CHAPTER SIX - LOSSES NOT INSURED

                

CONCEALMENT OR FRAUD

 

ISO.  2.    Concealment or Fraud. The entire policy will be void if, whether before or after a loss, an insured has:

a.  intentionally concealed or misrepresented any material fact or circumstance;

b.  engaged in fraudulent conduct; or

c.  made false statements; relating to this insurance.

 

Other Company.         2.         Concealment or Fraud. This policy is void as to you and any other insured, if you or any other insured under this policy has intentionally concealed or misrepresented any material fact or circumstance relating to this insurance, whether before or after a loss.

 

 

There are many cases and situations where concealment and/or fraud is the subject.

 

Misrepresenting residence:  Policy was rendered void where the insured misrepresented that he was residing at the insured premises at the time of the loss.

 

Prior loss history:  Policy was rendered void where the insured made a statement on application regarding prior loss history that he knew to be false.

 

Coverage after sale:  Homeowners policy did not afford building loss coverage for a fire that occurred after the insured sold a seasonal residence because the term "residence premises" was unambiguous and required that dwelling had to be used by the insured as his residence in order for loss to be covered.  Insured recovered upon contents claim when insurer failed to prove policy was void under fraud provision.

 

Proof of arson:  Motive and opportunity are two factors to be considered in determining whether an insured had a guilty connection with a fire; however, they are not mandatory elements of circumstantial proof of the arson defense.

 

Insurer’s duties to pay after being unable to deny claim:  Despite jury verdict in favor of insureds, who were denied coverage for fire loss by insurer in good faith, based upon allegations of arson and fraud, pursuant to policy provisions they would be required to actually repair, rebuild, or replace at the same or another site before the insurer would be required to pay the difference between the actual cash value and replacement cost of their dwelling.

 

Separate contract between lienholder and insurer:  (Remember the relationship between the insurer and the mortgagee when the following court decision was rendered.)  Standard loss payable clause operated as a separate contract between lienholder and insurer, and the insured's material breach of insurance contract by intentional destruction of his motor home by fire, as well as fraud and false swearing regarding the loss, did not constitute conversion and thus did not operate to preclude lienholder from recovery of insurance proceeds.

 

Recovery of portion of loss by innocent insured wife:  Innocent insured wife could recover one-half of insurance proceeds for fire loss to barn and personal property, even if insurer proved by preponderance of evidence that the insured husband had committed arson and fraud.

 

Assignee of interest of vendor:  Although listed as an additional insured by vendee on policy declarations page and innocent of any wrongdoing, assignee of interest of vendor under contract for deed was excluded from recovery by "intentional acts" exclusion and "concealment or fraud" provision after vendee intentionally set fire to the insured dwelling and was convicted of arson.  Assignee also was not entitled to payment as a mortgagee.

 

Ambiguous provision:  A court determined that "concealment or fraud" provision was ambiguous and permitted insureds to recover for building and contents loss, despite denying insureds' claim for additional living expenses because they had submitted fraudulent receipts purporting to represent their living expenses after fire destroyed their residence.

 

(Not ambiguous provision )- Denial of claim because of refusal of coinsured to answer questions:  In finding concealment clause unambiguous and not against public policy, court affirmed summary judgment in favor of insurer that had denied coverage to innocent insured based upon refusal of coinsured to answer questions concerning arson fire and other potential criminal matters.  Policy definition of word "you" did not require both of the named insureds to breach concealment clause before coverage was voided.

 

MISREPRESENTATION IN APPLICATION

 

 

 

Misrepresentation of type of structure:  A Homeowners policy was declared void ab initio (from inception) because of misrepresentations by the insured that the structure was a dwelling. Therefore the insured had no coverage for its burglary loss.  The insurer was required to return all the premiums that had been collected under the void policy.

 

Material misrepresentation:  Insured could not recover for loss by fire when he made material misrepresentations in procuring the policy, including identifying the seller under a land installment contract as mortgagee.  Correct information would have caused the insurer to inquire further into the relationship and order a credit report on the seller, which would have revealed the existence of a federal tax lien on all seller's property, and the policy would not have been issued.

 

 

Material fact:  One court specified a different definition of a “material” fact: “a misrepresentation is material if it would likely affect the conduct of a reasonable person in the insurance industry as opposed to the particular insurance company.”

 

Agent’s mistake:  IMPORTANT:  This is a case where agent’s mistakes was part of the issue.  The insurer could not rely on misrepresentation in an application for a policy where false answers on the application were the result of the agent's mistake rather than the insured's misrepresentation.  There was no fraudulent conduct concerning proof of loss where the insured turned in a claim for the same items also claimed by her former husband and continued to make claim for all items on her list.

 

Voiding of policy because of postloss misrepresentation:  For an insurer to void a policy because of a postloss misrepresentation, the misrepresentation must be knowing and material. An insured's misstatement is material if, when made, a reasonable insurer would have considered the misrepresented fact relevant to its concerns and important in determining its course of action. An insured's motive for lying is irrelevant, and prejudice from a postloss misrepresentation is unnec­essary to relieve the insurer from liability.

CONSUMER APPLICATION

 

Failure to inform insurer of previous claims:  (This has to be under the heading of “Big companies can foul up too!”)  Failure to inform insurer (a very large company) that insureds had filed five theft claims over a four-year period was material misrepresentation and was grounds for voiding the policy.  The insurer was entitled to rely on information provided by the insured when issuing the policy and was not required to verify the information given by the insured. (The large company did not have to pay, though.)

 

Previous claims not noted on application:  At least on one occasion, the agent was protected because the information on previous claims was not written in the application.  Where the insured signed Homeowners policy application containing incorrect information concerning prior fire loss, notwithstanding the insured's claim that she gave correct answers to the agent about the prior claim, the court found material misrepresentation in the application and denied recovery under policy for items stolen from the insured's residence.

 

The insurer need not rely on misrepresentations made by insured:    The insured filed suit against its homeowner's insurer after the insurer denied a fire claim on the basis of suspected arson. A jury found in favor of the insurer, and the insured appealed. The Eighth Circuit affirmed the lower court's decision, finding that the insurer need not have relied on any of the misrepresen­tations made by the insured to deny coverage.

 

MISREPRESENTATION IN CLAIM

 

 

Misrepresentation of cause of fire:  The Eighth Circuit found that insured's claims for fire loss and subsequent burglary were not recoverable, because the insurer had voided the insurance policy after the insured breached the policy by misrepresenting the cause of the fire as an accident rather than arson.

 

INNOCENT COINSURED

 

 

Under a Homeowners policy denying coverage for intentional loss committed by or at the direction of the insured and with the intent to cause a loss; the legal status of wives is separate and apart from that of their husbands .

 

Recovery by innocent spouse:  An innocent spouse may recover no more than half the value of the equity in real property damaged by fire when she remained married to, and continued to live with, her husband.  The husband was barred from recovery because he fraudulently misrepresented the cause of the fire. The insurer was entitled to credit for payment made to mortgagee to assure that guilty spouse did not benefit from his acts.

 

(This was discussed earlier, but applies mostly to this section of the policy).  Innocent coinsureds could not recover any part of a loss to insured property even though the policy provided that each named insured was a separate insured under the policy.  The use of the terms "an" or "any" in the policy's negligent and intentional acts exclusions indicated that the insureds' obligations under those provisions were joint, not several.

 

Fraudulent statement by husband on application binding on spouse:   Where a husband omitted on an insurance application that he had extensive criminal violations and encounters with law enforcement agencies and had had several prior fire losses, there was no coverage for the co­insured wife even though she did not commit fraud and did not sign the application.  The court held that the insured husband's misrepresentations on the application voided the policy from its inception and that, after the husband intentionally burned the house, the coinsured wife could not collect any proceeds under the policy.

- also -

The insured sued the homeowner's insurer, which had refused to pay for the destruction of their home in a fire.  The court held that there was evidence sufficient to support a jury finding that the husband had committed or participated in the arson of the home and, as such, the innocent spouse was not entitled to recover insurance proceeds for her share of community property destroyed by the fire.

 

                                                            STANDARD OF PROOF

 

 

Proving fraud, concealment or misrepresentation:  Unless the fraud or misrepresentation is readily apparent, in many cases the burden of proving fraud, concealment or misrepresentation becomes difficult.  The following court decision illustrates this point:  Insured's proof of loss failed to disclose a bond company that had paid her back taxes and therefore had an ownership interest in the insured dwelling.  The insured also failed to include in her list of debts a defaulted business loan that she had personally guaranteed.  The insurer contended that the insured, through her public adjuster, had overstated the amount of her loss, precluding any recovery under the policy.  On appeal from a verdict in the insured's favor, the insurer argued there was fraud, as a matter of law.  The court held that intent to defraud could not be found under the circumstances as a matter of law, because the insured's omission could have been innocent and the claim was not "fraudulently excessive."

 

Necessity of insurer to meet its burden of proof:  Another case further illustrates the necessity of the insurer to meet its “burden of proof.”  Insurer suspected arson and denied claim on grounds of the concealment or fraud provision.  At trial, both parties presented voluminous evidence concerning the cause and origin of the fire.  The insured also presented evidence demonstrating lack of motive.  The jury found for the insured. The insurer appealed on the grounds the verdict was against the weight of the evidence.  The court held the insurer had not met its burden of proof.

 

Insured lying to the insurer:  Even if the insured lies to the insurer, and this lie is known to the court, the response of the court is not necessarily in favor of the insurer.  In a 1991 case, where there was an action by the insureds to recover for fire loss, the trial court modified an instruction to state that if false swearing and material misrepresentations as to the loss and cause of the fire were not relied upon by the insurer, or were corrected by the insured prior to the insurer's reliance, they were not a bar to recovery under the policy. The appeals court held this modification as more accurately reflecting the meaning of the policy condition regarding fraud and concealment.

 

Difference between fraud and concealment:  Other courts have separated the “false and material misrepresentations” from fraud.  The following court decision from 1993 seems to draw a fine line.  Breach of a contract provision, including a "concealment" clause, need only be proven by a preponderance of the evidence rather than clear and convincing evidence. An insurer relying on a "concealment" clause defense must establish that the statements by the insured were (1) false, (2) material, and (3) knowingly and willfully made. It is not necessary that the insurer show that it was prejudiced by the misrepresentations.

 

False and material representation:  Generally, however, the insurer may avoid payment under a Homeowners policy if the insured makes a representation that is false and material, regardless of whether statement is fraudulent.  In the same vein, a court in the same year (1993) ruled that the insured's material misrepresentation in the claim submission, voided all coverage, as "concealment or fraud" provision clearly informed the policyholder that any material misrepresentation made at any time would void the entire policy.

 

Motive:  The most difficult requirement to prove in most cases, is that of “motive.”  The insurer had to pay in a case where the insurer was not able to carry its burden of proof on the issue of motive in an arson case where the insured's parents were willing to assist with the insured's financial burden, they did so, and they did so freely.  Additionally, the insured's payments were found to be current by the trial court.

 

This has been said before, in many ways, but it is important enough to reiterate:

 

 

 

LIBERALIZATION CLAUSE

 

ISO.  3.    Liberalization Clause. If we make a change which broadens coverage under this edition of our policy without additional premium charge, that change will automatically apply to your insurance as of the date we implement the change in your state, provided that this implementation date falls within 60 days prior to or dur­ing the policy period stated in the Declarations.

This Liberalization Clause does not apply to changes implemented through introduction of a subsequent edition of our policy.

All other provisions of this policy apply.

 

Other Company.         3.         Liberalization Clause. If we adopt any revision which would broaden coverage under this policy without additional premium, within 60 days prior to or during the period this policy is in effect, the broadened coverage will immediately apply to this policy.

 

In 1972, a court ruling that has been adopted in most of the other states, stated that the basic limit for liability coverage was increased for a Homeowners program during a policy period, and the change was approved by State Department of Insurance, and further, the change was made without increase in premium and without requirement of endorsement to or substitution of policy.  The liberalization condition would operate to increase the limit of an individual insured's coverage.

 

 

 

 

WAIVER OR CHANGE OF POLICY PROVISIONS

 

ISO. 4.

Waiver or Change of Policy Provisions. A waiver or charge of a provision of this policy must be in writing by us to be valid. Our request for an appraisal or exam­ination will not waive any of our rights.

 

Other Company. 4.

Waiver or Change of Policy Provisions. A waiver or change of any provision of this policy must be in writing by us to be valid. Our requests for an appraisal or examination shall not waive any of our rights.

 

 

 

 

 

 

 

 

 

 

 

CANCELLATION

 

ISO.

Cancellation.

a.    You may cancel this policy at any time by returning it to us or by letting us know in writing of the date cancellation is to take effect.

b.   We may cancel this policy only for the reasons stated below by letting you know in writing of the date cancellation takes effect.  This cancellation notice may be delivered to you, or mailed to you at your mailing address shown in the Declarations.

Proof of mailing will be sufficient proof of notice.

(1)   When you have not paid the premium, we may cancel at any time by letting you know at least 10 days before the date cancellation takes effect.

(2)   When this policy has been in effect for less than 60 days and is not a renewal with us, we may cancel for any reason by letting you know at least 10 days before the date cancellation takes effect.

(3)   When this policy has been in effect for 60 days or more, or at any time if it is a renewal with us, we may cancel:

(a) if there has been a material misrepresentation of fact which if known to us would have caused us not to issue the policy; or

(b) if the risk has changed substantially since the policy was issued. This can be done by letting you know at least 30 days before the date cancellation takes effect.

(4)   When this policy is written for a period of more than one year, we may cancel for any reason at anniversary by letting you know at least 30 days before the date cancellation takes effect.

c.     When this policy is cancelled, the premium for the period from the date of cancellation to the expiration date will be refunded pro rata.

d.    If the return premium is not refunded with the notice of cancellation or when this policy is returned to us, we will refund it within a reasonable time after the date cancellation takes effect.

 

Other Company. 5. Cancellation.

a.    You may cancel this policy at any time by notifying us in writing of the date cancellation is to take effect.  We may waive the requirement that the notice be in writing by confirming the date and time of cancellation to you in writing.

b.    We may cancel this policy only for the reasons stated in this condition. We will notify you in writing of the date cancellation takes effect.  This cancellation notice may be delivered to you, or mailed to you at your mailing address shown in the Declarations.  Proof of mailing shall be sufficient proof of notice:

(1)   When you have not paid the premium, we may cancel at any time by notifying you at least 10 days before the date cancellation takes effect. This condition applies whether the premium is payable to us or our agent or under any finance or credit plan.

(2)   When this policy has been in effect for less than 60 days and is not a re­newal with us, we may cancel for any reason.  We may cancel by notifying you at least 10 days before the date cancellation takes effect.

(3)   When this policy has been in effect for 60 days or more, or at any time if it is a renewal with us, we may cancel:

(a) if there has been a material misrepresentation of fact which, if known to us, would have caused us not to issue this policy; or

(b) if the risk has changed substantially since the policy was issued.  We may cancel this policy by notifying you at least 30 days before the date cancellation takes effect.

(4)   When this policy is written for a period longer than one year, we may cancel for any reason at anniversary.  We may cancel by notifying you at least 30 days before the date cancellation takes effect.

c.     When this policy is cancelled, the premium for the period from the date of cancellation to the expiration date will be refunded. When you request can­cellation, the return premium will be based on our rules for such cancellation. The return premium may be less than a full pro rata refund. When we cancel, the return premium will be pro rata.

d.    The return premium may not be refunded with the notice of cancellation or when the policy is returned to us.  In such cases, we will refund it within a reasonable time after the date cancellation takes effect.

 

 

Ignorance is no excuse:  The insurer is not obliged to give the notice required in the cancellation provision of the policy where the insureds failed to pay the renewal premium, which they admitted they knew was due.

 

 

Effect of catastrophes on Homeowners policies:  As mentioned earlier in this text, large natural catastrophes will have an effect on Homeowners policies and on regulations governing them.  In 1993, a Florida court ruled that the insurer was entitled to an exemption, at least "in part," from the six-month moratorium on cancellation or nonrenewal of personal lines property insurance policies following Hurricane Andrew upon its showing that its risk of probable maximum loss from a single hurricane event would exceed its surplus.

 

When cancellation is effective:  Pursuant to policy language, cancellation was effective although notice of cancellation was returned to the insured "unclaimed," the insurer was not required to return premium before cancellation could take effect, and the insurer's delay in tendering premium did not retroactively negate cancellation but rather created a debtor-creditor relationship.

 

Conflict with other state laws:  Throughout this text, there are references to policy provisions that are in violation of other state laws.  The states laws will have precedence in these matters.  Because this conflict may happen in one state, does not mean that the provisions will not be upheld in other states, which, in fact, is nearly always the case.  (Note the Consumer Application below).

 

 

When a provision is in violation of a state law, such as above, the state law will rule prevail.

 

Mailing of notice of cancellation:  Where notice of cancellation was mailed out and the insured insisted they never received such notification, it led to an interesting decision.  The insurer contended the policy in question was cancelled prior to loss.  Neither contract nor applicable statutes required the policyholder to receive the notice of cancellation for the cancellation to be effective.  Proof that a notice was properly completed, coupled with evidence of an office custom with reference to mailing notices, was sufficient to constitute proof of mailing if there is some proof or corroborating circumstance to establish that the custom was followed in a particular case.

 

Proof of compliance with mailing requirements:  The courts have been known to take the word of agents in cancellation, as found in a 1994 case.  The insurer denied coverage because the policy had been cancelled, prior to the loss, for failure to pay premiums.  Insurer's successful motion for summary judgment was affirmed because the uncontroverted affidavits from its agents established a timely and proper mailing pursuant to state statutes.  The insured's contention that he did not receive notice does not defeat the insurer's proof of compliance with the mailing requirement.

 

Burden of proof of nondelivery:  Also, under statutes of several states, once the insurer proves prima facie evidence that cancellation notice was mailed to the insured, the burden of proof shifts to the insured to prove, by affirmative evidence, nondelivery.  Whether an insurer is entitled to presumption of delivery of notice is a factual determination for the judge.

 

 

Midterm cancellations:  Midterm cancellations create a more difficult problem, as indicated in a ruling in 1995.  Although the insurer complied with all statutes and regulations pertaining to midterm cancellation of Homeowners policy, where the basis of the cancellation was stated only as “an increase in hazard,” material questions of fact concerning whether the insurer had an objective, reasonable ground for its conclusion that there was an increase in hazard, precluded (excluded) summary judgment on the issue of the insurer's compliance with contractual cancellation provisions.  [Simply put, even though the insurer complied with all the regulations about midterm cancellation, the reason the insurer gave for cancellation was nebulous (my word) so the court would not give a summary judgement in favor of the insurer that the policy was cancelled midterm.]

 

Dog bite can cause the policy to be canceled:   A notice of cancellation on the basis of increase in hazard due to a dog bite, complied with requirements of a statement of specific reasons for cancellation, even though it failed to state the date of the attack and the name of the dog involved, when the record was clear that the insured was familiar with the incident resulting in cancellation.  (Date of attack seems important, but who is going to ask a dog his name when he is being bitten by the dog…)

 

 

 

Time of policy cancellation by insured:  As far as when is the policy cancelled by the insured, most states now follow a ruling that cancellation by the insured is effective on the date the insured intends to cancel and not on the date the insurance company receives notice, as long as the insured's intent is clear and precise. Insureds' failure to pay renewal premium or otherwise respond to notice of renewal, their purchase of a policy from a different insurer, and testimony evidencing an intention to obtain new coverage to supplant the old were overt acts demonstrating the insureds' intent not to renew. Many state regulations or statutes that require notice prior to termination for nonpayment of premium were to ensure that property owners do not unknowingly find themselves without coverage.

 

 

NON-RENEWAL

 

ISO.  6.    Non-renewal. We may elect not to renew this policy.  We may do so by delivering to you, or mailing to you at your mailing address shown in the Declarations, written notice at least 30 days before the expiration date of this policy. Proof of mailing will be sufficient proof of notice.

 

Other Company.         6.         Non-renewal. We may elect not to renew this policy.  If we elect not to renew, a written notice will be delivered to you, or mailed to you at your mailing address shown in the Declarations.  The notice will be mailed or delivered at least 30 days before the expiration date of this policy. Proof of mailing shall be sufficient proof of notice.

 

 

Premium payment by worthless check:  Tender of a worthless check for an insurance renewal premium does not constitute payment so as to keep Homeowners insurance policy in force.

 

 

 

ASSIGNMENT

 

ISO.     7.  Assignment. Assignment of this policy will not be valid unless we give our written consent.

 

Other Company.         7.         Assignment. Assignment of this policy shall not be valid unless we give our written consent.

 

Assignment of claim:  The court held that a provision in a policy of insurance that prohibits assignment thereof except with consent of the insurer does not apply to prevent assignment of the claim or interest in the insurance money then due after a loss.

 

Insurers responsibilities after property sale:  Hard to escape responsibility.  Where a Homeowners insurer knew that property had been sold and objected to assignment of policy to new owners, but filed to cancel original policy and subsequently issued a renewal policy, the insurer was liable to original owner to the full extent of original owner's insurable interest in the property.

 

 

Assignment after death:  Assignment of the Homeowners policy after transfer of the property by deed and death of the named insured, was made to the purchaser.  These acts were accomplished by the insurance agent and were approved before the fire.  This vested the right of recovery in the purchaser and assignee named insured.

 

 

SUBROGATION

 

ISO.  8.    Subrogation. An insured may waive in writing before a loss all rights of recovery against any person. If not waived, we may require an assignment of rights of recovery for a loss to the extent that payment is made by us.

 

Other Company.      8.         Subrogation. An insured may waive in writing before a loss all rights of recovery against any person. If not waived, we may require an assignment of rights of recovery for a loss to the extent that payment is made by us.

If an assignment is sought, an insured shall sign and deliver all related papers and cooperate with us in a reasonable manner.

Subrogation does not apply under Section 11 to Medical Payments to Others or Damage to Property of Others.

 

 

Subrogation against tenant:  The landlord's insurer was entitled to subrogate against the tenant for damage resulting from a fire loss to rental property. The trial court's conclusions that the tenant was negligent and his negligence was the proximate cause of the fire were not plainly and palpably erroneous.

 

Tiger attack!: The Homeowners insurer, who had paid $100,000 on a settlement of an invitee's claim for injuries sustained when he was attacked by the insured's tiger, made out a prima facie case of equitable subrogation against the farm insurer.

 

Fire loss by defective heater, recovery as subrogee:  Insurer that paid its insureds for fire loss resulting from a defective heater was entitled to recovery damages as subrogee (one who is substituted for another in having a right, duty or claim.  An insurer frequently becomes a subrogee after paying a policy claim, as a result of which it is them in a position to sue a tortfeasor who injured the insured or otherwise caused damages.)  up to the amount it paid out to insureds;  but was not entitled to recovery of lawyer's fees under consumer protection statutes because insureds gave up this claim when they settled with the manufacturer and other defendants during trial.

 

 

 

 

As a final note to the discussion of subrogation, one court very succinctly defined it as “’Subrogation’ is an equitable assignment in which an insurance company can seek reimbursement to the extent that it has made payment to the insured.”

 

 

DEATH

 

ISO.  9.    Death. If any person named in the Declarations or the spouse, if a resident of the same household, dies:

a.  we insure the legal representative of the deceased but only with respect to the premises and property of the deceased covered under the policy at the time of death;

b.  insured includes:

(1)   any member of your household who is an insured at the time of your death, but only while a resident of the residence premises; and

(2)   with respect to your property, the person having proper temporary custody of the property until appointment and qualification of a legal representative.

 

Other Company.         9.         Death. If any person named in the Declarations or the spouse, if a resident of the same household, dies:

a.    we insure the legal representative of the deceased. This condition applies only with respect to the premises and property of the deceased covered under this policy at the time of death;

b.    insured includes:

(1)   any member of your household who is an insured at the time of your death, but only while a resident of the residence premises; and

(2)   with respect to your property, the person having proper temporary custody of the property until appointment and qualification of a legal representative.

 

Widow as legal representative:  Typically, a widow's claim for fire loss was covered as she was legal representative of her deceased husband, the insured, even though she was not a named insured.  Also a named insured was the husband's mother who was also deceased.

Coverage paid to a nonresident child:  For a nonresident child to receive coverage , under definition of "insured," which included named the insured and resident spouse, both named insured and spouse must die before triggering coverage for personal representative (nonresident daughter) under the clause of definition that passed protection upon death of "you" to "your personal representative or other person having proper, temporary custody" of covered property.

 

Widow not named as an insured:  If a widow is not specifically named as an “insured”, an insured's widow was held to be his "legal representative" within the meaning of the Homeowners policy declarations that insured the named insured and his legal representatives against loss.

 

 

DIRECT, PHYSICAL LOSS

 

ISO. COVERAGE A-DWELLING and COVERAGE B- OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; ...

 

Other Company.         COVERAGE A-DWELLING

We insure for accidental direct physical loss to the property described in Coverage A,

 

 

Direct loss:  An example of direct loss was illustrated in the following court ruling:  Insureds could not recover under all-risk Homeowners policy for alleged failure of their artesian well to produce a sufficient quantity of potable water after many years of use.  Insureds failed to carry their burden of demonstrating a fortuitous event causing the claimed loss, separate from the nature and inherent qualities of the well itself.

 

Direct loss by windstorm:  Another example, using windstorm, of direct loss:  Windstorm could have been the direct cause of loss when a windstorm blew open a roof door and subzero air entered the building, causing a pipe to freeze and burst, resulting in water damage.  Summary judgment was in favor of the insurer on the basis that the windstorm was too remote and was therefore improper.

 

 

 

SECTION I (EXCLUSIONS) NOT INSURED

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

3.    excluded under Section I-Exclusions.

 

Other Company.         COVERAGE A-DWELLING

We insure for accidental direct physical loss to the property described in Coverage A, except as provided in Section I-Losses Not Insured.

 

(No comments on this part of the “Perils Insured Against / Losses Not Insured”)

 

 

LOSSES DUE TO FREEZING

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

2.    caused by:

a.    freezing of a plumbing, heating, air conditioning or automatic fire protective sprinkler system or of a household appliance, or by discharge, leakage or overflow from within the system or appliance caused by freezing. This exclu­sion applies only while the dwelling is vacant, unoccupied or being con­structed unless you have used reasonable care to:

(1)   maintain heat in the building, or

(2)   shut off the water supply and drain the system and appliances of water;

 

Other Company.         1.         We do not insure for loss to the property described in Coverage A either consisting of, or directly and immediately caused by, one or more of the following: 

                 b.    freezing of a plumbing, heating, air conditioning or automatic fire protective sprinkler system, or of a household appliance, or by discharge, leakage or overflow from within the system or appliance caused by freezing.  This exclusion only applies while the dwelling is vacant, unoccupied or being constructed. This exclusion does not apply if you have used reasonable care to:

(1)        maintain heat in the building; or

(2)        shut off the water supply and drain the system and appliances of water;

 

 

The following court decisions have been discussed earlier in other applications, but apply to this section of the policy as well.

 

Neglect or rot:  Issue of whether or not damage to roof of the insured's mobile home was excluded under the policy because of "neglect" or not covered because of "wet or dry rot," was for the court to determine, not appraisers. The appraisers were entitled, however, to determine the amount of loss attributable to personal property damages caused by mildew after collapse of roof, even though they did not see some of the property, which had been discarded because of its deteriorated condition.

 

Vacant rental property damage:  Damage to vacant rental property caused by flooding from burst water pipes that froze because of termination of electrical service constituted "explosion" and was a peril insured against under extended perils coverage in policy.

 

Preventing pipes from freezing:  Whether the insureds exercised caution and diligence to prevent pipes from freezing involved a factual determination to be made by the trier of fact. The fact finder must determine what actions, if any, the insureds took to prevent freezing and whether, despite these actions, the freezing was unavoidable.

 

 

LOSSES CAUSED BY FREEZING/ THAWING OF FENCES, FOUNDATIONS, PIERS

 

 

ISO.

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

2.    caused by:

b.    freezing, thawing, pressure or weight of water or ice, whether driven by wind or not, to a:

(1)   fence, pavement, patio or swimming pool;

(2)   foundation, retaining wall or bulkhead; or

(3)   pier, wharf or dock;

 

Other Company. 1.

We do not insure for loss to the property described in Coverage A either consisting of, or directly and immediately caused by, one or more of the following:

c.  freezing, thawing, pressure or weight of water or ice, whether driven by wind or not, to a fence, pavement, patio, swimming pool, foundation, retaining wall, bulkhead, pier, wharf or dock;

 

The “Other Company” form is stricter in this provision than the ISO model.  It is a rather straight-forward provision also.

 

 

PROPERTY LOSS BY THEFT

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

2.  caused by: ...

c.     theft in or to a dwelling under construction, or of materials and supplies for use in the construction until the dwelling is finished and occupied;

 

Other Company.         1.         We do not insure for loss to the property described in Coverage A either consisting of, or directly and immediately caused by, one or more of the following: ...

                 d.  theft in or to a dwelling under construction, or of materials and supplies for use in the construction until the dwelling is completed and occupied;

 

Theft losses from property under construction:  In a rather convoluted case, where a Homeowners policy excluded theft “in or to a dwelling while under construction" and where the insured suffered two theft losses from property under construction, the court held that there was issue of fact as to whether first loss was covered where the insured may have requested coverage and may not have been informed prior to loss that such coverage had not been obtained, however that second theft loss was not covered where the insured had been informed after first loss that policy did not cover theft from dwellings under construction.  The insured had been notified once that he was not covered for theft, but he then put in a claim for a second loss.  Some people can’t take No for an answer…

 

 

 

 

VANDALISM AND MALICIOUS MISCHIEF

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

2.  caused by: ...

d. vandalism and malicious mischief or breakage of glass and safety glazing materials if the dwelling has been vacant for more than 30 consecutive days immediately before loss. A dwelling being constructed is not considered vacant;

 

Other Company.         1.         We do not insure for loss to the property described in Coverage A either consisting of, or directly and immediately caused by, one or more of the following: ...

                 e.      vandalism and malicious mischief or breakage of glass and safety glazing materials if the dwelling has been vacant for more than 30 consecutive days immediately before the loss. A dwelling being constructed is not considered vacant;

 

Vacancy clause application:  A Trial court was required to determine whether 30-day vacancy/ vandalism clause applied to the insured dwelling that had been vacant for six months prior to fire while the insured prepared it for sale and stored personal property within.

 

Wild Animal damage:  Damage to personal property within a dwelling, when caused by a wild animal, does not constitute vandalism and malicious mischief because a wild animal cannot develop an intent or malice as those terms are used to define vandalism in a renter's property and casualty policy.

 

Extending 60 day vacancy clause:  A sixty-day vacancy provision does not apply in a case where a part of the 60 days of vacancy occurred prior to the day policy came into force, except that where the policy has been renewed, a period of vacancy during the prior policy period should be tacked on to the vacancy continuing during the next subsequent policy period, assuming that there was not significant change in the coverage of the premises at time of renewal.

 

 

 

WEAR, TEAR, MARRING, DETERIORATING

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

2.    caused by:

f.   (1)   wear and tear, marring, deterioration;

 

Other Company.         1.         We do not insure for loss to the property described in Coverage A either consist­ing of, or directly and immediately caused by, one or more of the following: ...

                        g.         wear, tear, marring, scratching, deterioration,...

 

Water intrusion:  In keeping with the intent of this provision, the court ruled that the overall structure of the policy provided coverage for damage caused by water intrusion that is immediate and accidental but excluded coverage for losses that result from long periods of decay and deterioration.

 

Cracking of slab foundation:  Many houses are now built on “slabs”.  The court had to make a decision where there was damage to the slab.  The insurer had no duty to indemnify its insured for cracking and slow deterioration of the concrete slab upon which the insured's house sat which was caused by high levels of sulfates in the soil and became evident nearly 20 years after the house was constructed. The damage was excluded under the policy, which did not cover loss to property due to "seepage or leakage of water," "wear and tear," "deterioration," "inherent vice," "latent defect," or "contamination."

 

 

 

LOSSES BY INHERENT VICE, LATENT DEFECT, MECHANICAL BREAKDOWN

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

2.    caused by: ...

f.   (2) inherent vice, latent defect, mechanical breakdown;

 

Other Company.      1.         We do not insure for loss to the property described in Coverage A either consisting of, or directly and immediately caused by, one or more of the following: ...

                 g.  wear, tear, marring, scratching, deterioration, inherent vice, latent defect and mechanical breakdown;

 

 

(Latent Defect has been previously identified and defined)

 

Excluded by latent defect:  Courts have sometimes been severe in determining what is excluded by latent defect.  A typical ruling identified this exclusion, as follows:  In an action by the insured for coverage after discovery of cracks and separations in residence, the court held that the exclusion for latent defects applies to third-party negligence that is discoverable only through subsequent intensive expert investigation.

 

Cracks in foundation latent defect:  Further, the same court 4 years later, ruled that cracks in the concrete slab and foundation of the insureds' house caused by inadequate compaction of fill material were excluded from coverage under the "latent defects" exclusion in the insureds' policy.  The court affirmed that, where defective construction, design, or fabrication of property results in the property's failure or deterioration before its normal life, and the defect is not apparent upon reasonable inspection but only after postfailure examination by an expert, then the resulting loss is caused by a "latent defect." The court also held that the trial court did not err by concluding that the "latent defect" exclusion applied to a contractor's negligence.  Finally, the court held that when progressive damage occurs during the period when successive policies are in force, the policy covering the loss is the policy in force at the time the damage becomes appreciable or manifest. (Sound familiar?  This case was quoted earlier for another illustration.)

 

 

Cost of removing concrete slab:  If there is property damage because of deterioration, the cost of “tearing out” the concrete slab is not covered under the policy, although the repair of the pipes would be (evidently).  A ruling in 1990 was that the deterioration exclusion in a Homeowners policy was not limited to deterioration that was usual, ordinary, or normal.  The "ensuing loss" provision of the policy did not obligate the insurer to pay the costs of tearing out the Homeowner's cement slab in order to repair the copper pipe because of an exclusion for settling, cracking, shrinking, bulging, or expansion of the foundation.

 

 

 

LOSS BY SMOG, RUST, MOLD WET-OR-DRY ROT

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

2.    caused by: ...

f.   (3) smog, rust, mold, wet or dry rot;

 

 

Other Company.         1.         We do not insure for loss to the property described in Coverage A either consist­ing of, or directly and immediately caused by, one or more of the following: ...

                       h.           rust, mold, or wet or dry rot;

 

The overall structure of the policy provides coverage for damage caused by water intrusion that is immediate and accidental, but excludes coverage for losses that result from long periods of decay and deterioration.

 

 

SMOKE, CONTAMINANTS OR POLLUTANTS

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

2.  caused by: ...

f.     (4)   smoke from agricultural smudging or industrial operations;

(5)   release, discharge or dispersal of contaminants or pollutants;

 

Other Company.         1.         We do not insure for loss to the property described in Coverage A either consisting of, or directly and immediately caused by, one or more of the following:

i.  contamination;

j.  smog, smoke from agricultural smudging or industrial operations;

 

Negligence of a third party:  When is an exclusion not an exclusion?  When a court rules that although pollution damage would normally be an excluded event, coverage exists where the event resulted from the negligence of a third party, which is a covered risk.

 

Release of contaminant:  Losses directly caused by release of contaminant are excluded from coverage, but ensuing losses to property and personal property due to release of heating oil in basement would be covered.

 

Mercury spill:   The homeowner's insurer sought a declaratory judgment, stating that the absolute pollution exclusion in its policy precluded coverage for damage and injuries caused when its in­sured spilled a container of mercury in a neighbor's home.  The court held that coverage for damage and injuries arising out of the mercury spill was excluded and that the absolute pollution exclusion clause in the homeowners policy was unambiguous.

 

Fumes from sealant not considered as smoke:   A homeowner's insur­er moved for summary judgment after an insured brought an action against the insurer to recover for damages caused by waterproofing sealant fumes migrating into the interior of the insured's home.  The district court granted the summary judgment motion for the insurer, finding that the "pollution" exclusion barred coverage for damage to the home and that the personal property cov­erage for damage from smoke did not apply.

 

 

CRACKING AND SETTLING OF FLOORS AND FOUNDATIONS

 

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

2.    caused by: ...

f.     (6) settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundations, walls, floors, roofs or ceilings;

 

Other Company.         1.         We do not insure for loss to the property described in Coverage A either consisting of, or directly and immediately caused by, one or more of the following: ...

                  k. settling, cracking, shrinking, bulging, or expansion of pavements, patios,

foundations, walls, floors, roofs or ceilings;

 

 

Collapse because of inadequate support:  Movement of concrete porch slab due to deflection of steel rods and compression of wood supporting header board, which had been installed to correct prior slanting of porch that led to water damage in basement, constituted "collapse" under policy because the slab had fallen down because of inadequate structural support.

 

Swimming pool cracks:  The court summarily held that a Homeowner was not entitled to recovery for cracks that developed in his swimming pool because the claim for cracking came within the Homeowners settling exclusion; the court stated that "if cracking existed it is excluded no matter the cause."

 

 

 

LOSS BY VERMIN, INSECTS OR ANIMALS

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

2.    caused by: ...

f.   (7) birds, vermin, rodents, insects or domestic animals.

 

Other Company.         1.         We do not insure for loss to the property described in Coverage A either consisting of, or directly and immediately caused by, one or more of the following: ...

1.    birds, vermin, rodents, insects, or domestic animals.  We do cover the breakage of glass or safety glazing material which is part of a building, when caused by birds, vermin, rodents, insects or domestic animals.

 

Definition, in case you wondered:  A squirrel is not "vermin" even though it is a member of the order of rodentia.  "Vermin" encompasses only rats, mice, weasels, and similar creatures.

 

A cow is a domestic animal:  In its general sense, the term "domestic animal" means a tamed animal as distinguished from a wild animal, rather than a "household pet" as opposed to a wild animal or an animal that is "domesticated" but not a household pet; accordingly, provision of the Homeowners policy excluding loss to the dwelling caused by a domestic animal, excluded loss caused by a cow.

 

Who said that the raccoon is “vermin!”  Policy exclusion with respect to "vermin" not applicable to loss to residence where insurer failed to demonstrate that it would have been unreasonable for average reader of policy to conclude that term "vermin" did not include raccoons and that insurer's construction of exclusion was only one that could be fairly placed on the policy.

 

Another “squirrel-loving: court - a court in 1984 ruled that damage caused when a squirrel got into a house was not excluded from coverage under "vermin" exclusion because term was found to be ambiguous since it lacked a simple, plain, and generally accepted meaning and was susceptible to more than reasonable interpretation.  The court accordingly applied the interpretation that permits recovery. (See!!)

 

 

WEAR AND TEAR, MARRING, INHERENT VICE, LATENT DEFECT, ETC.

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

2.    caused by: ...

f.   (1) wear and tear, marring, deterioration;

(2)   inherent vice, latent defect, mechanical breakdown;

(3)   smog, rust, mold, wet or dry rot;

(4)   smoke from agricultural smudging or industrial operations;

(5)   release, discharge or dispersal of contaminants or pollutants;

(6)   settling, cracking, shrinking, bulging or expansion of pavements, patios, foundations, walls, floors, roofs or ceilings; or

(7)   birds, vermin, rodents, insects or domestic animals.

If any of these cause water damage not otherwise excluded, from a plumbing, heating, air conditioning or automatic fire protective sprinkler system or household appliance, we cover loss caused by the water including the cost of tearing out and replacing any part of a building necessary to repair the system or appliance.  We do not cover loss to the system or appliance from which this water escaped.

 

Other Company.         1.         We do not insure for loss to the property described in Coverage A either consist­ing of, or directly and immediately caused by, one or more of the following: ...

                  f.    continuous or repeated seepage or leakage of water or steam from a:

(1)   heating, air conditioning or automatic fire protective sprinkler system;

(2)   household appliance; or

(3)  plumbing system, including from within or around any shower stall, shower bath, tub installation, or other plumbing fixture, including their walls, ceilings or floors;

which occurs over a period of time and results in deterioration, rust, mold, or wet or dry rot.  If loss is caused by water or steam not otherwise excluded, we will cover the cost of tearing out and replacing any part of the building necessary to repair the system or appliance.  We do not cover loss to the system or appliance from which the water or steam escaped;

 

Collapse by hidden decay:  In a case very similar to that discussed earlier in this text, but appropriate to these provisions, the court ruled that a Homeowners policy, which covered collapse caused by "hidden decay," was held to cover collapse caused by wet rot although the policy excluded coverage for damage caused by "wet rot"; "wet rot" exclusion was ambiguous and therefore not applicable since the policy covered collapse for "hidden decay."  The court looked to the dictionary definition of "collapse" and ruled that, although there was no "abrupt or sudden occurrence," the undisputed evidence was that the structural integrity of the house was compromised.

 

 

ENSUING LOSS PROVISION

 

 

ISO. COVERAGE A-DWELLING and COVERAGE B-OTHER STRUCTURES

We insure against risks of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss: ...

(Items 1, 2, and 3 are set forth at this point.)

Under items 1 and 2, any ensuing loss to property described in Coverages A and B not excluded or excepted in this policy is covered.

 

Other Company .        1.         We do not insure for loss to the property described in Coverage A either consisting of, or directly and immediately caused by, one or more of the following: ...

(Items a. through 1. are set forth at this point.)

However, we do insure for any ensuing loss from items a. through 1. unless the loss is itself a Loss Not Insured by this Section.

 

Removing a slab:  The previously discussed court case where the insurer was not obligated to pay for having a cement slab removed before pipes can be repaired, etc., is applicable to these provisions also.

 

Release of contaminant in basement:  Although losses directly caused by release of contaminant in basement are not covered by the policy, indirect or ensuing losses caused by the excluded instrumentality are covered.

 

 

WEATHER CONDITIONS, GOVERNMENTAL DECISIONS, ETC.

 

ISO. 2.  We do not insure for loss to property described in Coverages A and B caused by any of the following. However, any ensuing loss to property described in Coverages A and B not excluded or excepted in this policy is covered.

a.    Weather conditions. However, this exclusion only applies if weather condi­tions contribute in any way with a cause or event excluded in paragraph 1. above to produce the loss;

b.    Acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body;

c.    Faulty, inadequate or defective:

(1) planning, zoning, development, surveying, siting;

(2) design, specifications, workmanship, repair, construction, renova­tion, remodeling, grading, compaction;

(3) materials used in repair, construction, renovation or remodeling; or

(4) maintenance;

of part or all of any property whether on or off the residence premises.

 

Other Company.    3.         We do not insure under any coverage for any loss consisting of one or more of the items below. Further, we do not insure for loss described in Paragraphs 1. and 2. immediately above regardless of whether one or more of the following (a) directly or indirectly cause, contribute to or aggravate the loss; or (b) occur before, at the same time, or after the loss or any other cause of the loss:

a.    conduct, act, failure to act, or decision of any person, group, organization or governmental body whether intentional, wrongful, negligent, or without fault;

b.    defect, weakness, inadequacy, fault or unsoundness in:

(1)   planning, zoning, development, surveying, siting,

(2)   design, specifications, workmanship, construction, grading, compaction;

(3)   materials used in construction or repair; or

(4)   maintenance;

of any property (including land, structures, or improvements of any kind) whether on or off the residence premises.

However, we do not insure for any ensuing loss from items a. and b. unless the ensuing loss is itself a Loss Not Insured by this Section.

 

 

Collapsing balconies:  Where hidden decay and insect damage caused balconies to collapse, the loss was within the additional coverage for collapse despite the fact that the loss was also caused by the excluded peril of faulty maintenance or negligent construction.

 

Earth movement by faulty workmanship:  Exclusion for earth movement caused by faulty workmanship was applicable to first-party claim when heavy rains washed away poorly constructed foundation.  Efficient proximate cause of loss was not a covered peril.

 

Efficient proximate cause rule:  Suit by insureds to recover for residential damage incurred as a result of landslides and mudflows proximately caused by rain. Insurer argued that the weather conditions exclusion applies to damage caused by rain if the rain causes an otherwise excluded occurrence. "Efficient proximate cause rule" states that when a specifically insured peril sets other, uninsured causes in motion, the specifically insured peril shall be considered the proximate cause of the entire loss. Insurer's attempt to utilize "weather conditions" exclusion is an attempt to circumvent "efficient proximate cause" rule and is unenforceable.

 

Sewer pipe damage only allowed:  In this declaratory judgment action, the insurer sought a declaration of no coverage for damage to the insured's home arising from leakage from an improperly cemented sewer-pipe connection. The court held that the policy's exclusion for a loss caused by constant water leakage barred "dwelling" coverage, but did not bar collapse coverage. Further, the faulty workmanship exclusion barred collapse coverage and only allowed recovery for damage to the sewer pipe itself.

 

 

 

ACCOUNTING BOOKS AND RECORDS

 

ISO. COVERAGE C-PERSONAL PROPERTY

Property Not Covered. We do not cover: ...

                  8.   a. books of account, drawings or other paper records; or

b. electronic data processing tapes, wires, records, discs or other software media; However, we do cover the cost of blank recording or storage media, and of pre­recorded computer programs available on the retail market.

 

Other Company. COVERAGE B-PERSONAL PROPERTY

2.    Property Not Covered. We do not cover: ...

j.     books of account, abstracts, drawings, card index systems and other records. This exclusion does not apply to film, tape, disc, drum, cell and other magnetic recording or storage media for electronic data processing.  We will cover the cost of blank books, cards or other blank material plus the cost of labor you incur for transcribing or copying such records;

k.     recording or storage media for electronic data processing that cannot be replaced with other of like kind and quality on the current retail market.

 

With so many people with computers in their homes today, these provisions are most apropos .  It would be very hard, and impossible in most cases,  to determine a value on important papers or valuable information on a computer.  Therefore, the best the insurance company can do is to pay for tapes, discs, available software programs, etc.

 

 

LOSS ASSESSMENT

 

ISO. ADDITIONAL COVERAGES

7.    Loss Assessment. We will pay up to $1,000 for your share of loss assessment charged during the policy period against you by a corporation or association of property owners, when the assessment is made as a result of direct loss to the property, owned by all members collectively, caused by a Peril Insured Against under Coverage A-Dwelling, other than earthquake or land shock waves or tremors before, during or after a volcanic eruption.

This coverage applies only to loss assessments charged against you as owner or tenant of the residence premises.

We do not cover loss assessments charged against you or a corporation or associ­ation of property owners by any governmental body.

The limit of $1,000 is the most we will pay with respect to any one loss, regardless of the number of assessments.

Condition 1. Policy Period, under Sections I and II Conditions, does not apply to the coverage provided by this endorsement.

 

Other Company.         No applicable language.

 

Since many people live in communities or condominiums, or other jointly-owned or regulated residences, in case of damage to the community because of a covered peril, such as fire or windstorm, and where the insured would be assessed for a share of the damages, the policy will pay up to $1,000 for these assessments.

 

 

VOLCANIC ACTION

 

ISO. COVERAGE C-PERSONAL PROPERTY

We insure for direct physical loss to the property described in Coverage C caused by a peril listed below unless a loss is included in Section I-Exclusions.. . .

17. Volcanic Eruption other than loss caused by earthquake, land shock waves or tremors.

 

Other Company.         ADDITIONAL COVERAGES

11. Volcanic Action. We cover direct physical loss to a covered building or covered property contained in a building resulting from the eruption of a volcano when the loss is directly and immediately caused by:

a.  volcanic blast or airborne shock waves;

b.  ash, dust or particulate matter; or

c.  lava flow.

We will also pay for the removal of that ash, dust or particulate matter which has caused direct physical loss to a covered building or covered property contained in a building.

 

Except for people in Hawaii and Alaska, most people wouldn’t worry about such coverage, however after Mount St. Helens a few years ago, this provision has taken on new meaning.

 

 

RECOVERED PROPERTY

 

ISO.  15. Recovered Property. If you or we recover any property for which we have made payment under this policy, you or we will notify the other of the recovery.  At your option, the property will be returned to or retained by you or it will become our property.  If the recovered property is returned to or retained by you, the loss payment will be adjusted based on the amount you received for the recovered property.

 

Other Company.         9.         Our Option. We may repair or replace any part of the of the property damaged or stolen with equivalent property.  Any property we pay for or replace becomes our property.

 

Whereas the ISO form outlines what happens if the insured should recover property for which they had paid a claim, the other company simply states that any property that is replaced or repaired becomes the property of the insurer.  It’s only fair.

 

 

VOLCANIC ERUPTION PERIOD

 

ISO.  16. Volcanic Eruption Period. One or more volcanic eruptions that occur within a 72 -hour period will be considered as one volcanic eruption.

 

Other Company  ADDITIONAL COVERAGES

          11. Volcanic Action....

One or more volcanic eruptions that occur within a 72 hour period shall be considered one volcanic eruption.

 

(Curiously, this provision does not immediately follow the volcanic action provision.)

This provision obviously alleviates paying multiple claims for one eruption.

 

 

CREDIT AND BANK TRANSFER CARDS

 

ISO. COVERAGE C-PERSONAL PROPERTY Property Not Covered. We do not cover: ...

 9. credit cards or fund transfer cards except as provided in Additional Coverages 6.

 

Other Company.         No similar language.

 

Other companies usually do not have this provision, as it is covered under Additional Coverages elsewhere in the policy.

 

 

STUDY QUESTIONS

 

1.  Where a Homeowners policy is in the name of the insured and his wife, an “innocent coinsured”, and the insured refused to answer questions concerning criminal matters, what is the status of the wife in receiving coverage for a loss?

      A.  The wife cannot receive benefits from the policy, as the policy states that “you” means either the insured or the coinsured, and does not require that they both breach the concealment clause.

      B.  The wife can receive full benefits as if the insured did not exist.

      C.  Where there is an innocent coinsured, the coinsured receives 50% of any benefits.

      D.  The policy will be cancelled ab initio (from inception), and premiums returned, with no claims payments made to either party.

 

2.  In order for an insurer to rely upon the concealment clause defense, the insurer must show that a statement by the insured was

      A.  true.

      B.  immaterial.

      C.  false and material.

      D.  unknowingly made.

 

3.  If the Acme Mutual liberalizes their Homeowners policy to no longer exclude ATV’s as motor vehicles at no additional premium, and Arnold just bought a policy 2 days before, from them and he owns an ATV that would be affected by the change, then

      A.  Arnold would be charged an extra premium for the coverage immediately.

      B.  at the next policy anniversary, an extra premium could be charged for the coverage.

      C.  if the present policy form was cancelled and replaced by another form with higher premiums, Arnold would have to take the new policy or go elsewhere.

      D.  if the policy form was not changed, there would be no additional premium.

 

4.  The insurance company can cancel a Homeowners policy

      A.  any time that they want to.

      B.  when there have been more losses then premiums received.

      C.  the insured has not paid the premium, if the policy is less than 60 days old, and if there has been material misrepresentation.

      D.  only upon not receiving the billed premiums within 90 days of due date.

 

5.  Jasmine Mutual cancelled the Homeowners policy of Archibald’s by mail when they discovered that he had misrepresented the property on the application.  Four weeks later after mailing the cancellation notice, the house caught on fire.  Archibald insisted that he never received any cancellation notice from Jasmine.

      A.  Jasmine had to pay for the full claim amount as it is their responsibility to property notify the policyholder of any cancellation or change.

      B.  The policy was cancelled, Jasmine has no responsibility to try to approve that Archibald had received the notice.

      C.  Since there is a discrepancy, the situation will go to Appraisal.

      D.  The insurance agent that wrote the policy would be personally responsible for notifying Archibald of the cancellation as the agent had been notified by Jasmine.

 

6.  When is a policy cancelled when it is cancelled by the insured?

      A.  When the insurance company receives the notification in their home office.

      B.  When the insurance agent is notified that the policy is to be cancelled.

      C.  Cancellation is effective on the date the insured intends to cancel.

      D.  Cancellation is effective 30 days from the time the insured mailed or otherwise notified the company.

 

7.  The substitution of one party for another whose debt the party pays, entitling the paying party to rights, remedies, or securities that would otherwise belong to the debtor, is the definition of

      A.  Title change.

      B.  Overinsurance.

      C.  Duplication of Coverage.

      D.  Subrogation.

 

8.  Losses caused by freezing is covered if the property affected is

      A.  a fence, patio or swimming pool.

      B.  frozen because a fire destroyed the heating unit and equipment affected had been covered in an attempt to protect them from the elements.

      C.  a foundation, retaining wall or bulkhead.

      D.  pier, wharf or dock.

 

9.  ________  ________ is a provision of a Homeowners policy that excludes construction that is likely to suffer a loss.

      A.  Inherent vice

      B.  Latent Defect

      C.  Causation effect

      D.  Elemental Subrogation

 

10.  Pete’s house in Florida is built on a concrete slab, with pipes installed in the slab before the walls and the rest of the house is completed.   The pipes under the house started leaking and a building engineer discovered it was caused by the concrete slab cracking.  What will Pete’s Homeowner policy pay, if anything?

      A.  The policy will pay for the repair of the slab and replacing the pipes.

      B.  The policy will pay for the repair of the pipes only, as the slab cracked because of deterioration which is excluded in the policy.

      C.  The policy will not pay for anything, as the causation was deterioration, an exclusion.

      D.  The policy would pay for the complete destruction of the house, the repair or replacement of the slab and pipes, and the rebuilding of the house.

 

ANSWERS TO STUDY QUESTIONS

     

1A     2C     3D     4C     5B     6C     7D     8B     9A     10B