Golf carts and
homeowners insurance

Not so fast with those
low speed vehicles

The high cost of gasoline has a growing number of consumers using golf carts for short trips on public roads and pathways. In many communities, local officials are seeking to accommodate the trend by issuing permits to those seeking to use golf carts in this fashion.

But, before hopping into a cart and zipping off, consumers should know if they have liability insurance in place for such use of a golf cart or similar vehicles. Chances are good that they have little, if any, such coverage under their homeowners policy.

Homeowners coverage for non-golf use of golf carts is typically quite limited, and can vary according to the state where an insured lives, the municipality where a golf cart is operated, and the version of the policy forms used by his or her homeowners insurer.

Ironically, the permit process can actually lead to a restriction of coverage under the latest standardized homeowners policies for on-road use of golf carts.

As always, it is necessary to consult one's own policy to determine whether and when coverage is in place. To have adequate coverage for one's particular use of a golf cart, it may be necessary to buy a separate  policy for that purposes, or extend coverage under an auto policy to golf cart use, if permitted.

25 mph threshold

It's been 10 years since the National Highway Traffic Safety Administration (NHTSA) issued vehicle safety standards that recognized a new category of "low-speed vehicles" distinct from passenger cars. In its rules, issued in 1998, the NHTSA noted that at least 16 states had laws authorizing local governments to permit some use of golf carts on public roads.

For the NHTSA's purposes, golf carts may or may not qualify as low-speed vehicles, depending on how fast they can go. In short, golf carts and newly emerging "neighborhood electric vehicles" are subject to NHTSA safety standards if they are designed to travel between 20 and 25 miles per hour on level ground.

Vehicles designed to travel less than 20 mph (which includes most golf carts) are exempt by statute from federal safety standards. Vehicles that can exceed 25 mph are deemed to be passenger cars subject to safety standards for automobiles.

After the NHTSA rules were issued, the 25 mph threshold was incorporated into standardized homeowners insurance policy forms.

AAIS forms

For example, the latest homeowners forms developed by the American Association of Insurance Services (AAIS) provide incidental coverage for bodily injury and property damage arising from use of a motorized golf cart owned by the insured.

Golf cart coverage in the latest version is subject to several limitations, including a provision that the golf cart "is not built or modified after manufacture to exceed a speed of 25 miles per hour on level ground."

In addition, among other restrictions, there is no liability coverage for a golf cart that is "registered for use on public roads or property." Nor is there liability coverage for a golf cart that is "required by law or governmental regulation to be registered for use at the location of the occurrence" of damage or injury.

The first provision cited in the paragraph above is a longstanding provision designed to prevent homeowners coverage from being applied to "auto" losses as traditionally understood; i.e., losses arising from the ownership, use, or maintenance of registered motor vehicles.

The second provision was added more recently, and seeks to limit homeowners exposure for regular use of golf carts and other smaller vehicles for transport, a growing practice indicated by the number of municipalities now issuing permits for that purpose.

Limited use

Generally speaking, homeowners coverage for use of golf carts evolved to cover limited use of carts off of the golf course.

The broader and more open-ended golf cart use becomes, the more the exposure becomes a vehicle exposure. Insureds are, therefore, advised to add coverage for use of a golf cart to their auto policies, or to purchase separate golf cart liability policies, now marketed by several carriers.

One could see, however, where consumers could have a misconception and believe that applying for and receiving a permit will preserve or extend homeowners coverage for use of a golf cart. After all, the permit process is designed to promote public safety.

Local officials need to understand and inform individuals that official sanction for on-road use of golf carts and other small vehicles does not mean that use is insured, however.