Form HO 05 24 - Business Pursuits
What the form is:
The HO 05 24, titled "Business Pursuits," is an endorsement to a Homeowners policy (like the HO 00 03) designed to provide liability coverage for specific business activities conducted by an insured. It's crucial to understand that this endorsement does not apply to any business owned or financially controlled by the insured or by a partnership in which the insured is a member. Instead, it's intended for insureds who are employed by someone else but conduct certain work-related activities that could expose them to liability. The specific business pursuits must be described in the endorsement for coverage to apply. This form modifies the standard homeowners policy, which typically excludes or severely limits coverage for business-related liability.
Classes of business it applies to:
The HO 05 24 is generally suitable for insureds engaged in specific, often part-time or incidental, business activities as an employee. Common examples include:
- Clerical office employees: Such as an administrative assistant who occasionally works from home or handles company-related errands.
- Salespersons: Individuals who might meet clients or conduct sales activities away from their employer's main premises.
- Collectors and Messengers: Employees whose duties involve travel and interaction with third parties on behalf of their employer.
- Teachers: Educators who might tutor students at their home or another location outside of school property. This endorsement can sometimes offer an option to include liability coverage for corporal punishment, if applicable and permissible.
It's important to note that this endorsement is not designed for full-fledged home-based businesses where the insured is the owner or a principal. For those scenarios, a more comprehensive solution like the Home Business Insurance Coverage endorsement (HO 07 01) or a separate commercial policy would be more appropriate.
Special considerations:
- Ownership is Key: The defining factor for using HO 05 24 is that the insured is not the owner or a partner in the business. If the insured has an ownership stake, this endorsement is unsuitable.
- Described Pursuits Only: Coverage only applies to the specific business activities detailed in the endorsement schedule. Any pursuits not listed are not covered.
- Limited Scope: This endorsement primarily addresses liability. It typically does not provide significant coverage for business property, which is subject to low sub-limits in a standard homeowners policy (e.g., $2,500 on premises). While another endorsement, HO 04 12 (Increased Limits on Business Property), can raise this property limit, it doesn't address the liability exclusion.
- Not for All Home-Based Work: If an insured's work from home involves client visits to the residence, storage of significant business inventory, or specialized equipment, the HO 05 24 may be inadequate, and the underlying homeowners policy's exclusions for business activities could still pose a significant gap.
- Relation to HO 00 03: The HO 05 24 modifies the liability section (Section II) of the base homeowners form, like the HO 00 03, to carve back in some coverage for the described business pursuits that would otherwise be excluded.
Real-world example: A high school teacher who offers private tutoring sessions in students' homes on weekends could benefit from this endorsement. If a student were accidentally injured during a tutoring session at their home, and the teacher was found liable, the HO 05 24 could provide coverage, assuming tutoring was the described business pursuit.
Key information for agents and underwriters:
- Risk Assessment: Underwriters need to carefully evaluate the nature and scope of the described business pursuit. Factors to consider include the frequency of the activity, potential for injury to third parties, and whether any activities take place on the insured's residence premises (which could increase exposure). The number of clients visiting the business on a weekly basis and any physical alterations to the residence for the business are important underwriting considerations.
- Pricing: An additional premium is typically charged for this endorsement. The premium will reflect the perceived increase in liability exposure associated with the described business activities.
- Coverage Gaps: Agents must clearly explain the limitations of this endorsement. It is not a substitute for a commercial general liability policy or a comprehensive home business policy if the insured's activities are more extensive or involve ownership. Specifically, professional liability (errors and omissions) is generally not covered by this endorsement.
- Distinguish from HO 07 01: It's crucial to differentiate the HO 05 24 (for employees' business pursuits) from the HO 07 01 (Home Business Insurance Coverage), which is designed for businesses owned by the insured and operated from the residence. The HO 07 01 offers broader property and liability coverage for the insured's own business.
- Underwriting Guidelines: Insurers will have specific guidelines on eligible business pursuits. Activities that are inherently hazardous, involve manufacturing, or have significant public interaction at the insured's home might be ineligible or require more specialized coverage. Some insurers may have a maximum gross annual receipts threshold for businesses to be considered under any home-based business endorsement.
Real-world example for underwriters: An application listing "occasional consulting work from home office for XYZ Corp (employer)" with no client visits and minimal off-premises activity might be a straightforward risk. However, an insured listing "part-time salesperson with in-home product demonstrations" would warrant closer scrutiny regarding the types of products, frequency of demonstrations, and potential for premises liability claims at the insured's home, even if they are an employee.