James and Megan Webb recently purchased a home for $300,000. The home is insured under an HO-3 policy for $250,000 with no endorsements attached. Megan collects antiques for a hobby. James has a stamp collection that contains several rare stamps. The couple also owns a 30-foot sailboat that they use on weekends.
a. Assume you are a risk management consultant who has been asked to evaluate the couple's HO-3 policy. Identify three endorsements that James and Megan may wish to purchase to modify their HO-3 policy.
b. Explain how the above HO-3 policy would be modified by each endorsement identified in your answer to (a) above.
c. For each of the following losses, indicate whether Section II of the homeowners policy would provide full coverage for the loss. If full coverage would not be provided, explain why.
1. Megan entertains members of a local garden club in her home and serves the guests a buffet luncheon. Two guests become seriously ill and sue Megan, alleging she had served them contaminated food. The court awards each guest damages of $60,000.
2. James is an architect. The roof of a new addition to a client's home collapses. The client alleges that the roof collapsed because of faulty design. The cost of rebuilding is $40,000. The client seeks to recover that amount from James.
3. During a visit to a friend's home, Megan accidentally breaks a figurine that she picked up to admire. The figurine has a value of $475. The friend is seeking damages from Megan.