Your Homeowners Insurance Policy and You – Coverage Exclusions and the Duty to Defend

By: Rudman Winchell Attorney Colin E. Howard

Despite its title, the protection provided by a homeowners insurance policy is not limited to the home. It applies in a wide range of circumstances—much wider than what most people think. Most policies contain personal liability coverage that applies if you are sued for injuries to someone else or for damage to another person’s property—no matter where the conduct occurs.

It’s important to understand the extent and limits of your homeowners policy. This article briefly explores the types of protection and coverage exclusions you might find in a typical homeowners policy. For more information, visit the Maine Attorney General’s Consumer’s Guide to Homeowner’s Insurance, and this list of frequently asked questions about homeowners insurance policies.

If a lawsuit is brought against you, there are two ways your homeowners insurance policy might protect you. First, the policy may pay for an attorney to defend you in the lawsuit. Second, if you lose the suit or settle before trial, the policy may pay whatever money you owe to the plaintiff, protecting you from personal liability.

The distinction between these two benefits becomes apparent when your insurer argues that your policy does not provide coverage for the claims the plaintiff brings against you.

Homeowners policies are riddled with coverage exclusions. The largest and most common exclusion is for intentional torts. If, for example, a judge or jury determines that you intentionally assaulted someone, most policies will not pay for whatever damages you owe.

However, even if your policy will not pay for the damages you owe, it many cases, it will still pay for an attorney to defend you in the lawsuit. This is called an insurance company’s “duty to defend.” If there is a chance that a claim against you could fall within your policy’s coverage, then your insurer has a duty to defend you. For example, if a plaintiff sues you, claiming you intentionally and also negligently injured her, your insurance company will most likely have a duty to defend, because negligence is covered by almost all homeowners policies. (Note that when Maine courts consider coverage/exclusion issues, they tend to favor coverage, giving the policy-holder the benefit of the doubt.)

The Maine Supreme Court recently considered whether an insurance company had a duty to defend against a defamation claim. In a case called Hardenbergh v. Patrons Oxford Insurance Company, 2013 ME 68, the homeowners policy stated that for defamation claims, it would provide a defense, but not pay any damages. The policy also contained a coverage exclusion for any claim arising out of the policy-holder’s “business pursuits.” Chalmers Hardenbergh, who owns and edits a publication called the Atlantic Northeast Rails & Ports Newsletter, was sued for defamation after publishing statements in the newsletter that the plaintiff alleged were not true. The Court explained that although the claim was for defamation, it did arise solely within Mr. Hardenbergh’s business pursuits—namely, his newsletter. Therefore, the coverage exclusion applied, and the insurance company had neither a duty to defend nor a duty to pay the damages.