CHAPTER TEN - ADDITIONAL PROVISIONS

 

 

 

The provisions discussed in this Chapter are just some of the many additional provisions available in a Homeowners policy.  Some of these provisions are replacement provisions when the standard provisions either do not apply, are not allowed by state law or insurance code, or are used as underwriting support (in other words, by changing a provision, a risk may become insurable, whereas it is not insurance under the standard wording). 

 

The following provisions are picked for illustrative purposes because they either have had some legal rulings that have affected them recently, or they are of sufficient importance to justify being discussed here.  Agents should ALWAYS make sure that the provisions in the policy offered to a prospective insured, will apply in that particular state.  In nearly all cases, the insurance company will be aware of any changes, deletions or deviations from the standard wording and will provide the agent with such information.  However infrequently, agents who represent multiple companies writing Homeowners insurance may not be aware of such differences, even though the insurer has provided this information to their agents.  It is finally the responsibility of the agent to make an accurate and complete presentation.

 

 

ORIENTAL RUG COVERAGE

 

ISO. No applicable provision.

 

Other Company:  $2,500 on any one article and $10,000 in the aggregate for loss by theft of Oriental rugs. Oriental rugs are any hand-woven silk or wool rug, carpet, tapestry, wall-hanging or other similar article, whose principal value is derived from its color, design, quality of wool or silk, quality of weaving, condition and age.  Oriental rugs include but are not limited to Persian (Iranian), Turkish, Caucasian and Turkoman, Chinese and Indian rugs.

 

 

REFRIGERATED PRODUCTS

 

ISO.  No applicable provision.

 

Other Company.         ADDITIONAL COVERAGES

8. Refrigerated Products. Coverage B is extended to cover the contents of deep freeze or refrigerated units on the residence premises for loss due to power failure or mechanical failure. If mechanical failure or power failure is known to you, all reasonable means must be used to protect the property insured from further damage or this coverage is void. Power failure or mechanical failure shall not include:

a.  removal of a plug from an electrical outlet; or

b.  turning off an electrical switch unless caused by a Loss Insured.

This coverage does not increase the limit applying to the damaged property.

 

 

ARSON REWARD

 

ISO.  No Applicable Provision.

 

Other Company.         ADDITIONAL COVERAGES

9.    Arson Reward. We will pay $1,000 for information which leads to an arson con­viction in connection with a fire loss to property covered by this policy. This cov­erage may increase the limit otherwise applicable. However, the $1,000 limit shall not be increased regardless of the number of persons providing information.

 

 

RESTORING, REBUILDING, STABILIZING LAND

 

ISO.  No Applicable Provision.

 

Other Company.         ADDITIONAL COVERAGES

10. Land. We will pay up to $10,000 for the cost required to replace, rebuild, stabilize or otherwise restore the land necessary to support the insured dwelling sustaining a covered loss. This may increase the limit applying to the property.

 

 

SPECIFIC EXCLUSIONS

 

ISO.  No applicable provision.

 

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:

 

Non-excluded peril must be predominant cause of loss:  A non-excluded peril must be the predominant cause of a loss under an all-risk Homeowners policy in order for there to be coverage; the "efficient proximate cause" analysis means the pre­dominating cause.

 

Earth movement language:  A "new language" policy that excluded losses that would not have occurred in the absence of earth movement, whether or not causes acted concurrently or in sequence with the earth movement, did not offend the state Insurance Code and effectively excluded coverage for losses from earth movement, even where a non-excluded peril was the "proximate" cause of the loss.

 

Anti-concurrent causation exclusion:   Insurer's "anti-concurrent causation" exclusion effectively excluded loss caused when a broken water pipe in a vacant house to the north of the insured's dwelling caused the cracking and settling of the foundation and walls of the insured's house.  The exclusion stated there was no coverage for loss "consisting of" or caused by settling and cracking, and the court held it was therefore unnecessary to decide the issue of what "caused" the damage.

 

 

COVERAGE EXCLUSION BASED ON CAUSE

 

ISO.     No applicable provision.

 

Other Company.         2.         We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss regardless of:

(a) the cause of the excluded event; or

(b) other causes of the loss; or

(c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss:

 

Operating an ATV covered because of social-host provision:   Insurer was obligated to provide a de­fense to action brought by a minor to recover for bodily injury sustained in the course of operating an all-terrain vehicle after having been served alcohol by the insured.  Relying on general principles of policy interpretation and the reasonable expectations of the insured, the court found that, be­cause the policy insured against social-host claims, the insurer was obligated to defend the covered risk and could not avoid that obligation merely because operation of an ATV constituted an addi­tional cause of injury.  The dissent would not treat this as a concurrent-cause situation but would find that, because the injuries arose out of operation of an ATV, the exclusion applied.

 

 

ADDITIONAL INSURED(S)

 

ISO.  No Applicable Provision.

 

Other Company.         Option AI-Additional Insured. The definition of insured in this policy includes the person or organization named in the Declarations as an additional insured or whose name is on file with us. Coverage is with respect to:

1.    Section I-Coverage A;

2.    Section II-Coverages L and M but only with respect to the residence premises. This coverage does not apply to bodily injury to an employee arising out of or in

the course of the employee's employment by the person or organization. This option applies only with respect to the location shown in the Declarations.

 

 

Coverage of additional insureds:  The word "insured" appearing in a provision of a Homeowners policy excluding coverage for injury, sickness, disease, death, or destruction caused intentionally by or at the direction of the insured was not limited to the named insured, but applied as well to additional insureds.  The policy operated to preclude the insured's son from obtaining indemnity as an additional insured for damages and lawyer's fees arising out of an intentional tort that was the basis of civil action against the insured and his son.

 

 

 

COVERAGE FOR CERTAIN TEACHING AND OFFICE POSITIONS

 

ISO.

No applicable provision.

 

Other Company.

Option BU-Business Pursuits.

1.    Section II applies to the business pursuits of an insured who is a:

a.  clerical office employee, salesperson, collector, messenger; or

b.  teacher (except college, university and professional athletic coaches), school principal or school administrator.

2.    This option does not apply:

a.    to bodily injury or property damage arising out of business pursuits of the in­sured in connection with a business. This exclusion applies only if the busi­ness is owned or financially controlled by the insured or by a partnership of which the insured is a partner or member;

b.    to bodily injury or property damage arising out of the rendering of or failure to render professional services of any nature (other than teaching or school administration). This exclusion includes but is not limited to:

(1)   architectural, engineering or industrial design services;

(2)   medical, surgical, dental or other services or treatment conducive to the health of persons or animals; and

(3)   beauty or barber services or treatment;

c.     to bodily injury to a fellow employee of the insured injured in the course of employment; or

d.    when the insured is a member of the faculty or teaching staff of a school or college:

(1)   to bodily injury or property damage arising out of the maintenance, use, loading or unloading of:

(a)   draft or saddle animals, including vehicles for use with them; or

(b) aircraft, motor vehicles, recreational motor vehicles or watercraft, air­boat, air cushion, jet ski or similar type of craft; owned or operated, or hired by or for the insured or employer or used by the insured for the purpose of instruction in the use thereof; or

(2)   Under Coverage M to bodily injury to a pupil arising out of corporal pun­ishment administered by or at the direction of the insured.

 

This is optional coverage available, that covers the listed occupations.  Interesting to note the last coverage – that of coverage for bodily injury to a pupil arising out of corporal punishment.

There has been no recent litigation involving these provisions, which are not part of the ISO Form but is offered by other insurers on their policy forms.

 

 

FIREARMS COVERAGE

 

 

ISO.     No applicable provision.

 

Other Company.         Option FA-Firearms. Firearms and related equipment are insured for accidental di­rect physical loss or damage. The limits for this option are shown in the Declarations. The first amount is the limit for any one article; the second amount is the aggregate limit for each loss.

1.  We do not cover loss or damage caused by:

a.  mechanical breakdown, wear and tear, gradual deterioration;

b.  insects or vermin;

c.  any process of refinishing, renovating, or repairing;

d.  dampness of atmosphere or extremes of temperatures;

e.  inherent defect or faulty manufacture; or

f.   rust, fouling or explosion of firearms.

2.  We do not cover:

a. breakage, marring, scratching, tearing or denting unless caused by fire, thieves or accidents to conveyances; or

b. infidelity of an insured's employees or persons to whom the insured property may be entrusted or rented.

3.  In addition to limitations and exclusions otherwise applicable, the following also apply:

a.   our limit for loss by any Coverage B peril except theft is the limit shown in the Declarations for Coverage B, plus the aggregate limit;

b.   our limits for loss by theft are those shown in the Declarations for this option. These limits apply in lieu of the Coverage B theft limit;

c.   our limits for loss by any covered peril except those in items a. and b. are those shown in the Declarations.

 

Self-explanatory.  The ISO Form does not cover firearms in this detail.

 

 

HOME COMPUTERS

 

ISO.  No applicable provision.

 

Other Company.         Option HC-Home Computer. The limit on electronic data processing equipment and the recording or storage media used with that equipment is increased to be the amount shown on the Declarations for this option. There is no coverage for said equipment or media while located away from the residence premises except when said equipment or media are removed from the residence premises for the purpose of repair, servicing or temporary use. An insured student's equipment and media are covered while at a residence away from home.

 

 

 

 

PERSONAL PROPERTY USUAL AND INCIDENTAL TO BUSINESS OCCUPANCY

 

ISO.     No Applicable Provision.

 

Other Company.         Option IO-Incidental Business. This option applies only to the incidental business occupancy on file with us.

1.   Section I: COVERAGE B-PERSONAL PROPERTY is extended to include equipment, supplies and furnishings usual and incidental to this business occupancy. This does not include electronic data processing equipment or the recording or storage media used with that equipment or merchandise held as samples or for sale or for delivery after sale.

The Option IO limits are shown in the Declarations. The first limit applies to property on the residence premises. The second limit applies to property while off the residence premises. These limits are in addition to the $200 special limit of liability on property used or intended for use in a business.

2.    Section II: The residence premises is not considered business property because an insured occupies a part of it as an incidental business.

3.    Section II: Exclusion 1.b. of Coverage L and Coverage M is replaced with the following:

b.    bodily injury or property damage arising out of business pursuits of an insured or the rental or holding for rental of any part of any premises by an insured. This exclusion does not apply:

(1)   to activities which are ordinarily incidental to non-business pursuits or to business pursuits of an insured which are necessary or incidental to the use of the residence premises as an incidental business;

(2)   with respect to Coverage L to the occasional or part-time business pur­suits of an insured who is under 19 years of age;

(3)   to the rental or holding for rental of a residence of yours:

(a)   on an occasional basis for exclusive use as a residence;

(b)   in part, unless intended for use as a residence by more than two roomers or boarders; or

(c)   in part, as an incidental business or private garage;

(4)   when the dwelling on the residence premises is a two family dwelling and you occupy one part and rent or hold for rental the other part; or

(5)   to farm land (without buildings) not in excess of 500 acres, rented or held for rental to others.

4.  This insurance does not apply to:

a.    bodily injury to an employee of an insured arising out of the residence premises as an incidental business other than to a residence employee while engaged in the employee's employment by an insured;

b.    bodily injury to a pupil arising out of corporal punishment administered by or at the direction of the insured;

c.     liability arising out of any acts, errors or omissions of an insured, or any other person for whose acts an insured is liable, resulting from the preparation or approval of data, plans, designs, opinions, reports, programs, specifications, supervisory inspections or engineering services in the conduct of an insured's incidental business involving data processing, computer consulting or com­puter programming; or

d.    the legal liability of any insured to:

(1)   any person who is in the care of any insured because of child care services provided by or at the direction of:

(a)   any insured;

(b)  any employee of any insured; or

(c)   any other person actually or apparently acting on behalf of any insured.

(2)   any person who makes a claim because of bodily injury to any person who is in the care of any insured because of child care services provided by or at the direction of:

(a)   any insured;

(b)  any employee of any insured; or

(c)   any other person actually or apparently acting on behalf of any in­sured.

Coverage M does not apply to any person indicated in (1) and (2) above. This exclusion does not apply to the occasional child care services provided by any insured, or to the part-time child care services provided by any insured who is under 19 years of age.

 

This coverage applies where the insured has an insured business.  This coverage is quite popular with home-based businesses. 

 

 

 

ADDITIONAL COVERAGE FOR FURS AND JEWELRY

 

ISO.  No applicable provision.

 

Other Company.         Option JF-Jewelry and Furs. Jewelry, watches, fur garments and garments trimmed with fur, precious and semi-precious stones, gold other than goldware, silver other than silverware and platinum are insured for accidental direct physical loss or damage.

The limits for this option are shown in the Declarations. The first amount is the limit for any one article; the second amount is the aggregate limit for each loss.

2.  We do not cover loss or damage caused by:

a.   mechanical breakdown; wear and tear; gradual deterioration;

b.   insects or vermin;

c.   inherent vice; or

d.   seizure or destruction under quarantine or customs regulations.

In addition to limitations and exclusions otherwise applicable, the following also

apply:

a.   our limit for loss by any Coverage B peril except theft is the limit shown in the Declarations for Coverage B, plus the aggregate limit;

b.   our limits for loss by theft are those shown in the Declarations for this option. These limits apply in lieu of the Coverage B theft limit, or

c.   our limits for loss by any covered peril except those in items 2.a. and 2.b. are those shown in the Declarations.

 

By adding this option, the need for a Personal Property Floater or similar separate policy is not needed to cover these valuable personal property items.

 

 

REPLACEMENT COST – CONTENTS, OPTION

 

ISO.     No applicable provision.

 

Other Company.         Option RC-Replacement Cost-Contents. Under SECTION I-CONDITIONS, items a. and b. of the Loss Settlement Condition are replaced with the following:

a.    (1) Fences and the following personal property at actual cash value at the time of loss:

(a)  antiques, fine arts, paintings, statuary and similar articles which by their inherent nature cannot be replaced with new articles;

(b) articles whose age or history contribute substantially to their value including but not limited to, memorabilia, souvenirs and collectors items;

(c)  property not useful for its intended purpose.

 

(2)   We will not pay:

(a) an amount exceeding that necessary to repair or replace the property; or

(b) an amount in excess of the limit of liability applying to the property.

b.    Other personal property, carpeting, domestic appliances, awnings and outdoor antennas, whether or not attached to buildings, and other structures (except fences) that are not buildings under Dwelling Extension, at the cost of repair or replacement at the time of loss without deduction for depreciation, subject to the following:

(1)   We will pay the cost of repair or replacement but not exceeding the smallest of the following amounts:

(a)            replacement cost at time of loss;

(b)            the full cost of repair;

(c)            any special limit of liability described in the policy; or

(d) any applicable Coverage A or Coverage B limit of liability.

(2)   Loss to property not repaired or replaced within one year after the loss will be settled on an actual cash value basis.

 

Effect of Replacement Cost Rider  when claim denied:  Even though the insurer denied claim, insured must still comply with terms of personal property replacement costs rider requiring actual replacement of damaged property before being entitled to recovery of full replacement costs.

 

 

MERCHANDISE SAMPLE COVERAGE OPTION

 

ISO.

No applicable provisions.

 

Other Company.

Option SA-Merchandise Samples.

1.    Our limit for business property consisting of merchandise:

       a.  held as samples;

b.  held for sale; or

c.  held for delivery after sale;

is the amount shown on the Declarations for this option.

2.    Coverage applies only when the property is contained:

       a.  in the described dwelling; or

b.  in structures on the residence premises.

3.    This limit is in addition to the Special Limit of Liability on business property.

 

 

SILVERWARE THEFT OPTION

 

ISO.  No applicable provision.

 

Other Company.

Option SG-Silverware Theft. The theft limit on silverware and goldware is in­creased to be the amount shown in the Declarations for this option.

 

 

CONFORMITY TO STATE LAW

 

 

ISO.  No applicable provision.

 

Other Company.         10. Conformity to State Law. When a policy provision is in conflict with the applicable law of the State in which this policy is issued, the law of the State will apply.

 

Shortening limitation period to comply with state laws:  In considering the issue of whether contract provision shortening limitation period to two years as opposed to the normal five-year period was valid, the court held that where the contract stipulated that State A law should apply, and where State A bore a reasonable relation to the transaction and that the con­tract limitation period was valid under State A law, then under such circumstances a State B statute declaring void contract provisions that shorten limitation periods did not apply.

 

 

 

INFLATION COVERAGE OPTION

 

ISO.  No applicable provision.

 

Other Company.

INFLATION COVERAGE

The limits of liability shown in the Declarations for Coverages A and B will be in­creased at the same rate as the increase in the Inflation Coverage Index shown in the Declarations.

To find the limits on a given date:

1.    divide the Index on that date by the Index as of the effective date of this Inflation Coverage provision; then

2.    multiply the resulting factor by the limits of liability for Coverages A and B sep­arately.

The limits of liability will not be reduced to less than the amounts shown in the Dec­larations.

If during the term of this policy, the Coverage A limit of liability is changed at your request, the effective date of this Inflation Coverage provision is changed to coincide with the effective date of such change.

 

For those policyholders who remember the days of runaway inflation, this Inflation Rider can help create peace of mind.  The formula is very simple, and the Inflation Coverage Index is on the Declarations page for easy reference to the policyholder.

 

 

 

CHILD CARE SERVICES

 

ISO.     No applicable provision.

 

Other Company.         1.         Coverage L and Coverage M do not apply to: ...

             i.       the legal liability of any insured to:

(1) any person who is in the care of any insured because of child care services provided by or at the direction of:

(a)   any insured;

(b)  any employee of any insured; or

(c)    any other person actually or apparently acting on behalf of any insured.

(2) any person who makes a claim because of bodily injury to any person who is in the care of any insured because of child care services provided by or at the direction of:

(a)   any insured,

(b)  any employee of any insured; or

(c)    any other person actually or apparently acting on behalf of any insured;

This exclusion does not apply to the occasional child care services provided by any insured, or to the part-time child care services provided by any insured who is under 19 years of age.

 

This option can be included to restrict the perils of child care services.  Liability claims have been excessive in child-care situations, and because of the emotionalism connected with injury to a child, the awards have been quite high, and punitive damages have been crippling to insurers in some cases.  Coverage L  (Personal Liability) and M (Medical Payments to Others) does not apply when this option is used. 

 

This option might be used by the insurance company if there are unusual exposures to child care in a particular risk.  In some cases, the premiums could be lowered if there were no child-care exposures whatsoever, as afforded by this option. 

 

STUDY QUESTIONS

1. Joseph took over the care and custody of his late cousin’s children, as that is what his cousin wanted in his Will. The children’s grandparents wanted custody of the children also, so they worked out an unofficial arrangement where the grandparents would get the children during summer months, but the children would remain the rest of the year with Joseph. Joseph wanted the children on his Homeowners policy as insureds, “just to make sure.”
A. Joseph could name the children as insureds under the policy, but they probably would have been considered as “insureds'’ anyway.
B. Joseph cannot name the children as insureds since the familial relationship is too distant.
C. The grandparents are the only ones that could name them as insureds under a Homeowners policy.
D. Joseph would have to name the children as “joint-insureds” with the grandparents also naming them as “joint-insureds.”

2. Under the “BU option – business coverages for certain persons – Larry is a sales representative for a marketing organization, and Larry is a stockholder in the company, owning approximately 5% of the business. Which of the following is true?
A. He will qualify as a salesperson, and does not own or control the company.
B. He would qualify as a salesperson, but would not qualify because he is in effect, working for himself.
C. He would not qualify under any circumstances as sales people are not included for coverage.
D. He would not qualify for this coverage as he is not a teacher or school administrator, which are the only occupations covered under this option.

3. Under Option FA – Firearms coverage – firearms and related equipment are insured for
A. accident-related physical loss or damage.
B. mechanical breakdown, wear and tear and gradual deterioration.
C. accidental direct physical loss or damage.
D. rust, fouling or explosions of firearms.

4. Under Option HC – Home Computer , which of the following is true?
A. EDP equipment and recording/storage media used with that equipment is specifically excluded from coverage under this option.
B. An insured’s student’s equipment and media are covered while at a residence away from home.
C. EDP equipment removed from home for any reason, including repair, is excluded.
D. The limit on EDP equipment and recording/storage media is limited to the limits of liability for EDP equipment and media..

5. Under Option JF – Jewelry and Furs, etc. – Jewelry, watches and other valuable items are insured for accidental direct physical loss or damage, including loss by
A. mechanical breakdown; wear and tear or gradual deterioration.
B. insects or vermin.
C. seizure or destruction under quarantine or customs regulation.
D. theft.

6. Certain property, such as works or art, or works of history, and property not useful for its intended purposes, are difficult and generally, impossible, to replace. The available option to provide equitable settlements in of loss or damage, is
A. Option IC – increased cost.
B. Option AJ – Arts and Jewelry.
C. Option RC – Replacement Cost-Contents.
D. inadequate to provide the type of coverage necessary for these items.

7. Under the Option SA – Merchandise Samples – coverage is not provided for
A. merchandise held as samples.
B. merchandise held for repair.
C. merchandise held for sale.
D. merchandise held for delivery after sale.

8. One type of option increases the limits of liability according to a particular formula. This option is called
A. Additional Insurance Guarantee Option.
B. Under-appraised Value Option.
C. Inflation Coverage.
D. Anticipated Value Option.

9. The Child Care Services option
A. increases the liability to include any liability or medical payment claims while children are in the care of the insured.
B. eliminates any coverage under Coverage L (Personal Liability) and M (Medical Payments to Others) while engaged in child care services.
C. allows the insured to become fully insured while taking care of children in the home.
D. provides for medical care for any child while in the care of the insured, either in the home or away from home.

10. Under the Refrigerated Products Option, which of the following is true?
A. The option provides coverage even if the refrigeration unit fails because the plug is pulled.
B. All reasonable means must be made to protected the insured property from further damage or the coverage is void.
C. Loss of power is covered if someone other than the insured turns the power off.
D. This option does not cover mechanical failure, but only power failure.

 

ANSWERS TO STUDY QUESTIONS

 

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