The Breezeway Garage, the Business Inventory, and the 10% Limit
A single-family dwelling is insured under the Dwelling Form for $250,000 building and $100,000 contents, with a $2,000 deductible. A detached garage is connected to the house by a covered breezeway with a continuous roof. The garage is used partly for personal parking and partly for the insured's woodworking business, where he stores $15,000 of business inventory and a $6,000 table saw. A flood damages the garage structure ($40,000), the business inventory ($15,000), and the table saw ($6,000). The insured also claims $2,000 for a riding lawnmower stored in the garage. The adjuster confirms the garage is at the same location and is not used as a dwelling. The policy has no endorsements for business property. The insured argues the garage is 'attached' because of the breezeway, so the 10% limit should not apply.
1. Does the covered breezeway make the garage part of the dwelling, or is it still a detached garage subject to the 10% limit?
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The garage remains a detached garage. A covered breezeway with a continuous roof connects the structures, but it does not make the garage structurally part of the dwelling. The SFIP treats a detached garage at the same location as part of the building coverage, but limits the amount payable for the garage to 10% of the building coverage. Ten percent of $250,000 is $25,000. That $25,000 is part of, not in addition to, the $250,000 building limit. The garage damage is $40,000, so the most payable for the garage structure is $25,000, before applying the deductible to the loss. The adjuster should document the breezeway, the separate foundation, and the garage's use. If the garage were truly attached and under the same roof line as the dwelling, the 10% detached-garage limitation would not apply, but the facts here do not support that.
2. Are the business inventory and table saw covered? Explain.
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No. The Dwelling Form covers residential property, and the SFIP excludes property used in a business. The $15,000 of woodworking inventory and the $6,000 table saw are business property, even though they are stored in a garage that also parks a personal vehicle. The business use is not incidental; the insured stores inventory and equipment for a woodworking business. The adjuster should verify whether the business is a hobby or a for-profit activity, but the presence of inventory and a table saw strongly indicates business use. The insured would need a commercial flood policy or other appropriate coverage for those items. The garage building itself may still be covered as a building, subject to the 10% limit, but the business contents are not.
3. How should the adjuster apply the $2,000 deductible to the garage building loss?
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The deductible applies once to the building coverage, not once per structure. The garage damage is $40,000. Subtract the $2,000 building deductible from the loss, leaving $38,000. The detached-garage limitation caps the building payment at 10% of $250,000, or $25,000. Because $38,000 exceeds $25,000, the payable amount is $25,000. The deductible is effectively absorbed by the limit; it does not reduce the capped amount to $23,000. If the garage damage had been $20,000, the payment would be $20,000 − $2,000 = $18,000. If the dwelling also had covered damage, the adjuster would combine the covered building loss, apply the deductible to the total, and then apply the 10% garage cap to the garage portion, ensuring the total does not exceed the building limit.