Coverage E (personal liability)

Coverage E is the personal liability portion of a homeowners (HO) policy — the first of the two liability coverages that make up Section II of the policy (the other, Coverage F, pays medical payments to others regardless of fault). Coverage E responds when the insured is legally liable for bodily injury or property damage suffered by someone else, such as a guest who slips on an icy walkway or a neighbor whose fence is destroyed by the insured's negligence.

Coverage E pays two things: the damages the insured is legally obligated to pay, up to the policy limit, and the cost of defense — attorney fees and court costs — which the insurer pays in addition to the limit. The insurer has both the duty to defend and the right to settle a claim. Policies are commonly issued with a base Coverage E limit of $100,000, which insureds can increase for a modest additional premium.

Importantly, Coverage E follows the insured, not just the residence: it applies to non-auto, non-business liability arising from the insured's personal activities almost anywhere. Standard exclusions include liability arising from motor vehicles, most watercraft and aircraft, business pursuits, intentional injury, and contractual liability. Similar personal liability coverage appears in dwelling policies (as Coverage L under an added liability endorsement) and in other personal lines forms.

Coverage E is core material on the state property and casualty licensing exams. Property, casualty, and personal lines candidates should know the Section I versus Section II structure of the HO policy, what Coverage E pays versus Coverage F, that defense costs are paid in addition to the limit, and the major exclusions.