CHAPTER TWO - SECTION I-PROPERTY COVERAGES/COVERAGES
DWELLING
ISO. Coverage A-Dwelling
We cover:
1. the dwelling on the residence premises shown in the Declarations, including structures attached to the dwelling; and
2. materials and supplies located on or next to the residence premises used to construct, alter or repair the dwelling or other structures on the residence premises. This coverage does not apply to land, including land on which the dwelling is located.
Other Company
. 1. We cover:
a. the dwelling used principally as a private residence on the residence premises shown in the Declarations. This includes structures attached to the dwelling;
b. materials and supplies located on or adjacent to the residence premises for use in the construction, alteration or repair of the dwelling or other structures on the residence premises;
c. wall-to-wall carpeting attached to the dwelling on the residence premises; and
d. outdoor antennas.
Except as specifically provided in the Section I, ADDITIONAL COVERAGES, for Land, we do not cover land or any costs required to replace, rebuild, stabilize or otherwise restore the land.
The mortgage holder attempted to contact the insureds when they fell behind in their payments, only to find that the ex-wife had disappeared (after executing a quitclaim deed in favor of the ex-husband) and the ex-husband was incarcerated. The mortgage holder then claimed under the insureds' policy for a subsequent fire loss to the premises (the right of the mortgage holder to file a claim under a Homeowners policy will be explained in great detail later in the text). The claim was denied by the insurer because of the mortgage holder's failure to notify the insurer of the change in occupancy. The court framed the issue as whether the change in occupancy would have precluded recovery by the named insured, given that the policy covered only a dwelling used as "residence premises." The carrier contended that the insured premises did not constitute the "residence premises" because neither insured "resided" there for eight months prior to the fire. The court held that the term was ambiguous as to whether the incarcerated husband's claim could be denied and that the carrier's proposed interpretation was contrary to statute. 16
This CONSUMER APPLICATION above might seem odd, however later in the text when the protection of the right of a mortgager is discussed, it will become more apparent why the court ruled this way in this situation.
Direct physical damage required: Since the policy excluded coverage for damage to land (ISO version), the insurer was not liable when a landslide significantly weakened the lateral support of the land under insured's home but caused no direct physical damage during the policy period.
OTHER STRUCTURES SEPARATED FROM DWELLING
We cover other structures on the residence premises set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection.
This coverage does not apply to land, including land on which the other structures are located.
Other Company. COVERAGE A-Dwelling
2. Dwelling Extension. We cover other structures on the residence premises, separated from the dwelling by clear space. Structures connected to the dwelling by only a fence, utility line, or similar connection are considered to be other structures.
Damage limited to dwelling: During a previous discussion which discussed “Efficient Cause of Loss” it is quite clear that property covered under a Homeowners policy is clearly limited to damage to the dwelling, unless land and landscaping is damaged by one of the enumerated perils.
OTHER STRUCTURES
ISO.
COVERAGE B-Other Structures ... We do not cover other structures:
1. used in whole or in part for business; or
2. rented or held for rental to any person not a tenant of the dwelling, unless used solely as a private garage.
The limit of liability for this coverage will not be more than 10% of the limit of liability that applies to Coverage A. Use of this coverage does not reduce the Coverage A limit of liability.
Other Company.
2. Dwelling Extension ...We do not cover other structures:
a. not permanently attached to or otherwise forming a part of the realty;
b. used in whole or in part for business purposes; or
c. rented or held for rental to a person not a tenant of the dwelling, unless used solely as a private garage.
Even if the insurer did not use the business exclusion under this section (Section I – Coverage A), does not “estop” (think “preclude”) the insurer from using the business exclusion under Section II (to be discussed later).
Mort owns an apartment building and reconstructed a large second floor apartment, with disastrous results. With obvious structural damages, he filed a claim against his Homeowners insurance for the damages. The insurer denied as the structural repair was a “business pursuit” and excluded from coverage.
Mort screamed loudly, principally because he was an electrician by trade and considered his carpentry as incidental and a hobby. That did not change the decision. 18
Supplemental income must significantly supplement livelihood: Babysitting activities of 15-year-old did not qualify as "business pursuit" under business exclusion, where such activity was not a significant source of income. Supplemental income derived from part-time activities may justify the profit motive element of business pursuit only where such income is capable of significantly supplementing livelihood or subsistence and contributing to living requirements.
(In a declaratory judgment action) the court held that the business pursuits exclusion in a homeowners policy precluded coverage for a fire occurring while the insured was gratuitously working on his business partner's automobile, even though the injury causing activity was the type of work that the partner's part-time auto repair and restoration business performed. The court reasoned that although the business grew out of their hobby of auto restoration, and they had historically worked on each other's vehicles without compensation, to hold that this specific automobile activity only arose out of the partner's hobby rather than their business activity would have ignored the significant financial advantages they had gained through operation of their business. 134
PERSONAL PROPERTY
ISO.
COVERAGE C-Personal Property
We cover personal property owned or used by an insured while it is anywhere in the world. At your request, we will cover personal property owned by:
1. others while the property is on the part of the residence premises occupied by an insured;
2. a guest or a residence employee, while the property is in any residence occupied by an insured.
Other Company.
COVERAGE B-Personal Property
1. We cover personal property owned or used by an insured while it is anywhere in the world. This includes structures not permanently attached to or otherwise forming a part of the realty. At your request, we will cover personal property owned by others while the property is on the part of the residence premises occupied exclusively by an insured. At your request, we will also cover personal property owned by a guest or a residence employee, while the property is in any other residence occupied by an insured.
Personal property of the insured's live-in girlfriend was destroyed by fire. The girlfriend had lived with the insured for five months. The insured had never asked the company to cover her property nor informed the company that her property was on the premises. As part of the motion for summary judgment, the parties agreed that the girlfriend was a guest. The insured argued that the property of guests would be covered after loss if requested by the insured or, in the alternative, the language was ambiguous. The court held that the only reasonable interpretation of the language was that no coverage existed until the insured notified the insurer of the guest's property and requested additional coverage. This allows the insurer to adjust premiums accordingly. 19
F One rule of insurance coverage is that the party, who claims to be an insured under a policy, has the burden to demonstrate that he/she is an insured.
COVERAGE C - PERSONAL PROPERTY
ISO.
COVERAGE C-Personal Property ...
Our limit of liability for personal property usually located at an insured's residence, other than the residence premises, is 10% of the limit of liability for Coverage C, or $1000, whichever is greater. Personal property in a newly acquired principal residence is not subject to this limitation for the 30 days from the time you begin to move the property there.
Other Company. COVERAGE B-Personal Property ...
We cover personal property usually situated at an insured's residence, other than the residence premises, for up to $1,000 or 10% of the Coverage B limit, whichever is greater. This limitation does not apply to personal property in a newly acquired principal residence for the first 30 days after you start moving the property there. If the residence premises is a newly acquired principal residence, personal property in your immediate past principal residence is not subject to this limitation for the first 30 days after the inception of this policy.
Moving to temporary residence: When an insured moves from an insured residence in one city, to a motel temporarily in a new city, any personal articles stolen while living in the motel would be covered but limited to the 10% limitation for property away from insured premises.
SCHEDULE C - PERSONAL PROPERTY
ISO. COVERAGE C-Personal Property ...
Special Limits of Liability. These limits do not increase the Coverage C limit of liability. The special limit for each numbered category below is the total limit for each loss for all property in that category.
Other Company. COVERAGE B-Personal Property ...
Special Limits of Liability. These limits do not increase the Coverage B limit. The special limit for each of the following categories is the total limit for each loss for all property in that category.
Insureds purchased a “Camper-trailer” which was a "trailer" within special limits of liability clause, since policy did not define trailer, it was not self-propelled, and it was designed to be towed by a motor vehicle. 20
ISO. COVERAGE C-Personal Property ... Special Limits of Liability....
1. $200 on money, bank notes, bullion, gold other than goldware, silver other than silverware, platinum, coins and medals.
Other Company. COVERAGE B-Personal Property ... Special Limits of Liability....
a. $200 on money, bank notes, bullion, gold other than goldware, silver other than silverware, platinum, coins and medals.
Homeowners insurer was liable for the full amount of loss where its insured was forced at gun point to procure and cash checks for direct payment to a thief. It could not be said as a matter of law the insured's loss was either money or checks and the evidence supported the jury's conclusion that the loss was in the form of checks where an exclusion would have limited the recovery for stolen currency. 21
CONSUMER APPLICATION
A cashier's check is held to be the equivalent of cash for purposes of coverage for theft under a Homeowners policy; the insured's loss of a cashier's check to a building contractor who absconded with the check would be limited to $100 as the policy limited theft losses of cash to $100. 22
ISO.
COVERAGE C-Personal Property ... Special Limits of Liability....
2. $1000 on securities, accounts, deeds, evidences of debt, letters of credit, notes other than bank notes, manuscripts, personal records, passports, tickets and stamps.
3. $1000 on watercraft, including their trailers, furnishings, equipment and out-board motors.
Other Company.
COVERAGE B-Personal Property ... Special Limits of Liability....
c. $1,000 on securities, checks, cashier's checks, traveler's checks, money orders and other negotiable instruments, accounts, deeds, evidences of debt, letters of credit, notes other than bank notes, manuscripts, passports, tickets and stamps.
d. $1,000 on watercraft of all types and outboard motors, including their trailers, furnishings and equipment.
Policy limitations: Where a Homeowners policy states that unscheduled personal property coverage is limited to $17,000 (as an example), and where "additional conditions" section of policy states that the insurer's liability for losses relating to unscheduled watercraft is limited to $500 (for example), THEREFORE the insurer's liability is limited to $500.
TRAILERS, GRAVE MARKERS, JEWELRY, ETC.
ISO. COVERAGE C-Personal Property ... Special Limits of Liability....
4. $1000 on trailers not used with watercraft.
5. $1000 on grave markers.
6. $1000 for loss by theft of jewelry, watches, furs, precious and semiprecious stones
Other Company. COVERAGE B-Personal Property ... Special Limits of Liability....
e. $1,000 on trailers not used with watercraft.
f. $1,000 for loss by theft of jewelry, watches, fur garments and garments trimmed with fur, precious and semi-precious stones.
CONSUMER APPLICATION
An insured who liked big-game hunting, and had many trophies in his house, had a bear-hide wall mount stolen. The insurer maintained that that was not a "fur" within meaning of an exclusionary clause in Homeowners policy limiting recovery to $500 for the "loss of jewelry ... and furs including articles containing fur which represents its principal value.” The bear wall-mount was considered as “fur”, thus, the insured was entitled to recover the full value of the stolen hide. 23
Jewelry: While in most cases, the definition of “jewelry” is “unambiguous” and enforceable, once in a while a situation may arise where the court (and therefore ultimately the insurer) may look at what most people would consider as “jewelry” to be something else thereby bypassing the limitation in the policy.
What is considered as jewelry: In one such case in the Southwest, the insured lost Indian belts and bolo ties made of turquoise, coral and other stones, as well as certain decorations of copper and silver. The insurer put a limitation on the loss considering them all to be “jewelry, but a court found that it was not that simple, and that whether or not it was considered “jewelry” would be a question for a jury. (The case was settled out of court – keeping the insured happy, but not setting a precedence as to whether this very-popular “jewelry” – or whatever it is – would be classified as jewelry in the future.)
SILVERWARE, GOLDWARE
ISO. COVERAGE C-Personal Property ... Special Limits of Liability....
8. $2500 for loss by theft of silverware, silver-plated ware, goldware, gold-plated ware and pewterware. This includes flatware, hollowware, tea sets, trays and trophies made of or including silver, gold or pewter.
Other Company. COVERAGE B-Personal Property ... Special Limits of Liability....
h. $2,500 for loss by theft of silverware and goldware.
Silver articles: If the policy contains coverage for "articles containing silver," such special limits applies to silverware because the value of silverware derives from its intrinsic quality as precious metal.
(Another one of those “seems obvious but someone took it to court..”)
Changing limits of coverage for silver: The insurance company has certain well defined responsibilities in changing limits of coverage for silver, which has happened in the past because the price of silver fluctuates considerably at times. If a policy has a limitation on the silverware and the policy has not been issued but binder given, then this would be interpreted as if the policy was in force and the limitations would apply.
Notification of insureds when silver coverage changes: However, if the amount of silver coverage changes while a policy is in force, the insurer must so notify the insured(s) – which is usually done at renewal – or in case of a claim, the limitations of the original policy will still govern.
FIREARMS
ISO. COVERAGE C-Personal Property ... Special Limits of Liability....
7. $2000 for loss by theft of firearms.
Other Company. COVERAGE B-Personal Property... Special Limits of Liability....
g. $2,000 for loss by theft of firearms and related equipment.
The obvious difference between the two policy forms is that the Other Company’s (deviated) form allows for loss of not only firearms, but also “related equipment”, such as telescopic sights, cleaning equipment, etc.
This is stated very simply, which probably accounts for the fact that there have been no recent court cases involving this policy provision. This is rather interesting, considering all of the political furor over personal firearms. One might think that there would be so many firearms stolen (and there really are a lot stolen, particularly small sidearms) that there would be a lot of claims, and where there are claims, there are a lot of differences of opinions, leading to more lawsuits, etc.
PROPERTY NOT COVERED
SEPARATELY DESCRIBED AND INSURED
ISO. COVERAGE C-Personal Property ... Property Not Covered. We do not cover:
1. articles separately described and specifically insured in this or other insurance;
Other Company. COVERAGE B-Personal Property ... Property Not Covered. We do not cover:
a. articles separately described and specifically insured in this or any other insurance;
The insured attempted to recover for the theft of a diamond ring that was scheduled in a policy as a woman's ring but which, after the wife's death, had been reset as a man's ring. Evidence of the underwriting rules limiting recovery to $2,500 for any single item of men's jewelry, while allowing a $7,500 limit on any single item of women's jewelry - was improperly excluded. 24
Baggage insurance: In this era of considerable airline travel, the question has arisen often about how much can be claimed under a Homeowners policy when the airlines also covered the loss. Courts have ruled as early (or as late, depending) as 1970, that coverage provided by airline for checked baggage was not coverage that separately described and specifically insured the luggage and, therefore, the loss of luggage was covered under the Homeowners policy.
Property insured under another policy: When the Homeowners insurance policy covering contents contains a provision that coverage does not apply to "property which is separately described and specifically insured in whole or in part by this or any other insurance," the Homeowners policy was held to be specific insurance and thus primary over another policy that provided personal articles floater coverage. Thus Homeowners coverage was primary coverage and the floater policy was excess.
ANIMALS, BIRDS OR FISH
ISO. COVERAGE C-Personal Property ... Property Not Covered. We do not cover: ...
2. animals, birds or fish;
Other Company. COVERAGE B-Personal Property ... Property Not Covered. We do not cover: ...
b. animals, birds or fish;
This is another simplistic coverage statement that evidently is so simple that there have been no court cases one way or the other, over the recent years.
MOTOR VEHICLES & MOTORIZED LAND CONVEYANCES
ISO. COVERAGE C-Personal Property ... Property Not Covered. We do not cover: ...
3. motor vehicles or all other motorized land conveyances. This includes:
a. equipment and accessories;
Other Company. COVERAGE B-Personal Property ... Property Not Covered. We do not cover: ...
c. any engine or motor propelled vehicle or machine, including the parts, designed for movement on land. We do cover those used solely for the service of the insured location and not licensed for use on public highways;
The exclusion for "motorized land vehicle," which the policy defined as "designed for travel on public roads or subject to motor vehicle registration," applied to theft of a 1955 automobile, which the parties agreed was in dead storage, because it was originally designed for road operation. 25
SOUND EQUIPMENT
ISO. COVERAGE C-Personal Property ... Property Not Covered. We do not cover: ...
3. motor vehicles or all other motorized land conveyances. This includes: ...
b. any device or instrument for the transmitting, recording, receiving or reproduction of sound or pictures which is operated by power from the electrical system of motor vehicles or all other motorized land conveyances, including:
(1) accessories or antennas; or
(2) tapes, wires, records, discs or other media for use with any such device or instrument;
while in or upon the vehicle or conveyance.
We do cover vehicles or conveyances not subject to motor vehicle registration which are:
a. used to service an insured's residence; or
b. designed for assisting the handicapped;
Other Company. COVERAGE B-Personal Property ... Property Not Covered. We do not cover: ...
d. Devices or instruments for the recording or reproduction of sound permanently installed in an engine or motor propelled engine. We do not cover tapes, wires, records or other mediums that may be used with these devices or instruments while in the vehicle;
Exclusion of coverage under Section I for theft of motorized vehicles, other than those both pertaining to the service of the premises and not licensed for road use is not ambiguous. Thus there is no coverage for the theft at the home of the insured of a three-wheel motorcycle when that vehicle was not licensed for road use but did not pertain to the service of the premises. 26
Service of the premises: Under this exclusion, a vehicle used for “service” of the premises, would mean that it was used around the property, such as a large farm might have a 3-wheel motorcycle for use in the fields only.
HOWEVER, in another case, under different circumstances, a contrary judgement was given.
Suit was brought under a Homeowners policy to recover for theft of a three-wheeled motorbike, which insured's family previously had used on insured premises, among other things, to get mail, carry trash, and inspect premises. Finding ambiguous the provision in the policy that provided coverage for motor-propelled vehicles or machines "used solely for the service of the insured location," the court allowed the insured to recover for the theft, despite the fact that the motorbike may have been purchased for "pleasure." 27
AIRCRAFT AND PARTS
ISO. COVERAGE C-Personal Property ... Property Not Covered. We do not cover: ...
4. aircraft and parts. Aircraft means any contrivance used or designed for flight, except model or hobby aircraft not used or designed to carry people or cargo;
Other Company. COVERAGE B-Personal Property ... Property Not Covered. We do not cover: ...
e. aircraft and parts;
There have been no significant court cases or disputes regarding these provisions recently. The “Other Company” evidently has not had problems with claims for model or hobby aircraft.
PROPERTY OF TENANTS
ISO. COVERAGE C-Personal Property ... Property Not Covered. We do not cover: ...
5. property of roomers, boarders and other tenants, except property of roomers and boarders related to an insured;
Other Company. COVERAGE B-Personal Property ... Property Not Covered. We no not cover: ...
f. property of roomers, boarders and other tenants, except property of roomers and boarders related to an insured;
Personal property of the insured's live-in girlfriend was destroyed by fire. The girlfriend had lived with the insured for five months. The insured had never asked the company to cover her property nor informed the company that her property was on the premises. The parties agreed that the girlfriend was a guest. The insured argued that the property of guests would be covered after loss if requested by the insured or, in the alternative, the language was ambiguous. The court held that the only reasonable interpretation of the language was that no coverage existed until the insured notified the insurer of the guest's property and requested additional coverage. This allows the insurer to adjust premiums accordingly. 28
COVERAGE D – LOSS OF USE
PROPERTY IN APARTMENT RENTED TO OTHERS
ISO. COVERAGE C-Personal Property ... Property Not Covered. We do not cover ...
6. property in an apartment regularly rented or held for rental to others by an insured;
Other Company. COVERAGE B-Personal Property ... Property Not Covered. We do not cover: ...
g. property regularly rented or held for rental to others by an insured. This exclusion does not apply to property of an insured in a sleeping room rented to others by an insured;
Temporary rental of home: In considering issue of coverage under a Homeowners policy, the court held that rental of home and furnishings for one year on a one-time basis while the insured was out of the country on a business trip presented a jury issue as to whether the property was "regularly rented" so as to come within the property-rented exclusion.
Richard inherited a two-story house with a “mother-in-law” suite in the basement. He was happy to rent the first and second floors to a bachelor with appropriate security deposit. The house was furnished by the original owners. After a couple of years, the bachelor suddenly married and moved away, leaving no forwarding address. When Richard inspected the apartment he discovered that many of the furnishings had been stolen. He made a claim to his insurer.
The insurance company denied the claim under the exclusion of property regularly rented. However, the court ruled that coverage was not excluded for furnishings stolen by tenant. 29
PROPERTY RENTED TO OTHERS OFF RESIDENCE PREMISES
ISO. COVERAGE C-Personal Property ... Property Not Covered. We do not cover: ...
7. property rented or held for rental to others off the residence premises;
Other Company. COVERAGE B-Personal Property ... Property Not Covered. We do not cover: ...
h. property rented or held for rental to others away from the residence premises.
There are no particular cases or contested situations regarding these provisions, in recent years.
COVERAGE C – SPECIAL LIMITS OF LIABILITY, PROPERTY USED FOR BUSINESS
PROPERTY ON OR AWAY FROM PREMISES
ISO. COVERAGE C-Personal Property ... Special Limits of Liability....
9. $2500 on property, on the residence premises, used at any time or in any manner for any business purpose.
10. $250 on property, away from the residence premises, used at any time or in any manner for any business purpose.
Other Company. COVERAGE B-Personal Property ... Special Limits of Liability....
b. $200 on property used or intended for use in a business, other than electronic data processing equipment or the recording or storage media used with that equipment.
Property used for business purposes: Under clause limiting coverage for property away from the residence premises used at any time or in any manner for any business purpose, courts have held that the proper inquiry is whether property was used at all for any business purpose, not whether the property was used primarily for a business purpose.
“Business pursuit” can be found ambiguous: One court did have a problem with this provision, and ruled that the "business pursuit" exclusion and exception in homeowners policy are subject to more than one reasonable interpretation and are therefore ambiguous.
COVERAGE D – LOSS OF USE
ISO. COVERAGE D-Loss of Use
The limit of liability for Coverage D is the total limit for all the coverages that follow.
Other Company. No similar language.
ADDITIONAL LIVING EXPENSE
ISO. COVERAGE D-Loss of Use ...
1. If a loss covered under this Section makes that part of the residence premises where you reside not fit to live in, we cover, at your choice, either of the following. However, if the residence premises is not your principal place of residence, we will not provide the option under paragraph b. below.
a. Additional Living Expense, meaning any necessary increase in living expenses incurred by you so that your household can maintain its normal standard of living; or
b. Fair Rental Value, meaning the fair rental value of that part of the residence premises where you reside less any expenses that do not continue while the premises is not fit to live in.
Payment under a. or b. will be for the shortest time required to repair or replace the damage or, if you permanently relocate, the shortest time required for your household to settle elsewhere.
Other Company. COVERAGE C-Loss of Use
1. Additional Living Expense. If a Loss Insured causes the residence premises to become uninhabitable, we cover the necessary increase in cost to maintain your standard of living. Payment is for the shortest time required (a) to repair or replace the premises or (b) for your household to settle elsewhere, but not to exceed 12 months. This period of time is not limited by the expiration of this policy.
Additional living expenses: It is pretty well established that an insurer would not breach the policy by refusing to pay the insureds their additional living expenses because the insureds fail to provide receipts for the additional living expenses, as required by the policy conditions after a loss.
Inflated Additional Living Expenses: In another “Whoops!” situation, the insurer waived right to seek restitution from the insured for amounts paid by the insurer for additional living expenses, where the insurer's agent (i.e., adjuster) knew ALE (Additional Living Expenses) claim was inflated, the insurer did not seek to recover sums until months later, and the insurer did not allege fraud or deceit by the insured.
FAIR RENTAL VALUE
ISO. COVERAGE D-Loss of Use ...
2. If a loss covered under this Section makes that part of the residence premises rented to others or held for rental by you not fit to live in, we cover the:
Fair Rental Value, meaning the fair rental value of that part of the residence premises rented to others or held for rental by you less any expenses that do not continue while the premises is not fit to live in.
Payment will be for the shortest time required to repair or replace that part of the premises rented or held for rental.
Other Company. COVERAGE C-Loss of Use ...
2. Fair Rental Value. If a Loss Insured causes that part of the residence premises rented to others or held for rental by you to become uninhabitable, we cover its fair rental value. Payment shall be for the shortest time required to repair or replace the part of the premises rented or held for rental but not to exceed 12 months. This period of time is not limited by expiration of this policy. Fair rental value shall not include any expense that does not continue while that part of the residence premises rented or held for rental is uninhabitable.
Actually, there are no particular cases or judgements affecting or regarding these provisions, probably because they are rather well defined and principally, they are fair to both parties.
LOSS OF USE BECAUSE OF CIVIL AUTHORITY
ISO. COVERAGE D-Loss of Use ...
3. If a civil authority prohibits you from use of the residence premises as a result of direct damage to neighboring premises by a Peril Insured Against in this policy, we cover the Additional Living Expense or Fair Rental Value loss as provided under 1 and 2 above for no more than two weeks.
The periods of time under 1, 2 and 3 above are not limited by expiration of this policy.
Other Company. COVERAGE C-Loss of Use ...
3. Prohibited Use. If a civil authority prohibits your use of the residence premises because of direct damage to a neighboring premises by a Loss Insured, we cover any resulting Additional Living Expenses and Fair Rental Value. Coverage is for a period not exceeding two weeks while use is prohibited.
Temporary move because of civil authority: If, for example, the crack house next door is falling down because of deterioration and other causes, creating a health hazard for anyone in the neighborhood, and the authorities tell the insureds to leave until the building can be removed, then the Homeowners policy will take care of the insureds for two weeks. Seems fair, no particular legal problems with this evidently.
CANCELLATION OF LEASE OR AGREEMENT
ISO. COVERAGE D-Loss of Use ...
We do not cover loss or expense due to cancellation of a lease or agreement.
Other Company. COVERAGE C-Loss of Use ...
We do not cover loss or expense due to cancellation of a lease or agreement.
This is a particularly innocuous provision simply put without much disagreement.
ADDITIONAL COVERAGES
DEBRIS REMOVAL
ISO. ADDITIONAL COVERAGES
1. Debris Removal. We will pay your reasonable expense for the removal of:
a. debris of covered property if a Peril Insured Against that applies to the damaged property causes the loss; or
b. ash, dust or particles from a volcanic eruption that has caused direct loss to a building or property contained in a building.
This expense is included in the limit of liability that applies to the damaged property. If the amount to be paid for the actual damage to the property plus the debris removal expense is more than the limit of liability for the damaged property, an additional 5% of that limit of liability is available for debris removal expense.
We will also pay your reasonable expense, up to $500 in the aggregate for the removal from the residence premises of:
a. your tree(s) felled by the peril of Windstorm or Hail;
b. your tree(s) felled by the peril of Weight of Ice, Snow, or Sleet; or
c. a neighbor's tree(s) felled by a Peril Insured Against under Coverage C; provided the tree(s) damaged a covered structure.
Other Company. ADDITIONAL COVERAGES
1. Debris Removal. We will pay the reasonable expenses you incur in the removal of debris of covered property when coverage is afforded for the peril causing the loss. This expense is included in the limit applying to the damaged property. When the amount payable for the property damage plus the debris removal expense exceeds the limit for the damaged property, an additional 5% of that limit is available for debris removal expense.
A policyholder overinsured his house as he had heard stories about insurers not paying the total replacement cost for a house that was destroyed. The insured’s house did burn down, and the insurer paid the entire value of the property to the insured, except for the cost of removing the debris after the fire. The court held that the insurer was obligated to reimburse insureds for expenses incurred in removing debris after house burned down, notwithstanding the fact that the home was overinsured and the insurer had paid entire value of the policy. 30
REASONABLE REPAIRS
ISO. ADDITIONAL COVERAGES ...
2. Reasonable Repairs. In the event that covered property is damaged by an applicable peril insured against, we will pay the reasonable costs incurred by you for necessary measures taken solely to protect against further damage. If the measures taken involve repair to other damaged property, we will pay for those measures only if that property is covered under this policy and the damage to that property is caused by an applicable Peril Insured Against.
This coverage:
a. does not increase the limit of liability that applies to the covered property;
b. does not relieve you of your duties, in case of loss to covered property, as set forth in Section I-Condition 2.d.
Other Company. ADDITIONAL COVERAGES ...
2. Reasonable Repairs. If damage is caused by a Loss Insured, we will pay the reasonable cost you incur of repairing damage to covered property to protect the property from further damage or loss. This coverage does not increase the limit applying to the property being repaired.
Stabilizing a dwelling after loss: An insurer has the obligation to pay, up to the policy limits, for measures necessary to stabilize a dwelling in the manner adequate to the changed condition of the land if a non-excluded peril damages or threatens the structure.
TREES, SHRUBS AND OTHER PLANTS
ISO. ADDITIONAL COVERAGES ...
3. Trees Shrubs and Other Plants. We cover trees, shrubs, plants or lawns, on the residence premises, for loss caused by the following Perils Insured Against: Fire or lightning, Explosion, Riot or civil commotion, Aircraft, Vehicles not owned or operated by a resident of the residence premises, Vandalism or malicious mischief or Theft.
The limit of liability for this coverage will not be more than 5% of the limit of liability that applies to the dwelling, or more than $500 for any one tree, shrub or plant. We do not cover property grown for business purposes.
This coverage is additional insurance.
Other Company. ADDITIONAL COVERAGES ...
3. Trees, Shrubs and Other Plants. We cover outdoor trees, shrubs, plants or lawns, on the residence premises, for loss caused by the following: Fire or lightning, Explosion, Riot or civil commotion, Aircraft, Vehicles not owned or operated by a resident of the residence premises, Vandalism or Malicious Mischief or Theft. The limit for this coverage, including the removal of debris, shall not exceed 5% of the limit applying to the dwelling. We will not pay more than $500 for any one outdoor tree, shrub or plant, including debris removal expense. This coverage may increase the limit otherwise applicable. We do not cover property grown for business purposes.
The property covered under the policy is clearly limited to damage to the dwelling, unless land and landscaping is damaged by one of the enumerated perils.
FIRE DEPARTMENT SERVICE CHARGE
ISO. ADDITIONAL COVERAGES ...
4. Fire Department Service Charge. We will pay up to $500 for your liability assumed by contract or agreement for fire department charges incurred when the fire department is called to save or protect covered property from a Peril Insured Against.
We do not cover fire department service charges if the property is located within the limits of the city, municipality or protection district furnishing the fire department response.
This coverage is additional insurance. No deductible applies to this coverage.
Other Company. ADDITIONAL COVERAGES ...
4. Fire Department Service Charge. We will pay up to $500 for your liability assumed by contract or agreement for fire department charges. This means charges incurred when the fire department is called to save or protect covered property from a Loss Insured. No deductible applies to this coverage. This coverage may increase the limit otherwise applicable.
In many parts of the country, particularly in the rural and suburban areas that do not have a full-time fire department available, there is a charge to the Homeowner for services rendered by the Fire Department. $500 seems to be the going rate at this time, but if it increases drastically, then expect the insurers to raise this amount.
PROPERTY REMOVED
ISO. ADDITIONAL COVERAGES ...
5. Property Removed. We insure covered property against direct loss from any cause while being removed from a premises endangered by a Peril Insured Against and for no more than 30 days while removed. This coverage does not change the limit of liability that applies to the property being removed.
Other Company. ADDITIONAL COVERAGES ...
5. Property Removed. Covered property, while being removed from a premises endangered by a Loss Insured, is covered for direct loss from any cause. This coverage also applies to the property for up to 30 days while removed. We will also pay for reasonable expenses incurred by you for the removal and return of the covered property. This coverage does not increase the limit applying to the property being removed.
As so stated, this provision provides for coverage of the insured property against any further damages from any cause while it is being removed from a premises because of a dangerous condition covered by an insured peril up to a maximum of 30 days while away from the premises.
To illustrate, imagine the insured as a pianist and a baby grand piano is moved from a house that has suffered storm damage, to another location, warehouse or what-have-you, until the damage to the house has been repaired, at which time the piano will be returned. Note the piano could not be gone from the residence for more than 30 days. If, assuming again, a bolt of lightning hit the warehouse and damage was done to the piano (the cause of the damage can be quite broad as the policy says “from any cause” – so a lift used in the warehouse could make the piano fall, etc.), then the piano would be covered under the policy.
CREDIT CARD, FUND TRANSFER CARD, FORGERY & COUNTERFEIT MONEY
ISO. ADDITIONAL COVERAGES ...
6. Credit Card, Fund Transfer Card, Forgery and Counterfeit Money. We will pay up to $500 for:
a. the legal obligation of an insured to pay because of the theft or unauthorized use of credit cards issued to or registered in an insured's name;
b. loss resulting from theft or unauthorized use of a fund transfer card used for deposit, withdrawal or transfer of funds, issued to or registered in an insured's name;
c. loss to an insured caused by forgery or alteration of any check or negotiable instrument; and
d. loss to an insured through acceptance in good faith of counterfeit United States or Canadian paper currency.
We do not cover use of a credit card or fund transfer card:
a. by a resident of your household;
b. by a person who has been entrusted with either type of card; or
c. if an insured has not complied with all terms and conditions under which the cards are issued.
All loss resulting from a series of acts committed by any one person or in which any one person is concerned or implicated is considered to be one loss.
We do not cover loss arising out of business use or dishonesty of an insured. This coverage is additional insurance. No deductible applies to this coverage.
Defense:
a. We may investigate and settle any claim or suit that we decide is appropriate. Our duty to defend a claim or suit ends when the amount we pay for the loss equals our limit of liability.
b. If a suit is brought against an insured for liability under the Credit Card or Fund Transfer Card coverage, we will provide a defense at our expense by counsel of our choice.
c. We have the option to defend at our expense an insured or an insured's bank against any suit for the enforcement of payment under the Forgery coverage.
Other Company. ADDITIONAL COVERAGES ...
6. Credit Card, Bank Fund Transfer Card, Forgery and Counterfeit Money. a. We will pay up to $1,000 for:
(1) the legal obligation of an insured to pay because of the theft or unauthorized use of credit cards and bank fund transfer cards issued to or registered in an insured's name. If an insured has not complied with all terms and conditions under which the cards are issued, we do not cover use by an insured or anyone else;
(2) loss to an insured caused by forgery or alteration of any check or negotiable instrument; and
(3) loss to an insured through acceptance in good faith of counterfeit United States or Canadian paper currency.
No deductible applies to this coverage.
We will not pay more than the limit stated above for forgery or alteration committed by any one person. This limit applies when the forgery or alteration involves one or more instruments in the same loss.
b. We do not cover loss arising out of business pursuits or dishonesty of an insured.
c. Defense:
(1) We may make any investigation and settle any claim or suit that we decide is appropriate. Our obligation to defend claims or suits ends when the amount we pay for the loss equals our limit of liability.
(2) If a claim is made or a suit is brought against an insured for liability under the Credit Card or Bank Fund Transfer Card coverage, we will provide a defense. This defense is at our expense by counsel of our choice.
Credit Cards and Fund Transfer Cards: With credit cards and fund-transfer cards being used by most Americans today, and with the subsequent “misuse” of these cards, coverage becomes quite important. Note that the Other Company model doubles the amount paid in case of loss, from $500 to $1,000. The ISO model contains the right to defend at the insurers expense, the insured or their bank, if they are sued for enforcement of payment (under the forgery provision). For example, if the insured is being sued for the amount of a bad check and the check was forged, the insurer may intercede at their expense on behalf of either the insured, or the insured’s bank. The bank is joined because the bank may have refused to honor a forged check.
In some states, using a credit card or bank card illegally, constitutes forgery, as seen in the Consumer Application below:
Losses sustained from theft and unauthorized use of the insured's bank card were not covered in full under the general theft provision of the Homeowners policy, Coverage C. Use of the card constituted forgery under the laws of that particular state, and therefore the insured's loss was the result of forgery.
The insurer's liability was limited by provision 6 of the policy's supplementary coverage providing a maximum payment for all losses by forgery. 31
Note the application of the “dishonesty of employee” exclusion in the following Consumer Application:
Additional coverage under a Homeowners policy for forgery of checks did not cover loss of money through misuse of automated teller machine card by the insured's housekeeper who had forged the insured's name to bank application and thus became able to use the card. 32
STUDY QUESTIONS
1. Which of the following is NOT covered for Homeowners insurance purposes?
A. A residential building lot with no buildings on it, owned by insured, in same block as residence.
B. A two car garage attached to the residence with a walkway.
C. A stack of building supplies that is being used to add another bathroom on the residence.
D. A dwelling on the residence premises as shown in the Declarations page.
2. Which of the following structures would be covered under the Homeowners policy?
A. A guest house separated from the main structure by a walkway.
B. A small house in the rear of the property, rented to friends of the insured.
C. A garage located away from the residence, on the alley, used for brake repairs & service.
D. A separate building connected to residence by a walkway, used by the insured as a beauty parlor.
3. Complete the following sentence: One rule of insurance coverage is that the party who claims to be an insured under a policy
A. must be a blood relative of the named insured.
B. has the burden to demonstrate that he/she is an insured.
C. will be accepted and the burden of proof to prove otherwise, lies upon the insurer.
D. in most cases, will not be an insured as there is a lot of fraud in Homeowners insurance.
4. When a Homeowners policy states that unscheduled personal property coverage is limited to $15,000, and under the “additional conditions”, losses relating to watercraft is limited to $1,000, in case of an accident involving a boat owned by the insured,
A. the limit of personal property coverage related to the boat is $15,000.
B. the limit of personal property coverage related to the boat is $1,000.
C. there is no personal property coverage for the boat.
D. the limit of personal property coverage is $14,000.
5. Bill has a jewelry floater covering personal jewelry with a limit of $25,000, and he also has a Homeowners policy with a difference company with a limit of $1,000 for jewelry. A burglar steals his wife’s necklace which had just been appraised for $35,000. How much will his Homeowners insurance pay?
A. $1,000
B. $35,000
C. $25,000
D. Nothing
6. Robert rented out his home to a business friend, and Robert moved to a basement apartment in his home previous used for guests. His friend moved out suddenly one day, and when Robert became aware that he was no longer there, he inspected the apartment to find that the former tenant had stolen furniture, dishes, silverware and other furnishings from the home. He put in a claim with his Homeowners insurance.
A. Homeowners insurance would not pay as property regularly rented is excluded.
B. Homeowners insurance would pay as property regularly rented is included.
C. Even though property regularly rented is excluded, coverage for furnishings stolen by a tenant is covered and not excluded.
D. His Homeowners insurance would be cancelled as renting part of the residence is the same as operating a business from that location, which is totally excluded.
7. Under a Homeowners policy, if a fire destroys the residence and the insured faces increased cost of maintaining his standard of living, how long with the insurer pay for additional living expense under the ISO form?
A. However long is necessary for the house to be rebuilt and the insured to move back in,
plus an additional 30 days.
B. The insurer will not pay for additional living expenses, just for normal expenses.
C. Payment is for the shortest time required to repair or replace the damage, or if relocating,
the shortest time required for the household to settle elsewhere.
D. All Homeowners policies restrict the payment for 90 days.
8. In a Homeowners policy, in the event that covered property is damaged by applicable peril insured against, the policy will pay ________________ for necessary measures taken solely to protect against further damage.
A. any amount requested.
B. $100
C. the reasonable costs
D. costs as determined by an independent appraiser
9. Joe’s home is located on a curve on a busy highway. Joe had professional landscapers plant a variety of expensive cypress trees and palm trees between the road and his home, plus several exotic flowering bushes to add color. One night a truck missed the curve, and pretty well wiped out the entire landscaping of Joe’s yard. How much will his Homeowners policy pay, if any?
A. The policy will not cover trees, shrubs or other plants.
B. The policy will pay only for the cost of replacing native trees and shrubs.
C. The policy will pay for replacing the entire landscaping, regardless of cost.
D. The policy will pay for replacing the landscaping, subject to a percentage of the limit of
liability, and/or a maximum amount for any one outdoor tree, shrub or plant.
10. Bill gives his cousin Henry one of his credit cards as Henry does a lot of handy-man work around Bill’s house and works on Bill’s car in the evenings and weekends. Henry is to use the card to buy material and supplies for the work that he does for Bill. Henry leave’s town with Bill’s girlfriend, with no forwarding address. When Bill gets the bill from the credit card company, he discovers purchases for such things as lap-top computers, a fur coat from a local furrier, etc., none of which he had authorized. He makes a claim to his Homeowners insurance company.
A. The insurer will reimburse him for everything stolen by use of the credit card.
B. The insurer will pay only for personal items, such as clothing, but not computers and
office supplies.
C. The insurer will deny the claim as the claim was the result of a fraudulent action.
D. The insurer will deny the claim as coverage is not provided if the loss by credit card is by
a person who has been entrusted with the card.
ANSWERS TO STUDY QUESTIONS
1A 2A 3B 4B 5A 6C 7C 8C 9D 10D