HO 00 08–ISO HOMEOWNERS 8 - MODIFIED FORM COVERAGE ANALYSIS

(March 2022)

Agreement

Definitions

Section I - Property Coverages

Section I—Perils Insured Against

Section I—Exclusions

Section I—Conditions

Section II- Liability Coverages

Section II - Exclusions

Section II—Additional Coverages

Section II—Conditions

Sections I And II—Conditions

For many homeowners, the replacement cost option for covering their property is either unavailable or not desired. This situation typically arises when a home’s replacement cost is substantially greater than its market value due to the structure being:

· Too large in relation to current needs and rebuilding costs.

· Out-of-date or consisting of obsolete construction.

· Unsuitable for year-round or modern living needs.

· In need of frequent and costly maintenance.

The HO 08, which provides coverage only on an actual cash value basis, is a practical alternative for such situations. This is an analysis of the ISO (Insurance Services Office) Homeowners Program’s Modified Coverage form, 03 22 edition. Differences between it and the 05 11 edition program will appear in bold.

Throughout, ISO made an editorial change. Any reference to the term “policy” has been slightly revised to “Policy.” Likely in the hopes to restrict application of meaning to a given, applicable insurance policy issued to a given policyholder. (03 22 Change)

AGREEMENT

Under this provision, the insurance carrier agrees to provide homeowners insurance (as described in the following policy pages) in exchange for the named insured paying the policy premium AND complying with the required policy provisions. BOTH conditions must be met in order to qualify for coverage.

DEFINITIONS

The HO 08 form defines terms that are familiar to anyone who uses ISO’s other HO forms. Specifically, it defines the following:

A. "You" and "your"

These are used in the policy to refer to the "named insured" who appears on the policy’s declarations. “You” and “your” also extend to the named insured's spouse, but only if he/she lives in the same household.

"Our," "us" and "we"

These three terms are used as references to the company providing the homeowner policy.

B. The HO 08 Modified Form policy also makes use of the following, defined terms:

1. “Aircraft Liability,” “Hovercraft Liability,” “Motor Vehicle Liability” and “Watercraft Liability”

a. “Aircraft Liability,” “Hovercraft Liability,” “Motor Vehicle Liability” and “Watercraft Liability” refer to legal liability for “bodily injury” or “property damage” that is related to the use or ownership of these items. Such liability would also encompass loss involving the following:

Maintaining, using, being within, operating, using, or unloading or loading a craft (aircraft, watercraft, hovercraft) when involving any person. (03 22 change).

An insured permitting another party to use a vehicle/craft (entrustment)

Maintaining, using, being within, operating, using, or unloading or loading a motor vehicle when involving any person meeting the policy’s “insured” definition. (03 22 change).

An insured's vicarious liability related to vehicle/craft

An insured's negligent supervision related to vehicle/craft

b. The vehicle and craft definitions include several, additional, descriptions:

(1) Aircraft - refers to devices that are used or designed for flight. It does not include model or hobby aircraft that is not intended (designed) to carry people or cargo.

(2) Hovercraft - refers to vehicles that are powered by force of cushioned air; naturally, such devices have motors. They must also be designed to travel over the ground, at ground level. This means a self-propelled motorized ground effect vehicle and includes, but is not limited to, Flarecraft (brand of air-cushion device) and other air-cushion vehicles; and

(3) Watercraft - refers to devices that operate on or in water. Movement can be powered by wind, motors, or engines. It does not include model or hobby aircraft that is not intended (designed) to carry people or cargo. (03 22 change).

(4) Motor Vehicle – refers to a separate definition that appears later in this section

2. "Bodily injury"

This term refers to sickness, disease, or bodily harm, and includes any resultant death. It also refers harm in the form of lost services and related expenses to provide care in the aftermath.

3. "Business"

a. “Business” refers to a trade, occupation, or profession, EVEN when such activity occurs only on a part-time or occasional basis.

b., c. The policy now extends this definition specifically to mineral rights at any insured location that an insured formally leases and situations that qualify as Home-sharing host activities. (03 22 Change).

d. The policy’s definition excludes the following instances from its business definition:

· Activities that only reimburse volunteers for expenses that are directly related to the activity

· An insured who provides home day care to his or her relatives

· Mutual exchanges of home day care services

Example: James retired a year ago after a long career as a high school music teacher and band director. He volunteers to assist the school music program by providing instrument and singing lessons to each grandchild in his home every week. He gets $10 dollars for the lessons. The money goes directly for costs of instruction materials, sheet music, etc. If a loss should occur during the lessons, coverage should still apply as he is volunteering his services.

The policy’s “business” definition above exceptions only applies for activities that involve modest amounts of income. Specifically, an activity is not considered to be a business if it generates no more than $5,000 (up from $2,000 - 03 22 Change) in compensation during the 12-month period before the homeowner policy period.

Note: This refers to the value of compensation, NOT merely cash. So, the details surrounding an activity greatly affect how the activity is classified such as net vs. gross income, how compensation is collected and the records an insured may have regarding his business activity.

Related Court Case: Homeowners Policy Bars Work-Related Claim

IMPORTANT: The definition of business has been modified by mandatory ISO Form HO 06 58–Home-Sharing Host Activities Amendatory Endorsement. The mandatory form also adds several, unique terms that affect coverage. Optional form HO 06 68–Broadened Home-Sharing Host Activities Coverage Endorsement should also be examined.

ISO Homeowners Optional Coverage Endorsements

ISO Homeowner Mandatory and Optional Home-Sharing Endorsements

4. Cannabis is a defined term. It refers to:

a. Consumable items that contain any measurable amount of either natural or synthetic THC (Tetrahydrocannabinol) or cannabinoid. Essentially, items that include chemicals derived from cannabis that are capable of creating a feeling of euphoria.

b. Examples of items referenced in part 4.a. include:

(1) plants or their parts that belong to the Cannabis L. family. Flowers, roots, seeds, stalks, and stems of such plants are included in the definition.
(2) The cannabis definition is even broader than what appears in 4.a. and b (1) above. The term refers to mixtures and items derived from such plants or chemicals (waxes, resins, oils, hash, hemp or even included in infusions and edibles) including marijuana. (03 22 Change).

5. “Employee”

This term refers to a person whose duties involve tasks that are NOT performed by a “residence employee” AND who either:

· works for an “insured” on a direct basis, or

· works for an “insured” through a leasing arrangement between an “insured” and a company that leases employees.

6. Home-sharing host activities

This term refers to the following:
a. Making use of a covered residence, in whole or in part, available to persons when the transaction is facilitated by any especially designed platform. The transactions may involve paying a fee for the property’s use (renting) or other exchanges of value.

Example: Len rents his home out to Lara for a long weekend. Lara uses the home to host a reunion of old band mates from various cover bands she played in over the years. The whole transaction is completed using an online app. This qualifies as a home-sharing host activity.

b. Making use of other property or services that are connected to use of a covered residence that has been made available to persons when the transaction is facilitated by any especially designed platform. However, the definition does not apply to use of property or services supplied by other, unrelated parties. (03 22 Change).

7. Home-sharing network platform

a. Refers to, essentially, any digital medium created both for making residential space and related property available for use by other parties.

b. The property use agreement (transaction) may be completed (rental fee payment, exchange of services or similar form of compensation) via the medium. It may include a website, phone application, community (network), etc. (03 22 Change).

8, Home-sharing occupant

a., b. This term applies to the party or parties who contractually agreed to make use of an insured’s residential and related property. The contract has to have been made via a method that meets the policy’s definition of a home-sharing network. Persons who occupy or use the property, along with the party(ies) that directly participated in the contract, also qualify as home-sharing occupants. (03 22 Change).

Example: Sharice rents out her home for several days to Marvin. It’s arranged through the use of a smart phone app.

Marvin is accompanied by two friends who also make full use of Sharice’s home. While the rental agreement only lists Marvin, both of his friends are considered home-sharing occupants.

No photo description available.

9. The Modified Form homeowner policy considers all of the following to be insureds (with notes on any exceptions):

a. the status of insured includes:

· you

(Refer to separate definition)

· your relatives if residents of "your" household

(Meaning relatives who live at the insured location with the named insured)

· persons under the age of 21 residing in "your" household and in "your" care or in the care of "your" resident relatives

Note: Such persons must BOTH be younger than 21 AND have a named insured, his or her spouse or a relative of the named insured/spouse as their caregiver.

b. The form’s definition of insured includes persons who are residents of the named insured’s household who are full-time students. In order for a full-time student to qualify as an insured, he or she must either be younger than 24 years of age and be related to an insured OR be younger than 21 years of age and be in the care of someone in the named insured’s household.

c. The following persons are insureds, but ONLY regarding section II, the liability portion of the homeowner policy:

Any party having legal responsibility for either animals or watercraft that are eligible for coverage under the homeowner policy.

Example: Shari is sued because a dog she was walking broke loose from her leash, chased, and knocked down a person who was also walking in the park. Shari was walking Fred’s dog while he was out of town on vacation. Shari is eligible as an insured under Fred’s HO Policy.

However, anyone in possession of an insured’s watercraft or animal is denied insured status if any business purpose is involved.

· Any person working for an insured while operating a motor vehicle that qualifies for homeowner coverage, and

· Any person who has the insured’s permission to use an eligible motor vehicle, but only while on the insured premises.

Note: Whenever the word “insured” immediately follows the word “an,” the phrase refers to one or more “insureds.” In other words, an “insured” means one or more persons who have covered status under the policy.

10. “Insured location”

This term refers to a variety of circumstances that includes the following:

· The residence premises (the policy also defines this term, see below).

· Parts of other premises or structures that are used by an insured as long as these locations are shown on the policy declarations page OR have been acquired by the insured as a residence during the policy period.

· Any premises that is related to a property that is covered by a Modified Form policy AND which is used by an insured.

· A premise that IS NOT owned by an insured but is an insured location while it’s used by an insured as a residence.

· Vacant land that is owned by or rented to an insured EXCEPT farmland.

· Land that contains a structure that will eventually be an insured’s (1 through 4) family residence.

Note: The building has to be for the insured’s residence. Land where an insured is building a residence that he plans to rent to another party would not be an insured location.

Example: Paula inherits a plot of vacant land from her parents. Because of its location, she decides to start building a two-family home. She plans to sell it on speculation. This is not an insured location.

Other situations that qualify as an insured location include:

· An insured’s individual or family cemetery plots or burial vaults.

· Part of a premises which is rented and used by an insured (as long as no business activity is involved).

11. “Motor vehicle”

A motor vehicle is a vehicle that is self-propelled, runs on land or on water (amphibious - 03 22 change), and includes any trailer that is towed or carried by such a vehicle. All of the following would qualify as motor vehicles:

cars	trucks	vans	recreational vehicles	certain golf carts
motorcycles	mopeds	all-terrain cycles	all-terrain vehicles	snowmobiles
sports utility vehicles	motorized carts	self-propelled mowers	lawn tractors	motorized bikes, scooters, and similar vehicles
Any of the above items that are designed as amphibious (capable of operating on land, water- including underwater), also qualify as motor vehicles. (03 22 Change).

Any vehicle or amphibian that is motorized and self-propelled is considered to be a motor vehicle. Both of these elements must be present.

Items such as sleds, non-motorized carts, bikes, boats, and similar property do not qualify as motor vehicles.

Related Court Case: “ATV Injury Not Covered by Homeowners Policy

12. “Occurrence”

This term refers to an accident and also to repeated exposure to similar conditions. However, in order for the accident or repeated exposure to be considered an occurrence it must cause "bodily injury" or "property damage" and that BI or PD must take place during the policy period.

Related Court Case: “Defamation is Not an Occurrence”

13. "Property damage"

This term refers to direct damage to tangible property (including its destruction) or the direct or indirect damage caused by the loss of use of tangible property.

Note: It is likely that the property damage definition will be revisited in light of the loss exposures accompanying the recent viral epidemic. Lawsuits continue to arise that challenge the understanding of what constitutes property damage. Merely the high volume of such claim allegations has caused state regulators and legislatures to consider creating a new coverage obligation in this area.

14. "Residence employee”

Refers to a person hired directly by a person who, by definition, is considered to be an insured. It also applies to a person a named insured hires to work for him or her via a contract with a firm that leases workers. In either case, the worker’s duties have to be related to maintaining or using the insured premises.

Example: Betty is the chief financial executive for a large, successful accounting firm. She injured her back and her doctor ordered her to stay in bed for, at least, two weeks. Betty decides to work from home. Due to the volume of work, she secures an assistant from a leasing firm. This person, though located at Betty’s home, is not considered a residence employee. This is because all his duties are connected to Betty’s work.

Note: A person who performs such duties for a named insured, but at a different location, also qualifies as a residence employee as long as that work is not connected to an insured’ s business.

Persons who are temporary substitutes for a named insured’s permanent household worker or a person acquired to help with a peak or seasonal work need do not qualify as residence employees.

15. “Residence Premises"

Refers to any of the following that are used mainly for family residential purposes:

· one-, two-, three- or four-family house, (the insured MUST live in one of the units of any multi-unit premises)

· the part of ANY other building where an insured lives as well as any other structures and grounds that exist at that location.

HOWEVER, any of the above must be listed on the policy declarations as the residence premises.

C. With regard to the HO 08 Modified Coverage Form Policy, there is a special consideration.

Persons who are deemed to be home-sharing occupants (as defined in the policy) are NOT occupants such as boarders, guests, roomers, or tenants. (03 22 Change). Their status is restricted and totally dependent on their residing on covered property due to a home-sharing agreement.

SECTION I—PROPERTY COVERAGES

Coverage A - Dwelling

Dwelling coverage applies to the dwelling on the specified location that is used principally as a private residence. It includes attached structures and materials and supplies located on or next to the residence premises. In order to qualify for coverage, the materials must be intended for use in the construction, alteration, or repair of the dwelling or other structures on the residence premises.

Land (including the land upon which covered structures sit) is not eligible for coverage.

Coverage B - Other Structures Coverage

1. Other structures coverage is essentially an additional amount of insurance equal to 10% of the limit that is available for the dwelling. It extends to structures on the residence premises that are separated from the dwelling by clear space. Structures that are merely connected to the dwelling by a fence, utility line or similar object also qualify as "other structures."

2. Structures used for business purposes are not covered. Ineligibility extends to structures that are rented (or held for rental) to anyone who is not a tenant of the dwelling. However, renting a structure for exclusive use as a private garage is an exception. Of course, excluding a property that is being offered for rent could be debatable since, in order to exclude coverage, the insurer would have to show that a building merely being offered for “non-garage” or business use represented an increase in exposure.

Example: Jason Cotillion’s home is covered by a HO 00 08 policy with a Coverage A insurance limit of $47,000. Jason struggles to pay his mortgage and maintain the home so, since he uses public transportation and has no car, he decides on a way to get financial assistance. He puts up a sign in front of his detached, two-car garage that announces:

“Good sized garage available for rent. Need parking, office, or studio space? Call Jason today!”

A couple of weeks later, half of Jason’s garage burns down. The fire department finds evidence of matches and firecrackers, so they suspect it was started by neighborhood children. The adjuster from Jason’s insurer sees his rental sign and tells him there’s no coverage. After reading his policy, Jason files a suit against the company saying that, since the garage's use had not been altered while it was being offered for rent, it shouldn’t be excluded from coverage.

Business use that could disqualify a structure from coverage includes using a structure to store business property when that property is owned by either an insured or a tenant of the residence. Eligible stored property does not include storage of liquid or gaseous fuels. However, a limited exception exists for fuel contained within a fuel tank of a vehicle or craft owned by an insured or a tenant.

3. The 10% of Coverage A limit that applies to this section is separate coverage. Payment under this section does not affect the protection available under Section A.

Coverage C - Personal Property

1. Covered Property

Personal property coverage is an additional amount of insurance that is typically written at 50% of the limit used for the applicable dwelling. Coverage applies only while the property is on the residence premises. At the insured's request, property of others can be covered but only when it is located in a part of the residence premises occupied by an insured.

2. Limit for Property at Other Locations

Property owned or used by an insured is covered anywhere in the world for the greater of $1,500 (increased from $1,000 - 03 22 Change) or 10% of the specified personal property coverage limit. This limitation does not apply to property located in a newly acquired principal residence. The policy’s full Coverage C limit applies to such property for 30 days immediately after an insured has begun to move his belongings.

Neither does the limitation apply to property at another location because the covered premises is undergoing repair, rebuilding, renovation and is not suited for living in or storing property. The order in referencing remodels, renovations and rebuilds was slightly changed for clarity. (03 22 Change).

3. Special Limits of Liability

Within the overall amount of insurance for personal property, there are several monetary limitations that apply to loss involving certain kinds of personal property. The targeted property classes are usually high valued (or liquid) and vulnerable to loss. Each of the following special sub-limits is the total amount that can be paid in a single loss involving all property in the described category:

a. $300 SUB-LIMIT (03 22 Change)

This sub-limit increased from the 05 11 edition amount of $200. It applies to the following:

Money, bank notes, bullion, gold, silver, platinum, coins and medals, scrip, stored value, and smart cards.

Note: This sublimit does not apply to dinnerware made from or coated with the listed precious metals.

b. $2,000 SUB-LIMIT (03 22 Change)

This sub-limit increased from the 05 11 edition amount of $1,500:

· securities

· accounts

· deeds

· evidences of debt

· letters of credit

· notes other than banknotes

· manuscripts

· personal records

· passports

· tickets and stamps.

Note: This sublimit applies regardless the medium in which such property exists. In other words, both paper and e-tickets are subject to the restricted coverage amount. Further, the limit also includes costs associated with researching and recovering lost property.

c. $2,000 SUB-LIMIT (03 22 Change)

This sub-limit increased from the 05 11 edition amount of $1,500:

· watercraft of all types, including their trailers, furnishings, equipment, and outboard engines or motors

d. $2,000 SUB-LIMIT (03 22 Change)

This sub-limit increased from the 05 11 edition amount of $1,500. It applies to:

· trailers or semi-trailers not used with watercraft of all types

e. $3,000 SUB-LIMIT

This sub-limit is changed in the 03 22 edition of the ISO Homeowners Program, from $2,500. (03 22 Change).

· property, on the "residence premises," used primarily for "business" purposes

Note: This limitation only involves property that is used PRIMARILY for any business purpose.

Example: The Carsons’ home suffered loss due to a grease fire in the kitchen. Smoke damage was extensive, including a loss of about $9,600 in furnishings and equipment located in a converted bedroom.

Scenario 1 – The room was converted into a game and recreation room. Under the HO 08 Modified Form policy, the Carsons’ full Coverage C insurance limit would be available to handle the loss.

Scenario 2 – The room was converted into a home office, used primarily for Ms. Carson’s job as a day-trader. Under the HO 08 Modified Form policy, total recovery is limited to $3,000.

f. $1,500 SUB-LIMIT

This sub-limit is unchanged from the 05 11 edition of the ISO Homeowners Program:

· property, away from the "residence premises," used primarily for "business" purposes

In order for this sublimit to apply, the “business” use has to be primary. In other words, the fact that a piece of property may, occasionally be used in business will not make it subject to this limitation. However, if the property involves electronic apparatus, this limitation is inapplicable IF such property is used with audio or video equipment that is located in or on a motor vehicle. These items are subject to limitations in items g. and h. below.

g. $2,000 SUB-LIMIT

This sub-limit is changed in the 03 22 edition of the ISO Homeowners Program, from $1,500. (03 22 Change).

· loss to electronic equipment that is portable, while in or upon a “motor vehicle,” but only if the electronic apparatus can be powered from the vehicle’s electrical system. The equipment must transmit, receive, or reproduce audio, data, or visual signals. Accessories are no longer subject to this limitation. Instead, they are subject to item k. below.

Important, the electronic item must be portable and can have multiple power sources as long as one possible source is the motor vehicle.

h. $300 SUB-LIMIT

This item was introduced in the 05 11 edition. The coverage was increased in the 03 22 edition from a sub-limit of $250. (03 22 change).

· loss to tapes, records, disks, media, wires, and antennas which are:

- in or on a motor vehicle, and

- used with equipment that must transmit, receive, or reproduce audio, data, or visual signals.

Note: The above sub-limits apply to the ENTIRE CLASS of property referenced.

Related Article: Personal Articles Floater

i. $2,000 SUB-LIMIT

This sub-limit is introduced with the 03 22 edition of the ISO Homeowners Program. (03 22 Change).

· loss to aircraft that are deemed to be either a model or hobby type that are incapable of carrying property or persons.

Note: The above sub-limits apply to the ENTIRE CLASS of property referenced.

Most of the above limits may be increased, at the option of the insured, by use of Coverage C—increased special limits of liability endorsements. Various items of high value may be insured for their full value by attachment of a scheduled personal property endorsement.

Related Article: Personal Articles Floater

4. Property Not Covered

Under Coverage C- Personal Property, there are eleven categories of property that are excluded from coverage. The excluded classes of property include:

a. Any property that is separately described and specifically insured in this or other insurance.

This exclusion is meant to prevent insureds from collecting twice for the same loss. This exclusion states that it applies regardless of the amount of coverage provided by any other source of insurance. Besides discouraging “double-dipping,” this should encourage insureds to insure property under a policy that is the most appropriate.

b. Animals, birds, or fish

While homeowner programs offer liability for animals owned by insureds, they have not offered livestock or animal mortality coverage.

c. Motor vehicles

This item has been slightly revised under the 03 22 edition.

The reference to motor vehicles applies to related equipment, and parts, but such parts have to be located within or on a motor vehicle. (03 22 change).

This does not apply to portable electronic equipment which can receive or transmit data and are powered by the motor vehicle but can also use other power sources. While this property is covered it is subject to a sublimit.

This exclusion also does not apply to motor vehicles which are not subject to motor vehicle registration and either of the following:

· They have the single purpose of servicing an "insured's" residence

· The property is designed to assist the handicapped.

Related Court Case: ATV Injury Not Covered by Homeowners Policy

d. Aircraft and parts

The policy defines aircraft as any contrivance that is used or designed for flight. This property exclusion does not apply to hobby or model aircraft that is not designed or used to carry people or cargo.

Note: Even model or hobby aircraft that is capable of carrying persons or property is excluded from coverage.

e. Hovercraft and parts

This exclusion is for any self-propelled motorized ground effect vehicle, and includes Flarecraft, air cushioned and similar vehicles.

f. This item was revised and reformatted in the 03 22 edition. The policy’s protection does not extend to property that belongs to:

(1) persons occupying the covered residence under instances that meet the definition of a home-sharing agreement

(2) Other persons who, while not directly involved in a home-sharing agreement, are using the premises because of instances that qualify as home-sharing activities:

Example: Harmony rents her furnished, soundproofed basement to Jerry, a musician who uses the location as a getaway to work on some songs for a music project. Jerry is accompanied by a friend who is his partner that writes lyrics. While Harmony is away from the home, a serious storm strikes the area causing windblown debris to breach the home, damaging a lot of the basement’s contents. Her policy should respond to the damage suffered to property belonging to Jerry and his friend, even though the friend is not listed in the home rental agreement.

(3) This portion of the exclusion applies to property that is owned by boarders, roomers and/or tenants. There is an exception for such property owned by such persons who are an insured’s relatives. (03 22 Change).

The purpose of this exclusion is to make sure that the homeowner policy is stretched to protect persons who should buy their own tenant’s or homeowners insurance. It preserves protection for property that is used by the insured instead of giving full coverage to property is more appropriately to be protected by another party’s own insurance.

g. Property that
(1) is located in any residential space which is actually rented to or that is regularly reserved for use of a person that is defined as a “home-sharing occupant.”
(2) furnishes an apartment regularly rented or held for rental to other persons and that activity is performed by an "insured"

(This item was revised and reformatted - 03 22 Change.)

h. Any property that is possessed in order to facilitate its use under contracts to share the space when transacted via, essentially, smart phone applications or network platforms. (New defined term – 03 22 Change.)

i. Property that is either rented or held for rental to others but only while off the "residence premises"

Example: Jenna works from her home as a graphic artist who freelances for a number of large advertising firms in her area. She constantly has to upgrade her equipment. She has helped recoup her expenses by renting out her older equipment to others. A renter’s home is burglarized and a rented printer was also stolen. That property is not eligible coverage under Jenna’s HO policy.

j. "Business" data

The data can be stored in any of the following:

· Books of account, drawings, or other paper records; or

· Computers and related equipment.

Related Article: ISO Valuable Papers Coverage Form

Note: The cost of blank recording or storage media, and of pre-recorded computer programs available on the retail market is covered.

k. Credit cards, electronic fund transfer cards or access devices used to withdraw, deposit or transfer funds.

This item no longer makes a reference to former, additional coverage that provided a modest amount of protection for such value cards. (03 22 Change).

l. Water or steam

The intent of this exclusion appears to prevent coverage of the expense of water utility service from the policy.

m. Virtual currency

Coverage is not granted for electronic or computer-generated, currency, including cryptocurrency and it applies regardless how the various currencies are named. (Defined term, newly added - 03 22 Change.)

Note: Digital currency refers to fiat (government-backed and issued) currency, such as digital U.S. dollars, digital euro, etc. Cryptocurrency is privately owned electronic money that is encrypted and protected via blockchain technology.

n. A variety of products and substances are deemed ineligible property. The exclusion applies to the following:

(1) Controlled Substances - refers to items, including chemicals, mixtures and compounds that are described under the U.S. Federal Food and Drug Law.

(2) Cannabis even when not categorized as a controlled substance (such as various narcotic drugs)

However, exclusion n does not apply to items (3) or m (4) below.

(3) Prescription Drugs – medicines acquired via a licensed health care professional and which are used according to applicable directions (dosage, frequency, and circumstances, such as with or after a meal).

(4) Hemp Derived Goods and Products

Coverage still applies to items made from or containing hemp (which does not contain hallucinatory effects). Clothing, food, seeds, extracts, oils, lotions, materials, and paper are examples. However, the exception is removed (exclusion is applied) if their use violates local or state laws, codes, regulations, etc.

(Defined term, newly added - 03 22 Change.)

1. Coverage D - Loss of Use

This portion of the Modified Form policy provides coverage for Additional Living Expenses, Fair Rental Value and Civil Authority. The insurance limit that appears for Coverage D is the total amount that applies to all three coverages. Specifically, Coverage D provides:

1. Additional Living Expenses

If a covered loss makes the insured premises unusable, this coverage pays an insured’s expenses which are beyond his or her normal living expenses.

Note: The extra expenses must involve the cost of maintaining an insured’s normal way of life.

Example: Consider these situations:
Likely Covered	Likely Not Covered
The added cost of renting a modest hotel room (for a married couple)	The added cost of renting a luxury suite (for a family of two)

a. b. Besides the insured, this coverage is extended to persons related to the insured who also lived in the insured’s home. Other eligible persons are those who younger than 21 that live in the insured’s home. However, these youths must be cared for by residents who share the insured’s living space and qualify as that insured’s relatives. (03 22 Change).

A time limit controls the payment of these expenses. Payment will last until the damaged property is repaired or replaced, or until the household has found a new, permanent residence, whichever occurs first. This part of the additional coverage was slightly edited, likely in an attempt for more clarity. (03 22 Change) Related Court Case: Additional Living Expenses Held Not Recoverable Following Contamination

2. Fair Rental Value

This coverage pays an insured the fair rental value of the part of the "residence premises" which the insured rents out or holds for rental. Any payment is reduced by any expenses which cease while the residence can’t be used.

Of course, the home must first be made unavailable or unlivable by a covered cause of loss.

No such coverage is available for loss situations that qualify as hosting activities related to home-sharing. (03 22 Change)

Payment under additional living expenses or fair rental value will be for the shortest of the time required to repair or replace the damage to property. This part of the additional coverage was slightly edited, likely in an attempt for more clarity. (03 22 Change).

3. Civil Authority Prohibits Use

If a civil authority prohibits the "residence premises" from being used as a result of direct damage to neighboring premises by a covered cause of loss, the additional living expense and fair rental value loss as provided under additional living expenses and fair rental value is covered for a maximum of two weeks.

Example: The home adjacent to an insured collapses due to it having been abandoned for years. A city inspector orders the insured’s household to leave the area until the damaged home can be leveled and cleared. The maximum time that the policy will pay for is two weeks to live elsewhere. Beyond two weeks, the additional costs of temporary living arrangements become an out-of-pocket expense.

The coverage periods extended under additional living expenses, fair rental value, and civil authority are not limited by the expiration date of the policy.

Note: This is another issue that may be affected by the ongoing pandemic. Many losses were created by the actions of local and state governments affecting the legal use of personal and commercial property. It is highly likely that this issue will be redefined.

4. Loss or Expense Not Covered

This section of the HO 08, oddly in our opinion, appears like the other three items; but it is NOT an additional coverage. It states that the policy does NOT provide reimbursement for loss related to the termination of a lease or other agreement. While this appears to be an attempt to provide greater clarity, the trade-off is distinctly listing an exclusion in the form of an additional coverage under Loss of Use.

Additional Coverages

The following categories of protection are also available under the HO 08 Form.

Note: Unless otherwise stated, the coverage amounts that appear in this section are unchanged from previous editions of the Modified Form Policy.

1. Debris Removal

a. Reasonable expenses will be paid for the removal of the following:

· Debris of covered property if an insured peril that applies to the damaged property causes the loss

Example: Marva returns to her storm-damaged home. The primary loss was to her front porch, including a large amount of porch debris that covers the front lawn. Debris Removal coverage would respond to the cost to clear the property.

· Ash, dust, or particles from a volcanic eruption but only if they caused direct loss to a building or to property that is within a building.

This coverage is a part of the limit of insurance that applies to the damaged property. If the sum of the amount paid for actual property damage and the debris removal exceeds the limit of liability for the damaged property, an additional 5% of that limit of liability is available for debris removal expense.

b. Debris Removal coverage also pays up to $3,000 (increased from previous limit of $1,000 - 03 22 Change) for the removal of the following from the "residence premises":

· The named insured’s trees which are destroyed by windstorm or hail

· The named insured’s trees which are destroyed by weight of ice or snow

· Trees belonging to an insured’s neighbor which are blown over or around by an insured peril under Coverage C

However, the trees must cause one or more of the following:

- Damage to a covered structure

- Block a driveway enough to prevent registered motor vehicles from entering or leaving the premises

- Block a ramp or passage that eliminates a handicapped person’s access to the dwelling.

The limit for any one loss is $1,500 for any one tree but only $3,000 for all fallen trees (increased from previous limits of $500 and $3,000 respectively). (03 22 Change).

The coverage amount is modest, offering some protection to events that are commonplace. While the increased coverage helps, it would still be quite inadequate at a site where debris consists of a large number of felled trees.

2. Reasonable Repairs

The policy pays for costs the insured faces to make temporary repairs that minimize or prevent further damage to property, but only if affected or threatened by a source of loss that is eligible for coverage under the HO 08 policy. This coverage reduces the policy’s applicable property insurance limit. Further, it does not affect any obligation under the policy’s “Duties After a Loss” condition.

3. Trees, Shrubs and Other Plants

Specific perils are covered for trees, shrubs, plants, or lawns on the “residence premises.” These perils are:

· Fire or lightning

· Explosion

· Riot

· Civil commotion

· Aircraft

· Vehicles not owned or operated by residents the insured household

· Vandalism

· Malicious mischief

· Theft

For all trees, shrubs, plants, or lawns, coverage is available for up to 5% of the limit of liability that applies to the dwelling.

No more than $1,500 (increased from previous limit of $500 - 03 22 Change) of this limit will be available for any one tree, shrub, or plant. However, this is an ADDITIONAL amount of insurance. Payment under this additional coverage does not affect the insurance limits that apply to other covered property. Additionally, it is important to remember that there is NO coverage for property grown for "business" purposes. This form now makes specific reference to property grown as part of business activity or cannabis. Neither class of property is eligible for coverage. (03 22 Change).

Example: Gail heard a loud thump and she rushed outside. An elderly neighbor lost control of her car and ran onto Gail’s property. She crashed into the wood stairs to Gail’s home’s entrance. Unfortunately, the crash also destroyed hundreds of dollars of exotic plants that were to be sold at her family’s Garden Center. The stairs are covered, but not the expensive plants.

4. Fire Department Service Charge

Fire department service charge coverage applies only to property located outside of recognized fire districts. The coverage clearly does not apply to property that is located within the limits of the city, municipality or protection district that furnishes the fire department response. The $500 reimbursement allowance, when applicable, pays for calling the fire department to protect property from any covered peril not restricted to fire. This limit is additional insurance.

5. Property Removed

This protection exists for eligible property that is taken off-premises in order to protect it from likely damage of loss from an insured peril. The policy’s limits for the removed property apply to this property for up to 30 days from the date of removal. The removed property is covered for any source of loss during this time period. Since this is merely an additional peril, it makes the policy’s protection broader, but does not provide additional insurance limits. Any loss paid under this cause of loss reduces the total amount of protection available. There is a clarification in policy wording, referencing “increase” in place of “change” in limits. (03 22 Change).

Previous editions of the ISO HO Special Form Policy used to have an Additional Coverage called “Credit Card, Electronic Fund Transfer Card or Access Device, Forgery, and Counterfeit Money.” This item was deleted. (03 22 Change).

6. Loss Assessment

a. The insurance company will pay up to $2,000 for “your” share of a loss assessment charged during the policy period against you by a corporation or association of property owners. (Increased from previous limit of $1,000 - 03 22 Change) The assessment has to be due to a direct loss to property that is collectively owned by all members. Further, the loss that triggers the assessment has to be caused by a covered peril under Coverage A Dwelling.

Example: Paula and Lanie live in an older neighborhood that includes a commonly owned recreational area and clubhouse. They are required to belong to the homeowners association that oversees the joint-owned property. During a severe period of rain, flooding destroys the clubhouse. Even though the association has a flood policy, it doesn’t pay the entire loss. Paula and Lanie, along with the other homeowners in the association, are assessed $3,700 to pay for the remaining cost of repairs. While their homeowner’s policy has $2,000 available for assessments, it does not apply here due to it involving a form of loss that is not covered by their policy.

Ineligible Assessments - This additional coverage excludes protection against loss due to earthquake and also due to any land shock waves or tremors occurring occur before, during or after a volcanic eruption.

b. No coverage is available for assessments made against an insured or a corporation or association of property owners by any governmental body.

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

Regardless of the number of assessments, $2,000 is the maximum amount that will be paid for a single occurrence. This insurance is subject to the policy deductible that appears on the declaration page. However, regardless of the number of eligible assessments in a single occurrence, the deductible only applies once.

c. Section I Condition Q. Policy Period does not apply to this coverage which means that the loss that causes the assessment is not required to occur during the policy period.

7. Glass or Safety Glazing Material

a. This additional coverage pays for any of the following:

· Glass or safety glazing material breakage but only if it is part of a covered building, storm door or storm window

· Glass or safety glazing material breakage but only if it is part of a building, storm door or storm window AND the direct cause of loss is earth movement

· Covered property that suffers direct damage from glass or glazing material that breaks out of storm doors/windows or other parts of the covered building

b. This coverage does not include loss on the "residence premises" if the dwelling has been vacant for more than 60 consecutive days immediately before the loss. However, if the vacant building is damaged by earth movement coverage does apply. There is an important exception, A dwelling being constructed is not considered vacant. Vacant status is also inapplicable to homes that are not actively occupied because of remodeling, renovations, or repairs. (03 22 Change).

Further, this provision does not cover loss that results from the openings that exist after glass or glazing material has broken. This wording merely prevents duplicate coverage with protection that may exist under other parts of the policy.

c. This coverage grants a maximum of $200 of protection. (Increased from previous limit of $100 - 03 22 Change).

d. This coverage does not increase the limit of insurance that applies to the damaged property.

SECTION I—PERILS INSURED AGAINST

The insurer’s obligation is to protect eligible property for the sources of loss listed below. That protection is provided to the property described under Coverages A, B and C. However, this section also references that protection is subject to this form’s separate exclusions section.

1. Fire or Lightning

Related Article: Dwelling Policy Program Perils

2. Windstorm or Hail

While coverage for wind and hail loss extends to watercraft, outboard engines, trailers, and related property, it only applies when damage occurs while this property is located in a building that is entirely enclosed.

Further, damage to property located within a building is covered only due to the direct force of wind that breaches the structure and permits damage to the contents. In other words, damage due to an open window or door is disqualified from coverage.

Example: Olivia reports a loss in which storm winds destroyed the contents of her studio. All of her pottery supplies and furniture were damaged and broken. Her insurer sends an adjuster who inspects the loss and turns the claim down. He noticed that the room’s window had been left open.

Related Article: Dwelling Policy Program Perils

3. Explosion

Example: Olivia is having a bad time. She returns home from a long walk-in time to meet a firefighter who explains they responded to an explosion at her home. They put out a fire and the damage was pretty extensive. It turns out that the scented candle she lit reacted to paint thinner fumes from her painting project. At least the damage to her bungalow is covered.

Related Article: Dwelling Policy Program Perils

4. Riot or civil commotion

In other words, this is basically vandalism coverage involving groups.

5. Aircraft

With the increasing incidences of small aircraft crashing in towns and city neighborhoods, this coverage is becoming more necessary. This coverage also applies to damage caused by spacecraft and self-propelled missiles.

6. Vehicles

Damage to a fence, driveway or walkway created by a vehicle owned by a resident of the insured household is ineligible for coverage.

7. Smoke

The policy only covers for smoke losses that qualify as being both accidental and sudden, but bars coverage for loss that is due to smoke from, fireplaces, industrial operations as well as agricultural smudging.

Eligible smoke damage includes a situation called “puffback.” Puffback is when a furnace, boiler or similar equipment releases soot, smoke, vapors, or fumes onto the covered property and causes damage.

8. Vandalism or malicious mischief

However, a change was recently made to this coverage. No protection is available for damage or loss that is related to home-sharing host activities (as defined in the policy). (03 22 Change).

This source of loss does not apply to either direct or indirect damage that results from any related, deliberate act if, at the time of loss, the property has been vacant more than 60 days. A home under construction, remodeling, renovating or repairs (03 22 Change) is not classified as a vacant home.

This coverage has, traditionally, occurred on the nuisance level and is often a loss handled by the homeowner as it does not rise above policy deductibles.

9. Theft

This is very modest coverage because the limit of loss for theft is only $1,000.

a. The theft peril includes attempted theft and property that is no longer located at a given place when its disappearance is likely caused by its theft.

b. There are several instances that are excluded from coverage, such as when the theft or loss:

· Is committed by an “insured”

· Occurs to or in a dwelling that is under construction

· Involves materials and supplies used for the construction of a dwelling before the structure is completed and occupied (as a residence)

· Occurs in a part of a “residence premises” which an “insured” rents out to someone other than another insured

· Occurs away from the “residence premises”

There is a new part of the provision, listed as b. (5) - No protection is available for damage or loss that is related to home-sharing host activities (as defined in the policy). (03 22 Change).

Under this peril only any personal property in a bank, public warehouse or self storage facility is considered to be on the residence premises.

10. Volcanic eruption

Other than loss caused by earthquake, land shock waves or tremors.

SECTION I—EXCLUSIONS

The following sources of loss are excluded from coverage under the HO 08 form.

Note: The exclusions apply whether the loss is direct or indirect.

1. Ordinance or Law

There is no coverage for loss due to the enforcement of any ordinance or law regulating the construction, repair, or demolition of a structure. This exclusion also refers to laws involving monitoring, testing and/or remediation of property due to polluting activity.

Building codes amended or enacted after the original construction of a building are a major reason for this exclusion. In some areas, laws prevent the repair of a building that has suffered damage equal to 50% or more of its value. The HO 08 form is not intended to cover the substantial costs to bring a building within compliance with local laws, especially when an insured may be required to demolish the remains of their covered property and rebuild.

2. Earth Movement

Earth movement is defined as an earthquake and includes land shock waves or tremors that occur before, during or after a volcanic eruption; landslide; mine subsidence; mudflow; earth sinking, rising, or shifting. This source of loss is excluded regardless of whether it is connected to human, animal or natural (force of nature) activity.

There is an important element of this exclusion. If a fire, theft, or explosion occurs after any earth movement, the policy will pay for the damage caused by the subsequent loss. However, any damage resulting from earth movement would be excluded from any payment made to care for theft, explosion, or fire damage.

Note: Such events are often referred to as ensuing losses.

3. Water

The Modified Form policy does not cover a loss caused by flood, surface water, waves, tidal water, tsunami, overflow of a body of water, or spray from any of these, whether or not driven by wind; water which backs up through sewers or drains or which overflows from a sump; or water below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool, or other structure. This source of loss is excluded regardless of whether it is connected to human, animal or natural (force of nature) activity.

The excluded situations mentioned above also extend to damage caused by waterborne material. So, a distinction may possibly be made among damage caused by water and damage caused by items borne (carried) by water. The reference, allegedly, is intended make the exclusion definitive in barring coverage for damage caused by debris-laden water or sewage. However, the latter item may beg the question of how such distinctions should be made. Is sewage synonymous with waterborne material? If not, the added wording, rather than clarifying the exclusion, could create confusion.

Direct loss by fire, explosion or theft resulting from water is covered.

Besides excluding damage from water and waterborne material, coverage is also barred from water (and material carried by water) that escapes or overflows from any containment system. The systems referenced in the form include:

· Dams

· Levees

· Seawalls

· Other boundaries

· Other containment systems

Questions arise about what is meant by ‘surface water’ since this source of loss is not covered. This term applies to water that stands or runs on the surface of the ground. It includes rainwater, which forms in pools or otherwise collects on the ground. It also encompasses similar conditions created by garden hoses and irrigation systems.

4. Power Failure

The HO 08 form bars coverage for loss caused by power failure. It refers to the failure of power or other utility service if the failure takes place off the residence premises. However, if a covered peril occurs following the power failure and that peril damages the residence premises, the policy will pay for the portion of the loss caused by the ensuing peril.

It is clear that the exclusion would apply if power failure were caused by damage to a power station or utility equipment away from the premises. But if, for example, lightning struck and damaged wiring on the insured premises, the exclusion would not apply, and the policy would pay for damage to covered property resulting from power failure caused directly by the lightning.

5. Neglect

Neglect refers to an insured who does not use all reasonable means to save and preserve property at and after the time of a loss. This exclusion underscores the insured's obligation to protect property that may have been damaged by a covered peril. While the insured is expected to take reasonable steps to protect his property, heroic or dangerous action is not expected.

Example: Insane Insurance reduces the Porters’ claim because, when they returned home from a night out and found it engulfed in smoke and flames, they refused to enter the house to save a kitchen table. On advice of its own in-house counsel, Insane later sent an additional check to cover the lost table too.

6. War

This term includes undeclared war, civil war, insurrection, rebellion, revolution, warlike act by a military force or military personnel, destruction or seizure or use for a military purpose, and any consequence of any of these actions. Discharge of a nuclear weapon is deemed a warlike act, even if accidental.

7. Nuclear Hazard

Nuclear hazard means any nuclear reaction, radiation, or radioactive contamination, controlled or uncontrolled or however caused, or any consequence of any of these acts. It is clear, however, that direct loss by fire resulting from the nuclear hazard is covered.

8. Intentional Loss

This exclusion applies to loss caused by and intended by an insured and denies coverage for ALL insureds when ANY insured commits an intentional loss.

Example: A married couple jointly owns a home that is insured for $40,000 under a HO 08. Angry over not winning the state lottery, the wife (without her spouse’s knowledge) sets fire to their home, causing $25,000 in damages. Since the loss was not accidental, both the guilty wife and the innocent husband are barred from making a claim for the extensive fire damage.

Note: The above scenario could be resolved differently depending upon the state where the incident occurs. Some state laws preserve the rights (insurable interests) of innocent parties (typically spouses).

9. Governmental Action

This exclusion applies to loss caused by any governmental unit’s decision to destroy or confiscate property, with the exception for property destroyed in order to guard against the spread of fire.

SECTION I– CONDITIONS

Note: These conditions appear in the policy, but they are not discussed in the order of their appearance.

A. Insurable Interest and Limit of Liability

Regardless of the number of people who have an insurable interest in the property covered, the insurer is not obligated to pay more than either the affected insured’s property interest or the applicable insurance limit.

B. Deductible

This provision stipulates that any loss is subject to any applicable, stated deductible that appears in the policy. If a situation appears where more than one deductible could, technically, be applied, only the highest deductible amount will be used when settling a loss.

C. “Your” Duties After Loss

In case of a loss to covered property, the “insured” is responsible for:

1. Quickly notifying the insurance company or its agent

Example: On May 3^rd, the Turners’ home was burglarized with most of the lost items involving electronics and musical instruments. On June 21^st, the Turners file a claim with their agent. The agent quickly forwards the information to their insurer but warns them that the late notification may endanger any payment.

2. Reporting theft losses to the proper authorities

3. Protecting the property from further damage. If repairs to the property are needed, the insured is required to take reasonable steps and necessary repairs to protect damaged property, recording all repair expenses

4. Cooperating with the insurance company as it reviews the claims

5. Preparing an inventory of damaged personal property, including items that documents property values and includes detailed property descriptions

6. Displaying any damaged property, sharing all records and documents related to the loss and participating in and signing examinations as many times as an insurer requests.

7. Providing a signed, sworn proof of loss within 60 days following an insurer’s request. The proof of loss needs to describe the following:

· The time of loss

· The cause of loss

· The interest of the "insured" and all others in the property involved

· The parties which have liens on the property

· Information regarding any other insurance which may cover the loss

· The details of any changes in title or occupancy of the property during the term of the policy

· Any specifications of damaged buildings and detailed repair estimates

· The inventory of damaged personal property as described in the inventory described in “Your Duties After Loss” section

· Valid receipts for additional living expenses incurred and records that support the fair rental value loss

Section C., Duties After Loss, no longer contains references of obligations involving credit card, electronic fund transfer card or access device companies. (03 22 Change).

D. Loss Settlement

1. If a covered loss occurs to:

· Personal property

· Awnings, carpeting, household appliances, outdoor antennas, and outdoor equipment, and

· Structures that are not buildings,

all are settled on the basis of the property’s actual cash value that exists at the time of the loss UNLESS it is less expensive to repair or replace the damaged or destroyed property.

Note: The actual cash value is the replacement cost of the item minus depreciation. If your client has a 10-year-old sofa that is destroyed in a fire, the insurance company won’t just write out a check for the value of a new sofa. The purpose of insurance is to make an insured whole again, re-establishing their pre-loss position; it is not to improve an insured’s financial position.

2. If a covered loss occurs to a building described under Coverage A or Coverage B, the settlement depends upon the insured’s choice on making a claim:

a. If the damaged property is, through repair or replacement, restored to the same occupancy and use, the policy will pay either the applicable limit of insurance or the actual amount needed to repair or replace the property. However, the insurer has the option to use common construction materials that are the functional equivalent of the damaged property.

The repair or replacement has to occur within 180 days after the loss.

b. If the insured does not repair or replace the damaged property within 180 days, the insurer will pay the least of the applicable insurance limit, the market value of the property (at the time of loss) or the amount needed to repair or replace the damaged property using material of like kind and quality (subject to depreciation).

E. Loss to a Pair or Set

When property that is part of a pair or set suffers a covered loss, the insurer can choose to settle on one of the following basis:

1. Repair or replace any component that results in returning the pair or set to its pre-loss value

2. Pay the amount equal to the pair or set’s pre-loss and post-loss actual cash value

F. Appraisal

Either an insured or the insurer can require a loss appraisal if they can’t agree on the amount of loss. The two parties have up to 20 days after getting an appraisal request to select a competent appraiser. The appraisers have a maximum of 15 days to choose an umpire. If an umpire isn’t found by that time, a judge of a court of record in the state where the "residence premises" is located can make the selection. Each appraiser has to submit a written loss amount and both the insurer and insured are bound to accept an agreement among any two of the appraisers and the umpire. Each party will pay its own appraiser and share the other appraisal expenses (including the cost of the umpire) equally.

G. Other Insurance and Service Agreement

If a loss covered by this policy is also covered by other insurance, the insurer will pay only their share of the loss. Their share equals the percentage of coverage the insurer provides, compared to the total amount of coverage that applies to the loss. If a loss covered by this policy is also covered by a service agreement (even one that operates similarly to insurance), this policy responds only on an excess basis.

Note: This condition only refers to other coverage but does not specify whether the other source has to be valid and collectible. Therefore, a dispute could arise depending upon how this condition is exercised.

Example: Fran Weekwill’s newly purchased home is covered by a HO 08 policy. Fran is moving into her home with the help of the moving company she hired, Olde Paradigm Movers. Fran’s porch and porch roof are destroyed when the Olde Paradigm truck driver backs up too fast and slams into the front of her home. Olde Paradigm has a general liability policy with limits of $50,000. Fran’s policy has a limit of $50,000 on her dwelling. The damage to her property is estimated at $6,000. Fran’s insurance company pays Fran $3,000 for the loss and tells her to collect the rest from Olde Paradigm, even after the insurer discovers that Olde Paradigm’s insurer is bankrupt and is unable to honor their policy. While Fran argues that no other collectible coverage applies to her loss, her insurer says that another source of coverage did, technically, apply to the loss and it doesn’t matter if the coverage lapsed.

H. Suit Against Us

The insured may not file legal action against the insurer unless and until he or she has complied with all of the applicable policy provisions. Further, the action must be filed no later than two years after the date of loss.

Note: This provision does not prevent a policyholder from suing his or her insurance carrier. The intent of this provision is to make certain that an insured takes every course of action that is available and to use a lawsuit as a last resort. It should be to everyone’s advantage if conflicts can be resolved without having to go to court. However, suits happen and if this alternative is chosen, the insured must file the action within one year of the applicable date of loss.

I. “Our” Option

If the “insured” is given written notice within 30 days after the insurance company receives the “insured’s” signed, sworn proof of loss, the insurance company may repair or replace any part of the damaged property with similar property.

Note: The insurer is not obligated to pay a loss with cash. The insurance company can actually replace the damaged property with similar property.

J. Loss Payment

Any losses will be adjusted between the insurer and the insured and payment will be made to the insured except when the payment is due to another person or party. The insurer is obligated to make payment within 60 days after it receives the proof of loss. However, this depends upon the insurer reaching an agreement with the insured and, naturally, is affected by receiving either an entry of final judgment or a filing of appraisal award.

K. Abandonment of Property

The insurer is not obligated to accept any property that an insured abandons.

L. Mortgage Clause

When the policy names a mortgagee (including trustees), any payments made under Coverages A or B will be paid to the mortgagee and the insured, according to their interest in the covered property. Multiple mortgagees are paid according to their order of precedence (i.e., 1^st Mortgagee, 2^nd Mortgagee, etc.).

A claim denial to an insured won’t affect a mortgagee who:

· Notifies the insurance company of any known change in ownership, occupancy, or substantial change in risk,

· Pays any premium when it’s not paid by an insured, and

· Provides a signed, sworn statement of loss within 60 days after being told that one hasn’t been provided by an insured.

Policy conditions relating to appraisal, suit against us and loss payment apply to the mortgagee.

The mortgagee will get at least 10 days’ notice that the policy is cancelled or not to be renewed.

When an insurer pays a mortgagee, but not an insured, the insurer may assume the mortgagee’s subrogation rights against an insured and subrogation won’t damage the mortgagee’s right to fully recover its claim.

M. No Benefit to Bailee

The insurance company will not recognize any assignment or grant any coverage that benefits a person or organization holding, storing, or moving property for a fee regardless of any other provision of this policy.

N. Nuclear Hazard Clause

Nuclear hazard is defined as any controlled or uncontrolled nuclear reaction, radiation, or radioactive contamination, including consequential losses. Such nuclear incidents will not be considered as fire, explosion, or smoke losses. However, there is coverage for direct loss by fire which results from a nuclear hazard.

O. Recovered Property

When either the insured or the insurer recovers property after a claim has been paid, the other party has to be told about the recovery. The two parties will discuss who is to keep the property and, if applicable, any adjustments that have to be made to the settlement.

Example: Paula received full reimbursement for all of the furniture and other items stolen during a burglary. When her insurance adjuster tells her that a half dozen items were recovered, she only asks that a chest of drawers that belonged to her grandmother be returned. The insurer returns it and asks her to repay a portion of the settlement.

P. Volcanic Eruption Period

Within a 72-hour period, all volcanic eruptions that occur will be treated as one eruption.

Q. Policy Period

This item merely states that the coverage supplied by this policy is only valid for loss that actually occurs during the applicable policy period.

R. Concealment or Fraud

This provision voids coverage for all persons otherwise eligible for protection if the insurer discovers any incidents of significant information being kept from it (either due to concealment or misrepresentation). Loss of coverage also results if any otherwise covered persons are guilty of fraudulent behavior or lying (false statement) regarding any aspect of the applicable insurance coverage.

The provision attempts to be comprehensive, barring coverage to all parties, including innocent insureds. However, the provision wording may likely cause confusion over how it applies and appears to be vulnerable to court scrutiny in the event of claims.

S. Loss Payable Clause

Whenever a loss payee appears on the policy, that party gains status as an insured and is due proper/required notice of policy termination.

SECTION II - LIABILITY COVERAGES

A. Coverage E - Personal Liability

This coverage obligates an insurance company to provide coverage for bodily injury or property damage caused by an occurrence. Of course, what is meant by property damage, bodily injury and occurrence is defined by the Modified form policy. If the loss does qualify for coverage, the policy (through the insurer writing the coverage) will:

1. Pay up to the policy’s insurance limits for the damages for which an "insured" is legally liable. Eligible damages include prejudgment interest levied against an "insured."

2. The Modified form policy also will, at the insurer’s expense, defend an insured. The defense is provided even when there are no grounds for the lawsuit or even when the suit was falsely or fraudulently filed. The insurer has the right to choose the legal representative.

Example: Glenda and her family love music. She happily lets her daughter’s punk rock band practice at her house. Her neighbor, who constantly complains about the noise, sues Glenda, claiming that the noise is causing cracks in his home. Her insurer defends against the nuisance “property damage” claim.

Along with its obligation to defend and, if necessary, pay a lawsuit, the insurer has complete power in investigating and settling claims as it decides is appropriate.

Once the insurance policy’s liability limit has been used up by either a settlement or a judgment, the insurer has no further obligation to provide a legal defense to the insured. The defense obligation ceases when a payment of a judgment or settlement exhausts the policy’s applicable insurance limit.

B. Coverage F - Medical Payments to Others

The insurance company will pay the necessary medical expenses that are incurred or medically ascertained (determined) but only those incurred within three years from the date of an accident that causes “bodily injury.” Medical expenses include reasonable charges for:

medical	surgical	x-ray
dental	ambulance	hospital
professional nursing	prosthetic devices	funeral services

This coverage part refers to necessary medical expenses and, in defining medical expenses, refers to reasonable charges. Therefore, in order for a charge to be paid under Medical Payments to Others, the charge has to be the result of accidental “bodily injury” covered by the policy and the charge has to be for a reasonable amount. There is no coverage for either unnecessary charges, even when they’re reasonable, or for necessary treatment that is performed for exorbitant fees.

The policy’s Medical Payments to Others coverage does not apply to “you” or regular residents of “your” household except "residence employees." With regard to others, this coverage applies only to:

1. a person on the "insured location" with the permission of an "insured"

2. a person off the "insured location," if the "bodily injury" arises out of any of the following:

a. A condition on the "insured location" or the ways immediately adjoining

b. Circumstances caused by the activities of an “insured”

c. Circumstances caused by a "residence employee" in the course of the "residence employee's" employment by an “insured”

d. Circumstances caused by an animal owned by or in the care of an "insured."

Example: Rhea is having a party to watch a basketball playoff game. It’s attended by friends and family. While rushing in from the kitchen to see the replay of a winning basket, Rhea’s son collides with her neighbor and both suffer broken ribs. The neighbor’s injury is eligible for coverage but the son’s is not.

SECTION II - EXCLUSIONS

This section addresses exposures which ARE NOT covered by the homeowner policy’s liability coverage part. A policy’s exclusion section is typically the most difficult to comprehend. As more consumers are exposed to the simplified shortcut writing used on computers and mobile devices; expectations on understanding such common forms may force future language changes.

The first four exclusions are self-contained and feature vehicles or crafts.

A. “Motor Vehicle Liability”

1. The Modified form coverage parts Coverage E - Personal Liability and Coverage F - Medical Payments to Others do not protect an insured against an “occurrence” related to “motor vehicle liability” when the loss involves:

a. A motor vehicle which is actually registered to be used on public roads or property.

b. Vehicles that are not registered for public road use but that are required by the governmental authority to be registered. The registration requirement is determined by the location where the place where the occurrence happens.

c. Coverage is also excluded when the “motor vehicle” (as defined by the Modified form policy’s definition section) meets any of the following conditions:

(1) Used in an organized or prearranged race, speed contest or other competition, including or preparing for the race

Note: Since this exclusion refers to prearranged or organized events, it would appear that a spontaneous event, such as a drag race, might be covered. Of course, such a race would have to involve vehicles that aren’t excluded by other parts of the policy.

(2) Rented to other persons

(3) A vehicle whose owner charges a fee to carry persons or property

Example: Wendell lives in Sunnygreen retirement community where golf carts are used to travel the community’s roads. Wendell makes extra money by owning two golf carts that he rents to other residents. Losses involving these carts are ineligible for coverage.

(4) A vehicle that is used in a “business,” with the exception of a motorized golf cart while it is being used on a golfing facility.

2. If a vehicle fails to fall under exclusion A.1, a motor vehicle is still not covered EXCEPT when the vehicle meets one or more of the following conditions:

a. It is on an “insured location” and in dead storage

b. Only used in connection with maintaining an “insured’s” residence

c. Riding mowers when in the course of cutting grass when a loss occurs. (03 22 Change)

d. It is made for use by handicapped persons and the loss occurs when either of the following is true:

(1) The vehicle is assisting a handicapped person

(2) The vehicle is parked on an “insured location”

Note: Even if a vehicle such as a motorized wheelchair is involved in a loss, the loss is not eligible for coverage UNLESS the wheelchair is ASSISTING a handicapped person or is parked.

Example: Gary’s brother, Jim, and his family are visiting. Jim is paralyzed and uses a wheelchair. Because Gary’s home has lots of stairs and furnishings, the wheelchair is parked outside their porch with the wheels locked. While the brothers’ kids are playing chase, Jim’s daughter smashes into the wheelchair and suffers a broken arm and serious cuts. Her injury is eligible for coverage.

e. A recreational vehicle that is MADE as a recreational vehicle to be used off public roads AND one or more of the following apply:

(1) The vehicle is NOT owned by an insured

(2)(a) The vehicle IS owned by an insured, but the loss occurs on an insured location. The insured location must qualify as such under the policy’s definition.

(2)(b) The vehicle IS owned by an insured, but the loss occurs away from an insured location. However, this off-location protection is quite narrow. It applies only when the loss involves a vehicle that is designed as a toy for and used by young children (6 years and younger), is battery-powered and is incapable of moving faster than 5 mph on level ground. In other words, the policy responds to, essentially, preschooler-operated toy losses.

Note: The 5-mph restriction applies whether the motorized toy’s speed capability was provided by the manufacturer or is due to later modification.

Of course, though the coverage is narrow, it is still valuable that the Modified form policy could respond to hazards caused by certain motorized property.

f. A motorized golf cart which is owned by an insured and which is built for carrying four or fewer persons and is not capable of traveling faster than 25 mph on level ground.

Further, the golf cart MUST be operated within the legal boundaries of the following:

(1) A golfing facility at which the golf cart is either kept or is being used by an insured to do any of the following:

(a) Play golf or some other activity sanctioned at the facility (interesting, what if golf cart races were sanctioned?)

(b) Ride between the areas where golf carts or motor vehicles are parked or stored

(c) Cross public streets in order to get to other areas of the golfing facility

(2) A private community which, with the consent of the community’s property-owner association, allows golf carts to travel upon its roads. However, the person operating the cart must have a residence located within that private community.

The Modified form policy is designed to tightly control the exposure to any imaginable liability related to motor vehicles.

However, even with the latest wording, it is not always clear that a vehicle's involvement with a loss will result in it being ineligible for HO coverage.

B. “Watercraft Liability”

1. The Modified form coverage parts Coverage E - Personal Liability and Coverage F - Medical Payments to Others do not protect an insured against an “occurrence” related to “watercraft liability” when the loss involves watercraft that is:

a. Used in an organized or prearranged race, speed contest or other competition, including practicing or preparing for the race

Note: Since this exclusion refers to prearranged or organized events, it would appear that a spontaneous race might be covered. Regardless, there is a racing exception. The exclusion does not apply to races involving sailing vessels or predicted log cruises (where specified locations or spots are predetermined and the single or multiple participants compete to see how quickly they can arrive at each destination).

b. Rented to other persons

c. Available to carry persons or property if a fee is paid to its owner

d. Used in a “business.”

2. If a situation involving watercraft fails to fall under exclusion B.1., a watercraft liability loss is still not covered EXCEPT when the watercraft is:

a. Stored

b. A sailing vessel. The exception is not affected by the vessel having auxiliary power, but the sailboat must be one of the following:

(1) Shorter than 26 feet

(2) Longer than 26 feet as long as it is not owned by an insured.

Item 2.b.2. no longer includes references to rented watercraft (03 22 Change).

In other words, a loss involving a short sailing boat could be covered.

c. Not a sailing vessel. However, if powered (regardless the type, engine, or motor), no matter their number, if total amount of power:

(1) (a) has 25 or less horsepower. There is no ownership requirement.

(2) is more powerful than 25 hp and falls under the following

(a) is not a craft that the insured owns

(b) while it is owned by an insured, ownership of the engine/motor is securing during the policy period, or

(c) an insured gets the engine/motor before the policy period, however eligibility is gained by

but only if:

(i) the insured advised of having possession of the engine or motor at the beginning of the policy’s inception and

(ii) the insured insures them within 45 days of purchasing the motor or engine.

Coverage applicable according to Item (b) exists throughout the entire policy period.

Item 2.c. was made significantly shorter in order to make it simpler and clearer. (03 22 Change).

Items (c) or (d) apply for the entire policy period.

Note: When horsepower appears in the policy, the term means the maximum power rating which the manufacturer has assigned to the engine or motor.

C. “Aircraft Liability”

This exclusion could not be simpler since, unlike the motor vehicle and watercraft exclusions, there are no exceptions. The size, wingspan, aircraft type, does not matter. Losses related to aircraft are not covered by the Modified form Policy.

D. “Hovercraft Liability”

This exclusion is a twin of the exclusion for aircraft liability. The Modified form policy, without exception, does not provide an insured protection from their liability related to hovercraft. Hovercraft liability is a term that is found in the Modified form policy’s definition section. While the decision to specifically exclude hovercraft clarifies the coverage philosophy of the policy (as opposed to assuming that such property may be excluded as a type of either air or watercraft), there is now the possibility that coverage may exist for unusual craft or vehicles that are not included in any current category. Of course, keeping things in perspective, the exposure to such craft or vehicle is likely to be rare.

E. Personal liability (Coverage E) and Medical Payments (Coverage F) do not apply to “bodily injury” or “property damage”:

1. Expected or Intended Injury

There is no coverage for any injury an “insured” expects or intends.

Intentional acts are excluded EVEN if the property damage or bodily injury is different in the kind or degree than what an insured hoped or expected would occur; or it is suffered by a different party or property than what an insured either expected or hoped.

There is an important exception to this exclusion. When bodily injury or property damage results from an insured acting to protect persons or property, the loss is covered IF it only involved use of reasonable force.

Note: The 05 11 added property damage coverage to the exception. Prior editions covered only bodily injury.

2. Business

a. There is no coverage for injury related to “business" activity that takes place at an insured location or in which an “insured” is engaged. This exclusion applies even if the business is neither owned by nor employs an insured. Further, the bar to coverage even extends to an insured’s omissions. An omission is WITHOUT consideration of whether it is related to the nature or duties of the insured’s business or service.

There are a couple of exceptions to the business exclusion.

b. The exclusion is not applied to:

(1) an insured location that is either rented or available for rental:

(a) only on occasion IF it the rental is for use as a residence,

(b) a partial rental of an insured location. In other words, even steady rental is covered if it only involves a portion of the insured location. HOWEVER, this exception is lost if it involves a single family unit that is occupied by an insured who rents part of it out to more than two roomer/boarders.

(c) a partial rental of an insured location if the purpose of the rental is for a school, studio, office or private garage.

2. b. (1) States that the exclusion does not take situations that qualify as home-sharing host activities into consideration. (03 22 Change).

(2) Another exception exists for insureds who are age 20 or younger and are involved in a part-time or occasional business which he or she owns. However, their business cannot have any employees.

Note: The exception makes no mention of partners.

Example: Joshua’s brother and his family live with him in his old home that has more than 3,000 sq. feet and six bedrooms. While they are away on vacation, vandals break in and completely trash one of the bedrooms. The loss consisted of PCs, workbenches, welding equipment and tools. The insurer rejects their claim as the room was rented to Joshua’s brother who ran “Puter Bay” PC and Electronics Repairs which, besides his brother, had two full-time employees.

3. Professional Services

There’s no coverage for property damage or bodily injury related to an insured performing or failing to perform a professional service (medicine, law, accounting, financial consulting, etc.)

4. Insured’s Premises not An Insured Location

There is also no coverage for liability stemming from a premises THAT IS NOT an insured location to which any of the following apply:

a. Is owned by an insured

b. Another party rents to an insured

c. An insured rents to other persons

5. War

No coverage exists for a loss that is due either directly of indirectly by war or any consequences of the following:

a. Undeclared war, civil war, insurrection, rebellion, or revolution

b. A warlike act by a military force or military personnel

c. Destruction, seizure or use for a military purpose.

Please note that even the accidental discharge of a nuclear bomb is defined as a warlike act.

6. Communicable Disease

No coverage is available for any liability due to someone being injured after catching an infectious disease from an insured. Communicable disease includes those which are transmitted via sexual relations but is not limited to it.

Note: Expect changes in this area due to ongoing developments of pandemics.

7. Sexual Molestation, Corporal Punishment or Physical or Mental Abuse

There is no coverage and there are no exceptions.

Related Court Case: Policy’s Sexual Molestation Exclusion Upheld

8. Controlled Substance

a. Protection is unavailable for any loss developing from the use, sale, manufacture, delivery, transfer, or possession by any person of a Controlled Substance(s) as defined by the Federal Food and Drug Law at 21 U.S.C.A. Sections 811 and 812.

Controlled Substances include, but are not limited to:

· Cocaine

· LSD

· All narcotic drugs

b. Protection is unavailable for any loss developing from the use, sale, manufacture, delivery, transfer, or possession by any person of cannabis. This exclusion is not affected when cannabis is not deemed to be a Controlled Substance. (03 22 Change).

This exclusion’s scope is along the same lines as the exclusions for motor vehicle liability. In other words, coverage would be excluded for any loss having any connection with controlled substances.

This exclusion makes an exception for any loss involving the legitimate use of prescription drugs by a person following the orders of a licensed health care professional.

Note: The expanding legalization of medical and recreational marijuana use will be tested via the courts. It is a specifically listed controlled substance and continues to be illegal under the Federal Food and Drug Law even as more states allow both medical and recreational marijuana purchases.

It is important to be aware that the following exclusions DO NOT apply to a bodily injury loss to a residence employee when the loss either occurs during or develops out of the employee performing his or her job:

· A. “Motor Vehicle” Liability,

· B. Watercraft Liability,

· C. Aircraft Liability,

· D. Hovercraft Liability, and

· E. 4. Liability stemming from an insured’s premises which are not defined as an insured location.

F. There is no protection provided under Coverage E - Personal Liability for:

1. Any Liability:

a. Caused by any assessment charged against an insured by any association, corporation, or community of property owners. However, this exclusion can be ignored for any coverage which applies under Additional Coverage 4. Loss Assessment.

b. Created by any contract or agreement made by or involving an insured. This exclusion does not apply if the agreements or contracts are in writing and either of the following applies:

(1) They are directly related to the ownership, maintenance, or use of an "insured location"

(2) An insured takes responsibility for another person’s liability before an "occurrence" unless the loss is excluded somewhere else in the Modified form policy.

Note: This exception merely restores coverage for liability losses which could have been lost by being mentioned under a written contract. In other words, the liability coverage under the Modified form policy is meant to cover losses connected to the covered property. The fact that such a liability is part of some contract arranged with an insured won’t affect that eligible coverage.

2. Property Damage to property owned by an insured.

The Modified form policy prohibits recovery for an insured’s costs/expenses related to the need to repair, replace, enhance, restore, or maintain such property to prevent injury to a person or damage to other persons’ property, anywhere. In other words, there are no set of circumstances for property damage liability coverage to be extended to an insured’s own property. However, damage suffered by a property belonging to an insured is often covered by the Modified form policy’s Coverage Part C - Personal Property.

Example: Rawlings is so excited about his new golf putter that he decides to take some test swings as soon as he leaves the store. On his third swing, he connects beautifully…with a luxury SUV that is passing in the store’s parking lot. His coverage will handle the damage to the damaged vehicle, but not the newly destroyed putter.

3. Property damage to property which is rented to, occupied, or used by or in the care of an insured. This exclusion does not apply when property damage is caused by fire, smoke, or explosion.

4. Bodily injury to any person eligible to receive any benefits that are provided on a volunteer basis or required to be provided by any “insured” under any workers compensation law, non-occupational disability law, or occupational disease law. Again, this is a precaution against obligating the Modified form policy to grant coverage that should be, rightfully, provided by another.

5. Bodily injury or property damage for which an insured under this policy also is insured under a nuclear energy liability policy or would be an insured under a policy except that the limits have already been exhausted.

A nuclear energy liability policy is one issued by any one of the following companies:

· Nuclear Energy Liability Insurance Association (formerly American Nuclear Insurers)

· Mutual Atomic Energy Liability Underwriters

· Nuclear Insurance Association of Canada

or any one of the successors to these companies.

Note: Both exclusions 4 and 5 are to prevent the Modified form policy from offering coverage that should be provided by other, specialized insurance policies.

6. Bodily injury to you or an insured within the meaning of the Modified form policy’s definition of insured.

The Modified form policy’s liability section is designed to cover an insured against his or her legal liability to others (or third parties), not for providing first party (an insured) protection.

G. Coverage F - Medical Payments to Others

These exclusions apply only to Coverage F. This coverage does not apply to bodily injury:

1. To a "residence employee" but only if both of the following apply:

a. The bodily injury must occur away from the “insured location”

b. The bodily injury is not related to the fact that the “residence employee” is working for the “insured.”

In other words, coverage is only provided in situations that represent the liability most closely related to the covered residence. If the loss has either a remote or no relation to the covered property, the loss is excluded from protection under the Modified form policy.

2. To any person who is eligible to receive benefits which are either voluntarily provided or required to be provided under any of the following:

a. Workers compensation law

b. Non-occupational disability law

c. Occupational disease law.

3. If bodily injury occurs from any of the following:

· Nuclear reaction

· Nuclear radiation

· Radioactive contamination

This exclusion applies regardless of how any of the above was caused or whether it is controlled or uncontrolled. No coverage is provided from any loss that is a consequence of nuclear reaction, nuclear radiation, or radioactive contamination.

4. To these parties:

a. any person living/residing in the covered location who qualifies as a home-sharing occupant.

b. any persons who are ongoing occupants on any part of the "insured location."

(03 22 Change).

The only exception is a residence employee.

SECTION II—ADDITIONAL COVERAGES

Under its liability portion of coverage, the Modified form policy provides four coverages which are in addition to the insurance limits that appear on the declarations page. Specifically, the Modified form policy also provides coverage for:

· Claims Expenses

· First Aid Expenses

· Damage to Property of Others

· Loss Assessment

A. Claims Expenses

The policy pays:

1. For costs and expenses tallied up during an insurance company’s efforts to defend an insured during a lawsuit.

Example: Freida is sued by a person who claims to have been injured while they were both playing in a charity tennis tournament. The claimant was in the tourney while on vacation. The insurer pays the expenses of bringing her in from her state for a deposition.

2. Expenses eligible for coverage include amounts assigned to an insured for a claim that the insurer is defending on the behalf of an insured. If any premiums or bonds are required while defending against a lawsuit, these premiums will be paid by the insurer. However, the company’s obligation to pay for this expense ends once the amount paid exhausts the Coverage E insurance limit. Also, the insurer HAS NO OBLIGATION to either apply for or to furnish any bond.

3. This additional coverage also pays for an insured’s reasonable expenses that are created by cooperating with the insurer. This includes the actual loss of earnings up to $250 per day for assisting the insurance company in the investigation or defense of a claim or a suit.

4. Finally, when an entry of judgment takes place, the insurer is obligated to handle interest that accrues between the time of judgment and when the insurance company pays its portion of the judgment. It is important to note that the interest the insurance company must pay is not limited to only its portion of the judgment. However, its responsibility for the interest ends when it has paid its portion of the judgment. The insured and/or other parties would be responsible for accruing interest on the remaining amount of the judgment if they do not pay before or at the same time the insurance company pays.

B. First Aid Expenses

If the insured incurs expenses in providing first aid to others because of “bodily injury" covered under this policy, the insurance company will reimburse the insured. However, the insurance company will not pay for first aid to an insured.

C. Damage to Property of Others

The Modified form policy pays to cover property belonging to other persons which is damaged (accidentally) by an insured. The coverage is on a replacement cost basis. The maximum per occurrence limit is $5,000 (up from $1,000 in the previous HO edition). (03 22 Change). This coverage is an example of risk management since the amount is available to quickly handle minor losses before they can escalate into expensive lawsuits.

Example: Harold is an avid collector of miniature railroad trains. A friend brings over several cherished models to show Harold. When he is handed one engine, Harold is so excited that he drops it. He apologizes and makes a claim for it. His friend is upset but forgives Harold when he receives reimbursement for the engine that was worth nearly $700.

However, the insurer will NOT pay for any of the following types of property damage:

· That can be fully recovered under Section I of the policy

· From an act that is intentionally caused by an "insured" who is 13 years of age or older

· If the property is owned by an "insured"

· If the property is owned by or rented to either an insured’s tenant or a resident in the named insured’s household

· That arises out of a “business” pursuit of an "insured"

· That arises from any act or omission in connection with a premises owned, rented, or controlled by an "insured,” that is not the "insured location.”

· That arises from the ownership, maintenance, or use of aircraft, watercraft or motor vehicles, or all other motorized land conveyances. This exclusion does not apply if the motor vehicle is designed for recreational use off public roads, is not subject to motor vehicle registration and is not owned by an "insured.”

D. Loss Assessment

1. The policy will pay up to $2,000 (up from $1,000 in the previous HO edition - 03 22 Change) in assessments charged to an insured during the policy period. The assessment has to be made by a corporation or association of property owners and the assessment has to involve "bodily injury" or "property damage" that is eligible for coverage under Section II (liability) of the policy. Further, the coverage applies only to loss assessments charged against the named insured as owner or tenant of the "residence premises."

This additional coverage will also pay for the liability for an act of a director, officer or trustee who causes a loss while performing their respective duties for the property owner, corporation, or association. Such persons must have been elected by the member property owners and their work must be compensation-free.

2. The policy’s Policy Period condition does not apply to Loss Assessment coverage.

3. Regardless of the number of assessments, the limit of $2,000 (again, 03 22 change) is the most the insurer is obligated to pay for a loss stemming from either of the following:

One accident, including continuous or repeated exposure to substantially the same general harmful condition
A covered act of a director, officer, or trustee.

Note: If more than one director, officer or trustee is involved in a covered act, it is considered to be a single act.

4. The policy will not cover loss assessments charged against an insured or a corporation or association of property owners by any governmental body.

SECTION II—CONDITIONS

A. Limit of Liability

The Modified form policy makes a maximum dollar amount available for any single, eligible loss. The total amount paid under Coverage E for all damages related to a single loss will not be more than the Coverage E insurance limit entered on the declarations. The stated limit IS NOT affected by the number of:

· "Insureds"

· Claims made

· Persons injured.

All "bodily injury" and "property damage" that is created by any one accident or from continuous or repeated exposure to substantially the same general harmful conditions are considered to be the result of a single "occurrence."

Example: Wayne is having a party to christen his new deck and BBQ area. As several friends come up the deck’s stairs, the deck collapses. Wayne is sued by all four injured friends in four separate lawsuits. His policy, with liability limits of $300,000, is the total amount to respond to the four lawsuits.

The total liability under Coverage F for all medical expense payable for "bodily injury" to one person as the result of one accident is no more than the limit of liability for Coverage F listed on the declarations.

B. Severability of Insurance

This insurance applies separately to each "insured." This condition will not increase the limit of liability for any single "occurrence."

If different insureds are involved with distinct losses that are covered by the policy, then the entire insurance limit is applied to each insured. In other words, the named insured may be sued for two different events during a single policy period and the total Coverage E insurance limit will be applied, in full, to each occurrence. Theoretically, all of the insureds identified under a single policy could suffer losses for different reasons on the same day and the policy’s full insurance limit would apply separately to each person and for each occurrence. However, the Modified form policy does try to limit its exposure to loss by defining all claims or expenses connected to a covered occurrence as a single loss and by construing all losses that result from a continuous and substantially same set of harmful conditions as a single loss.

C. Duties After Loss

In case of an "occurrence," an "insured" is obligated to perform several duties. The policy includes a specific statement that, if failure to comply with the policy conditions harms the insurer’s ability to handle the loss, the insurer may not be obligated to pay for the loss or defend an insured. The policy uses the phrase “prejudicial to the insurer,” which does leave room for debate over how an insured may lose their insurance protection. But the added wording is helpful to both the insurer and the insured. It gives greater emphasis to the importance of complying with the policy’s conditions and it gives the insurer a way to protect itself from an uncooperative insured.

Under this condition, the insured is obligated to:

1. Give written notice to the insurance company or the agent. It must be provided as soon as is practical. This information should include:

a. The policy number or other method to identify it plus the named insured on the declarations

b. The time, place, and circumstances of the "occurrence." Only that which is reasonably available is required.

c. The claimants and witnesses’ names and addresses.

2. Cooperate with the insurer as it investigates, settles, or defends a claim/suit.

This specific requirement has the goal of properly emphasizing an insured’s role in assisting the insurer with the claims process.

3. Send every notice, demand, summons, or other process relating to the accident or "occurrence” to the insurance company. This must be done in a prompt manner which is different from “as soon as practical.”

4. Only when requested by the insurance company, the “insured” must help in any of the following ways:

a. To make settlement

b. To enforce rights of contribution or indemnity which may exist against persons or organizations who may be liable to an “insured”

c. Attend hearings and trials and other parts of the conduct of suits

d. In securing and giving evidence and also in obtaining witnesses to attend.

5. If the claim is presented under Damage to Property of Others, then a claim must be submitted to the insurance company, within 60 days after the loss and a sworn statement of loss must be made along with the damaged property. The damaged property must only be provided if it is in an “insured's" control.

6. Voluntary payments, assumptions of obligations and other expenses can be made or incurred by insureds but only at their own expense. The only expenses the insurance company will reimburse are those for first aid to others at the time of the "bodily injury."

This last duty appears to be inconsistent with the policy’s earlier warning against an insured doing things that may prejudice the insurer’s rights or ability to handle a claim. One way to interpret this duty is to assume that as long as an insured is willing to make a payment out of his or her own pockets, then doing so is approved by the insurer. Since payments (outside of first aid treatment) can be viewed as an admission of liability, it does not seem appropriate to allow customers to make out of pocket payments….at least not without a separate warning that, by doing so, they may sacrifice their insurance coverage.

D. Duties of an Injured Person—Coverage F—Medical Payments to Others

1. Any injured person or someone acting for the injured person who is claiming medical payments must do both of the following:

· Provide a written proof of claim to the insurance company. It must be provided as soon as practical and an oath may be required.

· Provide authorization to the insurance company so that they can obtain copies of medical reports and records.

2. An injured party must be willing to submit to a physical exam by a doctor the insurance company’s chooses and the person must do so as often as the insurance company requires. However, the number of exams must be considered reasonable. Note that there is no definition of “reasonable.” Items like this are often a point of contention between injured persons and insurers. While four separate exams may be reasonable to a company claims adjuster, an injured person might question why he would need to be examined more than one or two times.

E. Payment of Claim—Coverage F—Medical Payments to Others

The policy explicitly states that receiving a payment under this coverage DOES NOT mean an insured considers himself guilty for causing a loss, nor is it an indication that the insurer thinks that they are obligated to pay an injured party.

F. Suit Against Us

1. Action can be brought against the insurance company but not until there has been full compliance with all of the terms under this section of the Modified form policy. Note that this condition refers to an insured’s need to FULLY comply with ALL POLICY TERMS before he or she can file a suit.

2. The second part of this condition mentions that another party can’t play “piggyback” by assuming a right to join the insurance company as a party to any action against an "insured."

3. Action with respect to personal liability can not be brought against the insurance company until the actual obligation of the "insured" has been determined by either a final judgment or under an agreement signed by the insurance company.

G. Bankruptcy of an Insured

The insurance company is not relieved of any obligation when an insured declares bankruptcy or is considered insolvent.

H. Other Insurance

It is usually a serious complication when a loss occurs and more than one source of coverage exists. It is the business version of “who takes their wallet out first” to pay for a shared meal. Under this provision, the applicable insurer places itself behind any other available coverage, acting as an excess source. There is an important exception. If the other source of coverage is written specifically as excess liability protection, then this policy responds first (primary coverage).

I. Policy Period

Coverage under the policy’s liability section is only valid for Bodily Injury or Property Damage that takes place during the policy period.

J. Concealment or Fraud

This provision voids coverage to all persons otherwise eligible for protection if the insurer discovers any incidents of significant information being kept from it (either due to concealment or misrepresentation). Loss of coverage also results if any otherwise covered persons are guilty of fraudulent behavior or lying (false statement) regarding any aspect of the applicable insurance coverage.

SECTIONS I AND II—CONDITIONS

A. Liberalization Clause

If the insurance company makes a change which broadens coverage under this edition of the policy and there is no additional premium charge for that change, it automatically applies to this policy as of the date the change is implemented in the state in which the policy is issued. However, this applies only if the implementation date falls within 60 days prior to the policy inception date or during the policy period stated in the declarations.

This clause does not apply to changes introduced in a general program revision which includes both broadening and restricting features. A general program revision can be implemented through either a subsequent policy edition or through an amendatory endorsement.

B. Waiver or Change of Policy Provisions

An insurer has to give an insured written permission or approval in order to make any valid waivers or changes in the policy. However, an insurer’s request for either an appraisal or examination will not waive any of an insurer’s rights.

C. Cancellation

1. The named insured has the right to cancel the policy at any time and for any reason. The only requirement is that the policy be returned or that a written notice be given to the insurance company. The named insured must specify the date upon which the cancellation is to be effective.

2. The insurance company is more restricted in how it may cancel the policy. A written notice must either be given to the named insured or mailed to the mailing address on the declarations.

The reason for the cancellation must be stated and those reasons and when they can be used are explained below.

Proof of mailing will be sufficient proof of notice.

a. Non-payment of premium - When premium has not been paid, the insurance company may cancel at any time by providing no less than 10 days notice before the date cancellation takes effect.

b. Under 60 days of coverage - When this is the first policy issued by this insurance company for this named insured and it been in effect for less than 60 days the insurance company may cancel for any reason by providing no less than 10 days notice before the date cancellation takes effect.

c. When this policy has been in effect for 60 days or more or if the policy is a renewal of a policy previously issued by this insurance company there are significant restrictions in cancellation. The insurance company may cancel only if one of the following occurs:

· There has been a material misrepresentation of fact. This fact must be such that had it been known the policy would not have been issued.

· A substantial change in the risk occurred after the policy was issued.

If either of these occur, the insurance company must provide a minimum of 30 days’ notice before the date cancellation takes effect.

d. multi-year policies - When this policy is written for a period of more than one year, the insurance company has the right to cancel it for any reason on its anniversary date. The insurance company must provide no less than 30 days notice before the date cancellation takes effect.

3. The premium for the unused days of insurance must be refunded when the policy is cancelled. The refund must be calculated on a pro rata basis.

4. The return premium can be provided with the notice of cancellation or at a later date provided the time frame is reasonable.

Related Court Case: Coverage Sought Under Cancelled Policy

D. Nonrenewal

The insurance company has the right to not renew this policy. If they do, they must either deliver a non-renewal notice to the named insured or mail such a notice to the mailing address on the declarations. The notice must provide no less than 30 days before the expiration date of this policy. Only proof of mailing is required as a proof of notice.

Note on the Cancellation and Nonrenewal Conditions: For purpose of providing a complete analysis, we have included comments on both of these conditions. HOWEVER, state laws control most aspects of how, when and if a policy can be cancelled or nonrenewed. Individual companies should be thoroughly familiar with the law of each state in which it uses the Modified form policy, since these laws may stipulate what is required for:

· Nonrenewal or cancellation reasons

· Parties who must receive advanced notice of either cancellation or nonrenewal

· An insured’s recourse concerning a cancellation or nonrenewal

· How such notices must be mailed

· Whether a notice must indicate the reason for either a cancellation or nonrenewal

· How much advanced notice is required for cancellations or nonrenewals

· The timing of such notices, etc.

E. Assignment

This policy provision merely states that a policy assignment cannot take effect unless and until the insurer gives its approval in writing.

While a company may validate a policy assignment, such arrangements are rare. Typically, once the insurable interest in a home has changed, it is preferable to terminate the old policy and rewrite coverage in the name of the current insurable interest.

F. Subrogation

This part of the policy still gives an "insured" the choice to waive all of his or her rights to recover against any person who is legally responsible for a loss that is paid under this policy. Such a waiver may also be allowed to any given organization. (03 22 Change). The waiver must be in writing and must have been performed before any applicable loss. If these rights are not waived, the insurer may require the insured to assign the rights so the insurer can attempt to recover payment from another party that is responsible for the loss. The rights are only good for the maximum amount that the insurer paid to handle the loss.

Example: The Jeffersons are throwing their annual neighborhood pool party. During a water volleyball game, as the teams are switching sides, a guest is pulled off the pool’s stairs and is seriously injured. The Jeffersons’ insurer handles all of the injured guest’s medical bills and then it pursues payment from the other guest who caused the injury.

When an insured assigns its rights to the insurer, the "insured" must sign and deliver all related papers and cooperate with the insurance company. Why? Well, having the insured’s right to recover payment against another party does an insurer no good if the insured does not help it to make its case. For instance, if a relative or friend of the insured was responsible for the loss, having the insured’s right to subrogate against the friend or relation is useless if the insured doesn’t want to make their friend or relative pay the insurer.

Subrogation does not apply under Section II to medical payments to others or damage to property of others.

Related Court Case: Subrogation Upheld in Property-Liability Case

G. Death

If the named insured dies, the insurance company will insure the legal representative of the deceased. This insurance is limited to only the premises and property of the deceased covered under the policy at the time of death. This also applies to the death of the spouse of the named insured provided that spouse is a resident of the same household as the named insured.

If the named insured and/or spouse dies, the definition of insured could alter radically so in this section the term insured is changed. Whoever was a member of the named insured’s household at the time of the death is an insured but only while a resident of the residence premium. Also, whoever has temporary custody of the named insured’s property is an insured but only until the appointment and qualification of a legal representative.