The Flaums proudly displayed their Renoir in their living room for more than30 years. They insured it for $350,000 using a fine arts endorsement on a homeowners policy purchased from Great Northern Insurance. In 2008, when they attempted to sell it they discovered it was a fake. Because their endorsement provided all risks coverage, they filed a claim with Great Northern for $525,000 due to loss of value.

Great Northern denied the claim because the painting had sustained no direct physical damage.

Click here to see how the appellate court ruled.

The term "all risk" is no longer used in Insurance Service Office (ISO) coverage forms because it suggests unlimited coverage which can lead to claims, such as the one above. Instead, the ISO Fine Arts policy and other personal and commercial lines coverage forms protect against direct physical loss or damage. This very broad coverage is then limited by exclusions or limitations that apply as they are found in the coverage form.

Click here to read the PF&M analysis of the ISO Personal Lines ISO Fine Arts Form

Every policy has a section called "exclusions" but it is very important to never stop reading there. Exclusions or exclusionary language can be found in any part of the policy. One of the most important but often overlooked places to find exclusions is in the Definitions Section.

Click here to read the Definitions Section in the PF&M Analysis of the HO 00 03-Homeowners Policy

The common definition of a term and the insurance policy definition of a term can be very different resulting in confusion and possible loss of coverage. Have you ever considered talking with your customers about the definition of a "residence" and how insured status changes as people move in or out of a residence? Click here for an emarketing article you could blog, email, post or include in your newsletter.