5.1 Section II Coverages E (Liability) and F (Medical Payments)
Key Takeaways
- Coverage E (Personal Liability) pays bodily injury and property damage the insured is legally liable for, plus defense costs outside the limit.
- Coverage F (Medical Payments to Others) is no-fault, applies to non-insureds, and is a small per-person sublimit (commonly $1,000-$5,000).
- Both coverages apply on an occurrence basis and exclude intended or expected injury, business activities, and auto/aircraft/large-watercraft liability.
- Defense ends and the insurer's duty stops once the applicable limit is exhausted by payment of judgments or settlements.
Section II Overview
Section II of the ISO Homeowners (HO) program (current edition HO 00 03, 05 11 / 2011) provides liability protection, while Section I handles property. The two liability coverages are Coverage E - Personal Liability and Coverage F - Medical Payments to Others.
Both respond to an occurrence, defined as 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 liable to pay because of BI or PD caused by an occurrence. It is liability coverage: fault must be established.
Three things make Coverage E powerful on the exam:
- It pays damages up to the Coverage E limit (commonly $100,000, often raised to $300,000 or $500,000).
- The insurer provides a defense and pays defense costs in addition to the limit of liability.
- Defense ends when the limit is exhausted by payment of a judgment or settlement.
Who Is an Insured
Under Section II, insured includes the named insured, the resident spouse, resident relatives, and other persons under 21 in the care of an insured. Coverage E follows the insured worldwide for personal (non-business) activities - a trap, since Section I property coverage is location-based but liability is not.
Example: the named insured's child accidentally injures a classmate during a school trip in another state - Coverage E can respond because liability coverage travels with the insured.
Coverage F - Medical Payments to Others
Coverage F is a no-fault, goodwill coverage. It pays reasonable medical expenses incurred within three years of an accident for BI to a person who is not an insured. No legal liability is required - it prevents small injuries from escalating into lawsuits.
Typical limits are $1,000 to $5,000 per person. Coverage F does not apply to the named insured or resident family members - they use their own health insurance.
Section II additional coverages
Beyond E and F, Section II includes built-in additional coverages that do not reduce the E/F limits:
| Additional coverage | What it pays |
|---|---|
| Claim Expenses | Defense costs, bonds, post-judgment interest, up to $250/day for the insured's lost earnings to attend trial |
| First Aid Expenses | Medical first aid to others at the time of an occurrence (not to an insured) |
| Damage to Property of Others | Up to $1,000 per occurrence for PD caused by an insured, regardless of fault - a goodwill, no-fault coverage |
| Loss Assessment | Up to $1,000 for the insured's share of a homeowners-association liability assessment |
The Damage to Property of Others coverage is a frequent trap: it pays even without legal liability (so a child who breaks a neighbor's window is covered up to $1,000), but it excludes damage to property the insured owns or rents and intentional damage by an insured over 13.
Key Section II Exclusions
Both coverages share core exclusions tested heavily:
- Intentional injury - injury that is expected or intended by the insured.
- Business pursuits and professional services.
- Motor vehicle, aircraft, and large/high-power watercraft liability (covered by auto, aviation, or watercraft policies instead).
- Liability assumed under contract (with exceptions).
- Injury to an insured (you cannot sue yourself).
Coverage F adds exclusions for residence employees off the insured location and persons regularly residing on the insured location.
Worked Scenario
A guest slips on the insured's icy walkway, sues, and is awarded $80,000 in damages; the insurer also spends $25,000 defending. With a $100,000 Coverage E limit, the insurer pays the full $80,000 judgment plus the $25,000 defense - because defense is outside the limit, the insurer pays $105,000 total and the limit is not exhausted (still $20,000 of damages capacity remaining).
Coverage E follows the insured, not the residence
A defining feature of homeowners liability is that Coverage E follows the insured worldwide for personal (non-business) activities, while Section I property coverage is tied to the residence premises. So an insured who injures someone while on vacation in another state, or whose child hurts a classmate on a school trip, can trigger Coverage E even though nothing happened at the insured home. This location-independence is a frequent exam contrast: property is premises-based, liability is person-based.
Defense outside the limit and exhaustion
Coverage E provides a duty to defend any suit seeking covered damages, even if groundless or fraudulent, and defense costs are paid in addition to the limit of liability. Worked example: a guest awarded $80,000 with a $100,000 Coverage E limit, plus $25,000 in defense, costs the insurer $105,000 total because defense is outside the limit, and $20,000 of damages capacity remains. The insurer's duty to defend ends only once it has exhausted the limit by paying judgments or settlements. The recurring trap is assuming defense erodes the limit - on the homeowners form it does not.
The motor-vehicle and business exclusions
Coverage E and F exclude motor-vehicle, aircraft, and large/high-power watercraft liability (those route to auto, aviation, or watercraft policies) and business and professional activities. The exam tests the edges: small, low-power watercraft and certain recreational vehicles on the insured location may still be covered, and an incidental office in the home may need a Permitted Incidental Occupancies endorsement to restore liability that the business exclusion otherwise removes.
A neighbor's child is hurt on the insured's trampoline. The insured was not negligent, but the policyholder wants the $1,800 emergency-room bill paid quickly to keep goodwill. Which coverage responds?
Under Section II, defense costs are handled how relative to the Coverage E limit of liability?