5.1 Section II Coverages E (Liability) and F (Medical Payments)
Key Takeaways
- Coverage E - Personal Liability pays sums the insured is legally liable to pay for bodily injury or property damage, plus defense costs paid IN ADDITION to the limit, on a worldwide basis.
- The insurer must defend even false, groundless, or fraudulent suits; the duty to defend ends only when the per-occurrence limit is exhausted by payment of judgments or settlements.
- Coverage F - Medical Payments to Others is NO-FAULT, paying a non-resident's reasonable medical expenses incurred within 3 years regardless of the insured's negligence.
- Coverage F never pays the insured or regular household residents; minimum starting limits are about $100,000 for Coverage E and $1,000 per person for Coverage F.
- Supplementary payments (defense, bonds, lost earnings up to $250/day, post-judgment interest) come on top of the Coverage E limit, not inside it.
Section II of the Homeowners policy is third-party (liability) coverage. Where Section I pays for the insured's own property, Section II pays when the insured is legally responsible for injuring someone else or damaging their property. The ISO HO-3 form (HO 00 03 05 11) carries two coverages: Coverage E - Personal Liability and Coverage F - Medical Payments to Others.
Both respond to an occurrence - an accident, including continuous or repeated exposure to substantially the same harmful conditions, that results in bodily injury (BI) or property damage (PD) during the policy period.
Coverage E - Personal Liability
Coverage E pays sums an insured becomes legally obligated to pay as damages because of BI or PD caused by an occurrence, and it provides a legal defense.
| Element | What it means |
|---|---|
| Bodily Injury (BI) | Physical harm: a guest slips on an icy walk; the family dog bites a visitor |
| Property Damage (PD) | Damage to others' property: your tree falls on a neighbor's car |
| Defense | Insurer hires and pays counsel; costs are IN ADDITION to the limit |
| Worldwide | Liability follows the insured anywhere on the globe |
Limits and the "in addition to" rule
Coverage E is written per occurrence, not per person. A single occurrence injuring three guests is still one $300,000 limit shared among them. Typical limit selections:
| Per-Occurrence Limit | Who selects it |
|---|---|
| $100,000 | Common policy minimum |
| $300,000 | Recommended for most families |
| $500,000 | Higher-asset households |
| $1,000,000+ | Usually via a separate umbrella |
Worked example. A guest wins a $250,000 judgment against an insured carrying a $300,000 Coverage E limit. The insurer also spent $60,000 defending the suit. Because defense and supplementary payments are paid IN ADDITION to the limit, the insurer pays the full $250,000 judgment AND the $60,000 defense - $310,000 total - and the insured owes nothing. The limit is not reduced by defense costs.
Supplementary payments on top of the limit include: defense costs, premiums on bonds, reasonable expenses the insured incurs at the insurer's request including up to $250/day for lost earnings, and post-judgment interest on the entire judgment until the insurer pays its share.
An insured with a $300,000 Coverage E limit is sued. The insurer pays a $300,000 settlement and $45,000 in defense costs. How much does the insured personally owe from these amounts?
Duty to defend - even groundless suits
The insurer must defend any suit seeking damages that are potentially covered, even if the claim is false, groundless, or fraudulent. The duty to defend is broader than the duty to pay. It ends only when the insurer has paid the applicable limit in judgments or settlements - settling a claim, not merely offering to, exhausts the obligation.
Coverage F - Medical Payments to Others
Coverage F is a no-fault, goodwill coverage. It pays the reasonable, necessary medical expenses - including surgical, dental, ambulance, hospital, professional nursing, and funeral services - incurred or medically ascertained within three years of an accident causing BI.
The key word is no-fault: Coverage F pays a covered person's medical bills regardless of whether the insured was negligent. There is no need to prove liability, which lets the insurer settle small injuries quickly and discourage lawsuits that would trigger Coverage E.
| Feature | Coverage E (Personal Liability) | Coverage F (Med Pay to Others) |
|---|---|---|
| Trigger | Insured legally liable (fault) | No-fault - pays regardless of fault |
| Pays whom | Third-party claimant | Injured non-resident guest |
| Defense | Yes, in addition to limit | No defense provided |
| Time limit | Statute of limitations | 3 years to incur expense |
| Typical limit | $100,000-$500,000/occ | $1,000-$5,000 per person |
Who Coverage F covers - and who it never covers
Coverage F applies to a person on the insured location with the insured's permission, or off the insured location if the injury arises from the insured's activities, a residence employee's work, or an animal owned by the insured. Crucially, Coverage F never pays the named insured or any regular resident of the household (other than a residence employee). A family member's broken arm is a Section I/health-insurance matter, not Coverage F.
Major Section II exclusions (HO 00 03 05 11)
Both coverages exclude liability that is:
- Expected or intended by the insured (intentional acts).
- Business or professional activities of the insured.
- Arising out of rental of the premises to others (beyond incidental).
- Arising out of motor vehicles, aircraft, or watercraft above stated size/horsepower thresholds (covered instead by auto/watercraft policies).
- Insured-versus-insured - bodily injury to one insured caused by another insured is excluded.
- Communicable disease, sexual molestation, or controlled-substance use.
A neighbor's child is injured falling off the insured's trampoline. The insured was not negligent. Which coverage most likely responds first, and why?
Section II Exclusions and the Business/Auto Boundary
Coverage E and F exclude liability arising from business pursuits, professional services, owned/operated motor vehicles and watercraft above stated sizes (those belong on auto/watercraft policies), intentional injury, workers comp obligations, and communicable disease. A limited incidental business carve-back and a permitted-use carve-back for small watercraft and recreational vehicles soften some exclusions.
The exam tests boundary cases: a dog bite on the premises (covered Coverage E), a home-based daycare injury (business-pursuits exclusion, needs endorsement), and a guest injured in the insured's car (auto policy, not HO Section II).
Additional Coverages Under Section II
Section II adds several coverages beyond E and F: claim expenses (defense costs, paid in addition to the limit, plus up to $250/day for the insured's lost earnings to assist defense), first aid expenses the insured incurs for others, damage to property of others (a goodwill coverage, often $1,000 per occurrence, paid regardless of fault for property the insured damages), and loss assessment for charges levied by a homeowners association. These mirror the supplementary-payments concept and are frequently tested as amounts paid outside the Coverage E limit.