“The adjuster’s initial response was that the injury was excluded by an endorsement the insurer has been attaching to all Homeowners Policy for several years. I am attaching a copy for your review. Here is the “eyes vs brain” problem: While it’s clear that the bounce house could be considered a ‘Rebounding device... Constructed of a resilient sheet or web,’ as the endorsement says, I’m not completely sure that this is the intent of the exclusionary endorsement.

“In fact, I seem to recall that when the insurer began using this endorsement, the explanatory information (or maybe what the underwriter told me) indicated that the purpose was to exclude trampolines. What do you think?”

After reading the endorsement, I see your point. Not only do I agree with your brain’s interpretation, I think your brain needs to give your eyes a stern lecture. Look again at the endorsement you attached to your email. I think your eyes (and probably the adjuster’s eyes also), stopped reading too early. 

Exclusion

Certain Recreational Equipment or Devices

1. Coverage E – Personal Liability and Coverage F – Medical Payments, do not apply to the following types of recreational equipment or devices:

(a) A rebounding device;

(b) Constructed of a resilient sheet or web;

(c) Supported by springs in a metal frame; and

(d) Used as a springboard and landing area

in tumbling and gymnastic springing.

Comments:

(1) The first two parts of the exclusion [1.(a) and 1.(b)] do seem broad enough to include a bounce house.

(2) Also, the bounce house might be “supported by springs” [1.(c)], and “used for tumbling” [1.(d].)

(3) However, the provision must be read in its entirety (vs picking out selected parts). In doing so, I think the conjunction “and” appearing at the end of 1.(c) is key. For the exclusion to apply, the equipment or device must possess all four characteristics. My reading of the entire exclusion is that it is aimed at a trampoline. In fact, Merriam-Webster’s Unabridged defines a trampoline as follows: “a resilient canvas sheet or web supported by springs in a metal frame used as a springboard in tumbling and exercising.”

(4) Lastly, the insurer of the party host clearly has a duty to provide an initial defense to any litigation.

Your situation serves as an excellent reminder to all insurance practitioners (newbies and veterans alike) to read the entire provision in a coverage form or endorsement. Here are a few other examples which illustrate how easy it is to misread an insurance policy.


Situation #1: “The Adventures of Semi-Colon Man.”

In addition to the importance of conjunctions such as “and” in the above case, there are many situations where a simple punctuation error can completely change the intent of a coverage form or endorsement. In this humorous article by Bill Wilson, CPCU, ARM, Director of the IIABA’s Virtual University, he relays the story of how he received the nickname “Semi-Colon Man” during his tenure at ISO (Insurance Services Office):

• The Adventures of Semi-Colon Man
  

Situation #2: Know the edition date.

The familiar idiom “change is the only constant” certainly applies to insurance. One coverage situation which arises frequently deals with the off-premises use of riding lawnmowers. Note that while the wording changes are subtle, the coverage changes are substantial.

Section II Exclusions

Motor Vehicle Liability

HO 00 03 05 11
Used solely to service a residence.

HO 00 03 10 00
Used solely to service an "insured's" residence.

HO 00 03 04 91
Used to service an "insured's" residence.

HO 00 03 04 84
Used to service an insured’s residence.

Here are several articles posted on the IIABA’s Virtual University (VU) dealing with coverage issues for riding lawnmowers:

• Are Riding Mowers Covered by the HO Policy? Are You Sure?
  
• Homeowners Coverage Gaps? Here Are Some Mower.
  
• Insuring Lawn Tractors Used Off Premises
  
• No Coverage for Riding Mower Until It’s Actually Used?
  

In July of 2014, a 30-inch water main almost 100 years old failed, and resulted in approximately 20,000,000 gallons of water damaging buildings and over 1,000 cars on the UCLA campus. It was big news in the insurance world, with commentary and analysis sparking heated discussions about the wear and tear exclusion, the surface water exclusion, as well as exceptions to those exclusions.

This Virtual University article discusses how important the edition date would be for the applicable commercial property form, since the newer edition provided an exception to the wear and tear exclusion, but which is found at the very end of the CP 10 30. In addition, the article explains how the ISO Commercial Property coverage form, the Homeowners Policy, and the Personal Auto Policy (PAP) differ with each other on wear and tear losses:

• Commercial Property Coverage for Public Water Main Breaks
  

Yet another dimension to knowing the edition date is to be aware of how proprietary forms differ from ISO – both in edition dates as well as coverage. A comparison of ISO forms to proprietary forms reminds me of the public embarrassment that NASA endured in 1999, when the unmanned Mars Climate Orbiter mission went awry into deep space because one design team was using the metric system in its calculations, while another team was using the English system. It never occurred to either team to be sure they were using the same measurement system.

Here is a comprehensive article on ISO forms vs proprietary forms posted on the Virtual University:

• Is It ISO or Is It Memorex?
  

The loading and unloading of an auto could fall under either the CGL (Commercial General Liability) or BAP (Business Auto Policy), depending on specific facts for each situation. Most common losses in loading and unloading are covered by the BAP. One exposure that requires a very close reading of the loading and unloading provisions is when a customer’s auto is involved. Excerpt from the ISO CGL:

CG 00 01 04 13

Commercial General Liability Coverage Form

Section I – Bodily Injury and Property Damage

1. Exclusions

g. Auto, Aircraft or Watercraft

"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading".

Section V – Definitions

11. "Loading or unloading" means the handling of property:

a. After it is moved from the place where it is accepted for movement into or onto an aircraft, watercraft or "auto"

Comments:

(1) The auto exclusion has two parts, both of which must be met in order for the exclusion to apply. The first part excludes the “ownership, maintenance, use [which includes loading or unloading], or entrustment to others” of certain autos. In the definition of “loading and unloading,” (see 11.a. above), once the loading or unloading of a customer’s auto has begun, the CGL exclusion is usually triggered.

(2) The second part of the auto exclusion applies to autos which are “owned or operated by or rented or loaned to any insured.” This is the provision that is often overlooked. A customer’s auto being loaded or unloaded is not “owned or operated by or rented or loaned to any insured.” Therefore, the CGL exclusion would not apply.

Here are two VU articles:

• Coverage While Loading or Unloading Non-Owned Autos
  
• Loading and Unloading – CGL or BAP?