit for.  You still get to use your Coverage B amount for these, so the total of the Coverage B limit and the HO 0448 amount should be enough to replace all the Other Structures.

We also need to be aware of some coverage issues.  Remember, this is a Homeowners policy and it does not like business exposures.  The fine folks who wrote the policy know that an Other Structure is often where business exposures happen, so they built in some exclusions. It doesn’t mean we can’t fix the exclusions, but we have to be aware of the exposure so we can attach the correct endorsement for the job.

The policy says:  We do not cover Other Structures:

  1. Used in whole or in part for business; or
  2. Rented or held for rental to any person not a tenant of the dwelling.  However, it’s OK to rent it out for use as a private garage.

If you have a situation where the Other Structure is used by the Insured for a business, as long as the company is agreeable to whatever that business is, you can fix the problem with the HO 0442 Permitted Incidental Occupancies endorsement.   You denote that the business is conducted in an Other Structure, and schedule the replacement cost of that building.  In this case you do not get to use the Coverage B limit.  All the coverage will come from the endorsement only.  The endorsement also provides the full Coverage C limit for business personal property and extends liability to the scheduled business.

If the Other Structure is rented out as a residence (even partially), Coverage B is excluded, but we can fix that with the HO 0440 Structures Rented to Others endorsement. The full value of the Other Structure is scheduled on the endorsement, as Coverage B will not apply. HO 0440 can also extend liability for this use of the Other Structure.

The coverage gap we still have is renting out your Other Structure for someone else to run a business in it.  There’s just no homeowners solution for that one and most companies would not want to write the HO3 if that situation existed on the premises.

Now you’re a Coverage B – Other Structures expert!  Make sure to let us know any other topics we can address.

Kathleen Davis, CPCU, CIC, ARM, API

About Kathleen Davis, CPCU, CIC, ARM, API

VP, Customer Relations
Tower Hill Insurance Group

Kat is a 1st Degree Insurance Nerd who started her career at Rollins Burdick Hunter (now AON) in Chicago, 1980. Kat spent 19 years in the brokerage/agency business in Chicago, Los Angeles, and Ft. Myers, FL. She was an Account Manager for most of this time handling retail and service businesses, and specializing in construction sub-contractors. Along the way she picked up her ARM, CPCU, API, and CIC designations (they were just lying around). Kat was hired by Tower Hill Insurance Group in 1999 to start their Training Department where she wrote and presented employee training and agency CE classes. In 2006 Kat moved to Underwriting to finally use her CPCU and picked up all kinds of great stories. She says: “Insurance is a laugh a minute, and I can’t understand why some people don’t see it.” In 2013, Kat was reassigned to Administration to assist Tower Hill’s Customer Service Department.