The Dog, the Guest, and the Umbrella
The Okafors carry a homeowner policy with $300,000 Section II personal liability, a $1,000 medical payments to others limit, and a personal umbrella of $1,000,000. Their policy has no dog exclusion. Their 14-year-old son's friend, Diego, is visiting when the family's rescue dog bites him, causing a deep laceration requiring $6,800 in emergency treatment and stitches. Separately, the same week, a delivery driver slips on ice on the Okafors' walkway and breaks a wrist, incurring $9,500 in medical bills and threatening to sue for $40,000 in lost wages. Mrs. Okafor also runs a home day-care for six neighborhood children; one child falls from a swing and the parents demand $25,000. The policy contains a standard business-pursuits exclusion and a 'home day-care' endorsement was never purchased.
1. Analyze coverage for Diego's dog bite under medical payments versus liability, and explain which responds first and why.
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Two coverage parts are in play.
Medical payments to others ($1,000): This pays reasonable medical expenses for a guest injured on the premises regardless of fault - no negligence required, no lawsuit needed. Diego's $6,800 in treatment triggers this part, but it is capped at $1,000. Medical payments is 'first dollar' and paid without regard to liability.
Personal liability ($300,000): Because the dog has no exclusion, the bite is a covered occurrence. If the Okafors are legally liable (dog-bite statutes often impose strict liability), liability coverage responds to the remaining $5,800 in medical costs plus any general damages, up to $300,000. The umbrella sits above once the primary limit is exhausted.
The sequencing point examiners test: medical payments pays its $1,000 promptly and without a fault finding, and that payment is typically not offset against a later liability settlement in the same way a judgment would be - but the insured cannot double-recover the same medical expense. Practically, Diego's family receives $1,000 quickly under MedPay, and the balance flows through liability if negligence/strict liability is established.
2. Evaluate the delivery driver's claim and the day-care claim, stating which is covered and which is excluded, with reasoning.
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Delivery driver ($9,500 medical, $40,000 lost-wage demand): A slip on the icy walkway is a premises liability occurrence. The homeowner owes a duty to invitees to maintain safe conditions; failure to clear ice supports negligence. Medical payments ($1,000 limit) can pay part of the $9,500, and personal liability responds to the balance of medical costs plus any proven lost wages, up to $300,000, with the umbrella above. This claim is covered (subject to the insurer's investigation of comparative fault and notice).
Day-care fall ($25,000 demand): The home day-care is a business engaged in on the residence premises. The standard business-pursuits exclusion bars liability arising from that business, and no day-care endorsement was purchased to buy back coverage. The claim is therefore excluded - the Okafors are personally exposed to the $25,000 demand. The umbrella does not help; it follows the underlying policy's exclusions and would not drop down to cover an excluded business exposure.
The judgment call: the dog bite and slip are ordinary personal exposures that the policy is built for; the day-care is a known, insurable business exposure the family chose not to endorse. The fix is to purchase the day-care endorsement (which typically restores liability and adds medical payments for enrolled children) rather than to argue the exclusion.