Mobile Homes, Boats and Farms: Separate the Property Interests

Introduction

A manufactured home, a boat and a farm each involve several different things the owner could lose. A manufactured home comes with a shed and the family's belongings. A boat comes with a motor, a trailer and gear. A farm combines a family household with a business. Before you can decide whether a loss is paid, ask one question: which piece of property, or which person, is this loss about?

In this lesson, a property interest means a specific thing someone owns or has a financial stake in and could lose. If you sort each loss into the right interest first, the coverage question becomes much easier to answer.

What you'll be able to do

• Sort manufactured-home property into the home, other structures and belongings, and tell a planned move from an emergency removal under a sample form.
• Apply that form's two payment methods to a total loss and a partial loss of the home.
• Sort boat items into boat, motor, trailer, equipment and personal effects, and match a boating loss to physical damage, liability or medical payments.
• Separate household property from farm business property, and keep each coverage's limit separate.

Before you start: You should be comfortable with mapping a homeowners loss to the right coverage and building a commercial property package and classifying the loss. Valuing damaged property will also help.

Where the rules come from: The details in this lesson come from specific documents:

• a 2008-edition Foremost manufactured homeowners form published on the Nevada Division of Insurance website
• a North Carolina Department of Insurance consumer page on boat insurance
• a 2010 Progressive boat rating guide
• two Oregon farm insurance sources

These documents show how real policy forms can work. They are not Nevada statutes, and they are not rules that every policy follows. For a real policy, read its own form. All people and dollar amounts in the examples are fictional.

Manufactured homes: sort the home, the extra structures and the belongings

A manufactured home is a home built in a factory and transported to its site. People also call these mobile homes. A manufactured homeowners policy insures that kind of home much as a homeowners policy insures a site-built house. It has separate coverages for the home, for other buildings and for belongings.

In the Foremost form, the three property coverages work like this:

• Coverage A — Dwelling (the home itself). This covers the home described on the declarations page, which is the policy page listing who and what is insured and for how much. It also covers structures attached to the home, and building materials kept in or next to the home for work on it. Coverage A does not cover fences or land.
• Coverage B — Other Structures (separate buildings you own on the property). A detached shed fits here. So does a structure connected to the home only by a fence, a utility line or a similar connection.
• Coverage C — Personal Property (your belongings). This covers belongings you own or use anywhere in the world. There is a smaller amount for belongings the form describes as usually located at a different home you own or rent. That amount is 10% of the Coverage C amount or $1,000, whichever is greater.

Neither Coverage A nor Coverage B pays to repair or restore the land under or around a structure.

Worked example: one storm, three coverages

The Ruiz household owns a manufactured home on a rented lot. Assume windstorm is a cause of loss the policy covers. A storm causes this damage:

• A wooden deck built onto the side of the home is damaged. Because the deck is attached to the home, it falls under Coverage A.
• A storage shed is damaged. The shed's only connection to the home is an electrical line. Under this form, a structure connected only by a utility line counts as an other structure, so the shed falls under Coverage B.
• A sofa inside the home is ruined. It is a belonging, so it falls under Coverage C.
• Runoff washes away soil under part of the lot. The cost of restoring land is not covered under A or B.

Why the shed lands in B: The rule depends on how the structure connects to the home, not on what the structure is used for. Change one fact: suppose the shed were built directly onto the home's wall. It would then be an attached structure under Coverage A.

Check your understanding: Under the same form, which coverage applies to each item?

1. A carport built onto the side of the home
2. A detached garage on the same lot
3. A lawnmower stored in that garage

Moving the home: a planned relocation vs an emergency escape

Manufactured homes can be moved, so the Foremost form deals with moving separately.

The basic rule (an exclusion, meaning a stated situation the policy does not cover): The form does not insure the home during a move. It excludes loss to the home, and to personal property inside the home, during a move. It also does not insure other structures during a move away from the premises.

The exception — Emergency Removal of Your Dwelling. This is an additional coverage, meaning a built-in extra coverage included automatically. It applies when the home must be moved because it is endangered by an insured peril, which is a cause of loss the policy covers (see peril, hazard and cause). In that case, the form pays the actual, reasonable and necessary cost to remove the home and return it to the premises listed on the declarations page. No deductible applies, and the move exclusion expressly does not apply to this additional coverage.

A related additional coverage, Emergency Removal of Your Personal Property, pays up to $250 to remove belongings endangered by an insured peril and return them to the listed premises. No deductible applies to this coverage either.

The emergency coverage needs two things:

1. The move is forced by danger from an insured peril.
2. The payment is for moving the property away and bringing it back to the listed premises.

A routine relocation, such as moving to a new lot, selling the home or chasing cheaper rent, meets neither condition.

Worked example: a cracked frame on moving day

Kai Ortega is moving a manufactured home from one park to a new lot across town. On the way, the hauling truck slides on gravel and the home's frame cracks.

• The damage happened during a move, so the move exclusion applies.
• Nothing endangered the home and forced it out, so this is not an emergency removal.
• The home was going to a new lot, not being returned to the listed premises.

Under this form, the frame damage is not covered.

Change one fact. Assume fire is an insured peril. A wildfire approaches the park and endangers Kai's home. Kai has it towed to a safe yard and then towed back after the fire passes. The cost of towing it out and back falls under Emergency Removal of Your Dwelling, with no deductible. Kai also spends $310 to move belongings out and back. That cost is capped at $250.

The tempting mistake: "It's a mobile home, so moving it must be part of what's covered." This form says the opposite for routine moves. The home's mobility is the reason the form spells out a move exclusion. A covered cause of loss during a routine move does not change the answer either, because the exclusion is about the move itself. Other manufactured-home forms may word their moving rules differently, so check the actual form.

How this form pays for the home: a total loss vs a partial loss

The Foremost form pays for damage to the home in two different ways:

• Total loss, meaning the home is damaged beyond reasonable repair. The loss equals the Amount of Insurance, which is the coverage amount shown on the declarations page. The form calls this the Agreed Loss Payment Method.
• Partial loss. The form pays the lowest of three amounts:
• the actual cash value of the damaged portion
• the cost to repair or replace it
• the Amount of Insurance

Actual cash value means what the damaged property was worth at the time of loss, taking age and wear into account, rather than what it would cost new.

For other structures and personal property, the form uses the lowest-of-three actual cash value method for both total and partial losses.

Worked example. Assume the Coverage A Amount of Insurance is $85,000, and leave out any deductible.

• Fire damages the home beyond reasonable repair. This is a total loss, so the form pays $85,000.
• Change one fact: the fire damages only part of the home. The actual cash value of the damaged portion is $7,200, and repairs would cost $9,800. The lowest of $7,200, $9,800 and $85,000 is $7,200.

Check your understanding: Under the Foremost form:

1. During a planned move to a new lot, strong winds tip the home off the hauling trailer. Assume windstorm is an insured peril. Is the damage covered?
2. A flood that the policy covers is rising toward the home. The owner pays $180 to move belongings out and bring them back. How much does the form pay?

Boats: sort the property first, then pick the coverage

Insurance for watercraft is written under policies the North Carolina page calls boatowners and yacht policies. Those policies can include three different coverages, and each one answers a different question:

• Physical damage covers your own boat property. It pays to repair or replace the boat when it is damaged or destroyed by causes the North Carolina page lists, such as fire, theft, lightning, vandalism, collision and windstorm.
• Liability covers harm to others. It pays for bodily injury and property damage to other people when a covered person becomes legally responsible. See negligence and other bases of liability.
• Medical payments covers reasonable and necessary medical and funeral expenses that result from a boating accident.

The pieces of boat property

The North Carolina page and the Progressive guide together describe these categories:

• The boat itself, meaning the hull.
• Motors. An inboard motor sits inside the hull. An outboard motor mounts on the back.
• The trailer, used to haul the boat on land. In the Progressive guide, the trailer is included in the boat's value only if trailer coverage is requested.
• Permanently attached equipment, meaning equipment fastened to the hull with bolts or brackets. Examples include radar, depth or fish finders, GPS systems, ship-to-shore radios and trolling motors.
• Portable boating equipment, meaning detachable equipment customarily kept on the boat for its use or maintenance. Examples include anchors, lights, covers, safety and lifesaving gear, water skis and portable marine electronics.
• Personal effects, meaning items that are not used in the boat's normal operation and are not permanently attached. Examples include a camera or clothing.

The North Carolina page says personal effects are not covered by physical damage coverage. It also says some insurers sell separate coverage, for an extra premium, for items such as fishing equipment, cell phones and computers used aboard. The Progressive guide notes that scuba gear is not portable boating equipment, but it can be insured under a separate Personal Effects coverage if the owner wants that.

Two questions sort most items:

1. Is it fastened to the hull? If yes, it is permanently attached equipment.
2. If not, is it kept on the boat for using or maintaining the boat? If yes, it is portable boating equipment. If no, it is a personal effect.

Worked example: a theft from a stored boat

Thieves break into Priya Nair's stored boat. They take:

• A GPS unit bolted to the console. It is fastened to the hull, so it is permanently attached equipment and part of the boat property.
• The anchor. It is detachable but kept aboard for using the boat, so it is portable boating equipment.
• A waterproof camera. It is not used to operate the boat and is not attached, so it is a personal effect. Physical damage coverage does not cover it unless Priya bought separate coverage.
• A scuba tank. The Progressive guide says scuba gear is not portable boating equipment. It is covered only if Priya bought Personal Effects coverage.

Change one fact: Suppose the GPS were a handheld unit clipped into a holder instead of bolted on. It would be portable marine electronics, which makes it portable boating equipment. It is still boat property, but in a different category.

The tempting mistakes:

• Treating everything aboard as "the boat." Personal effects are a separate interest.
• Assuming the trailer is automatically included. Under the Progressive guide, the trailer must be requested.

Valuing the boat in one rating guide

The 2010 Progressive guide lets the boat's value be reported in three ways. Each includes motors, portable boating equipment, permanently attached equipment and, if requested, the trailer.

• Actual Cash Value: the current market value, without sales tax or title fees.
• Total Loss Replacement/Purchase Price: the purchase price, including the tax and title fees paid at purchase.
• Agreed Value: the current market value, without tax or title fees.

These are rating-guide choices about which value to report. They are not general loss-settlement rules. The guide states only one settlement result: under the Actual Cash Value option, a total loss pays the lesser of the reported amount or the actual cash value at the time of loss, minus the deductible. In this lesson, assume the deductible is subtracted after choosing the lesser amount.

Worked example. The reported value is $24,000. The boat's actual cash value at the time of a total loss is $21,000, and the deductible is $500.

• The lesser amount is $21,000. Subtract the deductible: $21,000 − $500 = $20,500.
• Change one fact: the market value at the time of loss is $26,000. The reported $24,000 is now the lesser amount, so the payment is $24,000 − $500 = $23,500.

This is why the guide tells owners to keep the reported value current. An outdated, low value caps the payment.

Check your understanding: For each item, name the property category or the coverage that answers the question.

1. A depth finder bolted to the hull is stolen.
2. A cooler of drinks is stolen from the deck.
3. The insured's boat drifts into a neighbor's dock and damages it.
4. A passenger slips during a boating accident and has an emergency room bill.

Farms: keep the household separate from the farm business

A farm combines a family home with a business. Each part is a separate property interest:

• Farm dwelling: the farmhouse.
• Household personal property: the family's own belongings, such as furniture and clothing.
• Barns, outbuildings and other farm structures.
• Farm personal property: property used in the farming business. The Oregon FAIR Plan's list includes grain, hay, feed, crops in storage, farm products, supplies, tools and farm equipment.
• Mobile agricultural machinery and equipment: farm machines that move, such as tractors.
• Livestock: farm animals, such as cattle, sheep or horses.
• Liability: claims from other people who are injured or whose property is damaged.

What a farm package is, and what it is not

A farmowners package is a single farm policy that combines property coverage for the household and the farm business with liability coverage.

The 2010 Oregon Mutual farm manual shows this structure. It uses separate coverage forms for:

• the farm dwelling, the structures that go with it, and household personal property
• farm personal property
• barns and other farm structures
• mobile agricultural machinery
• livestock
• farm liability

Its "farm combination" applies when the policy covers all farm dwellings, farm personal property and other farm structures the insured owns, plus bodily injury and property damage liability for the farm premises and operations. A specific item can be excluded by agreement. Property owned by different people may be insured separately.

The manual also prevents double-listing. If the policy uses the separate machinery form or the separate livestock form, those items are not also written under the farm personal property form. So a tractor might sit under farm personal property in one policy and under a machinery form in another. Find where the policy actually lists it.

Contrast: The Oregon FAIR Plan, which calls itself "the insurance market of last resort," offers a farm program that covers dwellings, personal property, related structures, farm buildings and limited farm property. It states plainly that it does not offer a farm package, meaning it does not combine liability, property and business interruption under one policy. A "farm policy" is not automatically a package. Check whether liability is actually included.

Worked example: one fire, two limits

The Abara family's fictional farm package includes these limits, among others:

• Household personal property: $40,000
• Farm personal property: $70,000

Assume fire is covered and leave out deductibles. A fire spreads from the farmhouse to a nearby shed. It destroys:

• family furniture and clothing worth $15,000
• stored feed and tools worth $22,000

Sort first:

• Furniture and clothing are the family's belongings, so they fall under household personal property. The payment is $15,000.
• Feed and tools are used in the farm business, so they fall under farm personal property. The payment is $22,000.

The shed building itself is a farm structure. It would be a separate item under its own coverage and is not part of this calculation.

Change one fact: The household loss is $52,000 instead of $15,000. Household personal property pays its $40,000 limit. The unused room in the farm personal property limit cannot fill the $12,000 gap, because in this package each coverage has its own limit. The total payment is $40,000 + $22,000 = $62,000.

The tempting mistake: Treating everything the family owns on the farm as one pool and adding the limits together. Sort each item into its interest, then apply that interest's limit.

Check your understanding: Sort each item: a dining-room table, a stack of baled hay, a barn, a herd of cattle.

Compare the terms that get mixed up

• Planned move vs emergency removal: Was the property forced out by danger from an insured peril and then returned? A planned relocation is not.
• Personal property (manufactured home) vs personal effects (boat): In the home form, personal property is a coverage for belongings. On a boat, personal effects are a category of items that physical damage does not cover unless separate coverage is bought.
• Permanently attached vs portable boating equipment: Is the item fastened to the hull? Both are boat property; this only decides the category.
• Household personal property vs farm personal property: Is the item the family's own belonging, or is it used in the farm business?
• Physical damage vs liability vs medical payments: Whose loss is it (yours or someone else's), and is the question about legal responsibility or about accident-related medical expenses?
• Farm package vs farm property program: Does the policy combine property and liability, or does it cover property only?

Practice on your own

1. A homeowner sells their lot and hires a hauler to move both the manufactured home and a detached shed to a new park. Hail dents the roof of the home on the way, and the shed is also damaged. Assume hail is an insured peril. Under the Foremost form, what is covered?

2. Under the Foremost form, the Coverage A Amount of Insurance is $60,000. In a partial loss, the damaged portion's actual cash value is $11,000 and repairs cost $9,500. Leave out the deductible. What does the form pay? What would it pay if the home were damaged beyond reasonable repair?

3. A boat's reported actual cash value under the Progressive guide is $18,000. Its actual cash value at the time of a total loss is $16,500, and the deductible is $1,000. What does the form pay? Use the lesson's assumption about the deductible.

4. Sort these boat items: a fishing rod and tackle box, water skis, a trolling motor bolted to the hull, and a trailer with no trailer coverage requested.

5. A fictional farm package has these separate limits: household personal property $25,000, farm personal property $50,000, and a separate machinery form $90,000. A windstorm (assume covered, no deductibles) causes this damage: household belongings $9,000, hay and supplies $56,000, and a tractor $30,000. What does each coverage pay, and what is the total?

6. A farm client's policy covers the dwelling, barns and limited farm property but includes no liability coverage. A cow escapes and damages a neighbor's car. Is this policy a farm package, and does it answer the neighbor's claim?

What to remember

• Sort first: name the property interest or the injured person before you choose a coverage.
• Manufactured home (Foremost form): attached structures fall under Coverage A, separate structures under B, and belongings under C. A routine move is excluded. An emergency removal forced by an insured peril pays to move the home out and back, and belongings removal pays up to $250. A total loss pays the Amount of Insurance; a partial loss pays the lowest of three amounts.
• Boats: physical damage covers your boat property, liability covers harm you are legally responsible for, and medical payments covers medical and funeral expenses from a boating accident. Sort equipment by two tests: fastened to the hull, or used for the boat. Personal effects and the trailer may need to be requested or bought separately.
• Farms: household personal property and farm personal property are separate interests, each with its own limit. A package adds liability to property coverage. A farm property program without liability is not a package.
• For any real policy, read its form. These sources show how forms can work, not how every form works.