Section II of a homeowners policy has two coverages: personal liability and medical payments to others. Personal liability answers claims for two kinds of harm:
Bodily injury: harm to a person, including sickness or disease, required care and resulting death.
Property damage: physical injury to or destruction of tangible property, including its loss of use.
Examples: a guest's carbon monoxide illness is bodily injury. A neighbor's dented car door is property damage. If Marco negligently starts a fire that damages his neighbor's house, the rent the neighbor pays while the house is repaired is property damage too, because it results from loss of use. It is not additional living expense, which is a first-party benefit for the insured's own displacement.
A standard dwelling policy is different: it insures property only, with no built-in liability or medical payments coverage. A dwelling owner needs a personal liability supplement, an endorsement or a separate policy. For exam purposes, the CDI outline treats the Comprehensive Personal Liability supplement to the Dwelling Program as identical to Homeowners Section II.
Defense: the insurer defends covered suits, and defense costs are paid in addition to the limit. Example: a $300,000 limit, $40,000 of defense costs and a $300,000 settlement mean the insurer pays $340,000 in total. The duty to defend ends once the limit has been paid out in a settlement or judgment.