Coverage E

Reviewed by Stefan Tirschler

Noun

cov·er·age e | ˈkəv(ə)rɪdʒ i

Definition: The section of a home insurance policy that covers the insureds for their legal liability in personal matters or relating to the use or occupation of their home.

When the delivery person slipped and fell on Blake’s front step, Coverage E of his homeowner’s policy protected him from paying the legal damages.

What is Coverage E?

The Insurance Bureau of Canada (IBC) created standard homeowner’s forms, which many of Canada’s insurers use as the foundation of their home insurance policies. The IBC forms divide different coverages into parts A through G.

Coverage E contains personal and premises liability insurance.

Many Canadian home insurance policies retain IBC’s naming scheme, so you might see “Coverage E” on your own policy. Even if your policy doesn’t use the exact name (for example, Square One policies don’t), your policy will still include the coverage. Liability coverage is standard on most home insurance policies in Canada.

Liability insurance protects insureds when they are found legally liable for damages. To be found liable means that the legal process has determined something is your fault. Damages are the amounts of money a person is ordered to pay when they are found liable.

Most people are familiar with liability as it relates to motor vehicles. When a car accident happens, the people involved and their insurers fight about whose fault it is. They’re determining liability, and the same concept applies to personal and premises liability (though home insurance policies strictly exclude automobile-related stuff).

When you have liability insurance, it means your insurance company will cover compensatory damages you’re made to pay after being found liable for negligently causing harm to someone else. Compensatory damages are meant to compensate the victim for the harm they’ve suffered. They’re different from punitive damages, which are meant to punish the offender. Home insurance policies don’t cover punitive damages. As well, the damages have to be the result of an insurable incident, and the insurer will only pay up to the limit of insurance on your policy.

Since they’re on the hook for paying any damages, the insurer will also step in to defend you during legal proceedings. They’ll pay any expenses that arise as a result of the legal process, including lost wages, appeal bond premiums, and lawyer fees. The catch is that they get to pick the lawyer.

What is covered under Coverage E?

IBC’s standard form includes basic personal and premises liability insurance. Even though they may use the IBC forms as a starting point, insurance companies always customize the wordings of their own policies. Make sure you read your policy wordings for specifics about your coverage.

Coverage E insures the liability of the insureds for their actions as private citizens anywhere in the world.

Example

Jasmine has a home insurance policy for the apartment she rents, which includes liability insurance. Jasmine likes playing softball. During a game, she hits a line drive right into the face of the opposing pitcher. He’s hurt badly and has to miss several weeks of work. He sues Jasmine to cover his medical costs and lost wages. Since it was an accident, and Jasmine was at fault, her liability insurance covers the costs.

It also insures them against liability they might assume due to their ownership or occupation of their home.

Example

Stanley is a homeowner. During the winter, he can be a bit lazy about clearing his walkways of snow. One day, a delivery person slips and falls on his front step. The delivery person is hurt and can’t work for a couple of weeks. When Stanley is found liable, he’s made to pay for the delivery person’s lost wages and medical expenses. His home insurance policy can cover those expenses.

Premises liability is a major source of liability claims. Dog bites, slips and falls, out of control firepits… all of these things can lead to the homeowner being found liable, and that’s what Coverage E is there to protect against.

Of course, there are exceptions to the coverage.

  • Liability insurance will never cover an intentional act. If you punch the mailman in the face because your package was late, insurance can’t help you (maybe no one can).

  • It doesn’t cover injury to you or anyone else living in the home, except residence employees.

  • It doesn’t cover property that you’re borrowing or renting, unless the damage is caused by fire, explosion, water damage, or smoke (but not fireplace smoke).

  • It doesn’t cover damage you do while you’re doing work on something. If you accidentally scratch your neighbour’s windows while washing them for him, there’s no coverage.

There are other exceptions, which vary from policy to policy. As always, make sure to read your policy wordings to be sure about how you’re covered.

If you’d like to learn more about liability insurance, we’ve got plenty more information for you.

The important points

  • Coverage E includes personal and premises liability insurance.
  • Liability insurance covers you when you are found liable for damages.
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