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Homeowners Insurance vs Commercial Insurance

A Bed and Breakfast Insurance Story

Read the following story, there will be a quiz at the end.

Mary and Trent Black are "empty nesters" who have three extra bedrooms (with bathrooms attached). Mary would like to try her hand at inn keeping. Trent reluctantly agrees, but does not want to spend any extra money on this harebrained scheme of hers, so does not purchase commercial insurance for the business. Mary and Trent did not even ask their insurance agent to add the "business pursuits" endorsement to their current homeowners policy.

Mary builds a website and a facebook page, starts "tweeting" and puts a sign in her front yard announcing "Mary's Empty Nest" is now open for business.

Today is the day! Mary has been waiting for WEEKS and is so excited, her first guests will check-in any moment now. The tea is ready, cookies are just out of the oven, and soft music is playing in the background. The windows have been washed, the bed sheets pressed, and new fluffy towels are hanging in each bathroom.

John and Susie are on their second honeymoon. They were married 10 years ago this week, and found Mary's Empty Nest on-line. They thought it would be the perfect place retreat for them. As John and Susie rush up the front steps to ring the doorbell, John trips over the ridge on the top step. Susie is there to help John up, and they brush the dirt off his knee and go inside. Once inside, Mary greets her guests, and offers them tea and cookies, and shows them to their room.

As John is getting ready for their "romantic candle light dinner" at the restaurant downtown, he is moving slowly because his knee is starting to hurt. Mary sips her tea and relaxes, while waiting for John to finish up. While Mary is basking in the thrill of having her first guests, she notices on the evening news that ABC, Inc. (who supplies her tea) has been sued because of an alleged death associated with arsenic recently found in one of their tea blends. Mary is relived, because she never buys that particular blend of tea.

John and Susie go to dinner... and Mary goes upstairs to turn down the bed, and put chocolate truffles out for her guests. While in their room, she picks up the empty tea cups and in doing so, knocks a diamond earring (that Susie forgot to put on) into a crack in the floor. Unfortunately, there is no way under that particular section of the house. It was originally built on a foundation of stones, and shored up with cement a few years ago. This particular crack in the hardwood floor sits right between two areas of cement, making it impossible to get to.

During dinner, Susie starts to have trouble breathing, and is feeling very sick. She is rushed to the hospital, where tests reveal traces of arsenic in her system. John and Susie, after a week in the hospital, make it back home safely.

Did I mention that Susie and John have three children? Two sons, who are in the banking industry, and one daughter...who has quite a track record as a prosecuting attorney.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Keep in mind that homeowners policy contain a "business pursuits" exclusion. "Business pursuits" are normally defined as something that leads to financial gain. "Exclusion" meaning just that...any loss or claim in connection with pursuing financial gain is not covered.

As you read each item, try to determine if coverage will apply. I will give you the answers at the end of each item.

1.	Mary's Website	The website is very creative and ingenious, Mary used some catchy phrases that she picked up here and there. Never once did she think about "infringement of copyright, title or slogan"...that is until she received suit papers. Note: Homeowners policies do not typically pick up advertising injury. Some homeowners policies that have been endorsed to INCLUDE business pursuits will NOT provide coverage for advertising injury.
2.	Arsenic Tea	Mary served tea In the pursuit of business, will her homeowners policy cover "products and completed operations"? Note: While a homeowners policy endorsed to INCLUDE business pursuits may provide medical payments, the limit of coverage may not always be as high as it typically is on a Commercial Insurance Policy.
3.	Diamond Earring	Although the earring was in Mary's "care, custody, or control", and she was responsible for losing the earring, is there coverage under her homeowners policy? Note: A homeowners policy endorsed to INCLUDE business pursuits may provide coverage for this loss.
4.	John & Susie's Extend Stay	John and Susie had to pay for an additional weeks accommodations at a hotel near the hospital, due to the arsenic tea. Is coverage provided for this exposure? There is no coverage for this under Mary's homeowners policy, but coverage may be picked under the business pursuits endorsement. This process may be longer and take more time to resolve under an endorsed homeowners policy, than with a commercial insurance policy.
5.	John's Knee	It turns out that Johns knee cap was cracked as a result of his fall. He had to have surgery, and was off work for 6 weeks while recovering from surgery and will be looking at several weeks therapy before he can return to work as a dance instructor. You guessed it, no coverage under the homeowners policy. Again, coverage may be picked up under a business pursuits endorsement.

While our story might seem a little far-fetched, crazy things can happen. We did not even cover the fact that if Mary had all three rooms booked for the week, and a windstorm damaged the building, making it impossible to honor those reservations, very few homeowners policies endorsed to INCLUDE business pursuits, will provide coverage for;

1. Loss of business income - loss of net income plus continuing expenses (mortgage payment, electricity, etc.)

2. Guest Inconvenience Coverage - the extra expense to use other comparable lodging accommodations, expenses incurred while traveling to the alternate location.

Have you formed an LLC or Corporation to run the Bed and Breakfast? Some endorsed homeowners policies, do not address picking up liability for the LLC or Corporation.

If you are operating a bed and breakfast, I strongly urge you to obtain a commercial insurance policy.

Call today for a competitively priced Bed and Breakfast Insurance quote, or click the button below.

Karmen Ward - Ailes
765-381-4904

** All names and places in this story have been strictly the product of my imagination. This story is not a reference to any real bed and breakfast or any real person or persons.