HO 0004–AAIS CONTENTS BROAD FORM HOMEOWNERS ANALYSIS

(May 2024)

Collapsible Index

Agreement

Definitions

Property Coverages

Principal Property Coverages

Incidental Property Coverages

Perils Insured Against

Exclusions That Apply To Property Coverages

Liability Coverages

Principal Coverages—Liability And Medical Payments To Others

Incidental Liability Coverages

Exclusions That Apply To Liability Coverages

What Must Be Done In Case Of Loss Or Claim

How Much We Pay For Loss Or Occurrence

Payment Of Loss

Policy Conditions

Note: This analysis is based on the January 2008 edition of the form.

The homeowners program offered by the American Association of Insurance Services (AAIS) is simply and logically structured insurance document. Like its peers, the Contents Broad Form policy begins with a table of contents.

The table of contents that appears in this policy also appears above as this article’s index.

AGREEMENT

The policy's opening language states that the policy is subject to all of its terms and will provide property, liability and other insurance coverages that are described in the policy. These coverages are provided for a specific policy period. In return for this protection the named insured must pay a premium as required. Principal coverages apply only if a limit is shown for them on the declarations.

DEFINITIONS

The definitions section appears immediately after the Agreement.

1. You and Your

The person(s) who appear on the declarations as insured(s). The named insured’s spouse is also defined as you, but ONLY if he or she lives in the insured's household.

Note: Where possible, both spouses should appear on the declarations. If not, a non-resident spouse could be denied coverage under circumstances where coverage should actually apply.

2. We, Us, and Our

The company which supplies the homeowner's coverage.

3. Actual Cash Value

The amount it takes to repair or replace property, but that amount includes consideration of depreciation.

Note: The form does not address how depreciation is determined.

Related Court Case: Loss Settlement Delayed by Insurer – illustrates how a claim can be complicated due to ACV considerations.

4. Aircraft

This term is used only in the Liability section and refers to property made or used for flying. If a model aircraft and model hovercraft are not designed or used to carry people or cargo, they are not considered aircraft. Also, a hovercraft is not considered aircraft. This definition should be given greater thought due to the increased ownership of drones.

Example: Theresa has become very skilled in operating the drone she received for her last birthday. It is capable of carrying objects weighing up to 15 pounds. One day, she was flying the drone to a neighbor living across the street. It was carrying a six-pack of beer. The drone malfunctioned and the beer cans were released. They fell and seriously injured the neighbor’s child. Her insurer denied the loss.

5. Bodily injury

Actual or physical harm to a person. Harm includes sickness, disease, or death. Any required care and loss of services also qualifies as bodily injury. Unless a person has a physical injury first, there is no coverage for harm such as injury, illness or death that comes from an emotional or mental injury.

Example: The apartment building where Mary was living burned down in a terrible fire. At the time, Mary was pet sitting a friend’s dog and, sadly, the dog perished in the fire. Her friend is absolutely devastated and she had to seek treatment for severe depression. She sues Mary for the cost of her treatment. This treatment cost is not eligible as bodily injury.

6. Business

A trade, profession or occupation including farming, even if only occasionally practiced. This term includes the rental of property to others but does not include the occasional rental for residential purposes of the part of the covered location that is normally occupied solely by persons in the named insured’s household.

Note: If more than two roomers or boarders are involved, the exception does not apply.

If an insured receives money for an activity, it is considered a business. There are exceptions though. If an insured is caring for a relative, it is not a business even if money is exchanged. When an insured cares for a person, other than a relative, and, in exchange, receives like services, it is not a business.

Example: Jerry and Marnie are neighbors who trade services. Since Jerry does not own a washer-dryer set, Marnie does his laundry in exchange for Jerry cooking meals for Marnie, who hates cooking. While this is an exchange of services, a problem may arise if a loss occurs since they are not similar services.

Volunteer activities are also not a business even if the insured receives reimbursement for expenses. However, if compensation is provided, the activity no longer qualifies for an exception and the activity is considered a business. Other activities the insured may engage in are not considered business as long as in the 12-month period prior to the policy inception the total compensation for the particular activity did not exceed $2,500.

7. Declarations

This term refers to any document that is related to the homeowner policy and which may be called Declarations, Supplemental Declarations, or Schedule.

8. Described Location

A house (up to a four-family structure), townhouse or row house that is used by the insured for residential purposes provided it is described in the policy (schedule/declarations). The term also refers to related structures (such as garages, sheds, etc.) and grounds.

Private structures related to row houses and town houses qualify as described locations only if solely residential and used exclusively by the insured’s household.

Example: Melanie’s application for a tenant’s policy is rejected by an insurance company. She is renting a two-room unit within a home that was converted for use as a dental clinic.

9. Domestic employee

A person employed or leased under contract by an insured, to perform duties that are connected to the use and care of the described location such as a butler, housekeeper, or gardener. Included are persons who perform duties of a similar nature elsewhere for an insured provided the duties do not include business related functions.

A person who is furnished to the insured as a temporary substitute or to meet seasonal or short-term needs, is not a domestic employee.

10. Employee

Refers to a party who is employed in the business of an insured. The term includes persons who are hired via a labor leasing arrangement. The duties of such persons have to involve an insured’s business and not the residential or personal-oriented activities performed by a domestic employee.

11. Fungi

Any fungus (including but not limited to mildew and mold) as well as any substances released or created by such matter qualifies as fungi.

12. Hovercraft

This term is used only in the Liability section and refers to machines (including property called flarecraft) that are capable of traveling over the ground or water via the use of a compressed air cushion. The term does not apply to motor vehicles, aircraft, or watercraft. It also does not refer to models of hovercrafts, aircraft or watercraft that are neither designed nor used for moving people or property.

13. Insured

Insured is the person or persons named in the declarations (named insured) and that person’s relatives who live in the household. In addition, there are a number of persons who are insured based on conditions and circumstances:

· Relatives of the named insured who are under the age of 25, enrolled in school fulltime, are still financially dependent on the named insured and lived in the household prior to moving out to attend school

· Non-relatives of the named insured under the age of 21 who live in the household and are in the named insured’s care or in the care of a relative of a named insured who also lives in the household. These non-relatives are also covered while away from the household attending school full-time, provided they continue to be under the care of the named insured or a relative resident and had lived in the household prior to moving out to attend school.

Insured is further expanded but only for the Liability section of the policy:

· The named insured’s real estate manager but only within the scope of his or her duties that are related to the described location

· Any person employed by any of the insureds described in the first grouping of insureds is an insured but only for incidents involving a motorized vehicle that is covered by this policy. The insured status is limited to when that person is performing the duties for which he or she was employed.

· Any person that is using a covered motorized vehicle on the insured premises is an insured but only if the named insured had given that person permission to use the vehicle. The insured status applies only to liability resulting from the use of the vehicle.

· Other parties also qualify as insureds, but on a more limited basis. If a loss situation involves an eligible owned watercraft, golf cart or animal (usually a pet), coverage extends to persons/organizations that, with the insured’s knowledge/permission, have some related responsibility for the loss. This applies only if an insured, as defined in the first grouping of insured, owns the watercraft, golf cart or animal. The policy grants insured status for such parties but only to the extent that they are liable for injury or harm involving such insured property. This applies only if the insured gave permission for the watercraft, golf cart or animal use. Entities that are liable for watercraft or animal incidents are not insured if the use or control of either was business related.

Example: Rhoda rents the upstairs of a two-family home. The home is owned by Pete, a retiree. Pete helps Rhoda by walking her German Shepherd while Rhoda is working. One day, the dog pulls away from Pete, runs to and knocks down a child who was eating a burger. Later, the child’s parents send a bill to Pete for reimbursement for the child’s medical treatment. Pete would be eligible for coverage under Rhoda’s policy.

Finally, any policy reference to “insured” also applies to more than one person who qualifies for coverage.

14. Insured premises

The described location (as defined above) is an insured premises. In addition, any premises that is listed on the declarations as an insured premises and is used by the named insured as a residence is an insured premises.

A premises acquired during the policy term and that a named insured uses as a residence, is also an insured premises. Finally, if there are premises that are used by the named insured in connection with any of the above-described insured premises, they are also insured premises.

The next grouping of insured premises applies to insureds, not just the named insured.

Cemetery and burial plots of an insured, regardless of location, are insured premises. An insured’s temporary residence that is within a structure not owned by an insured and premises rented occasionally, for non-business reasons, to an insured qualify as insured premises.

Vacant land owned or rented to an insured, including land being developed to be an insured’s residence is an insured residence. However, vacant land and farmland is not the same. Farmland is not insured premises.

15. Limit

The policy merely defines this as the amount of insurance.

16. Motorized vehicle

Land or amphibious vehicles that are self-propelled are defined as motorized vehicles. Exceptions are hovercrafts, (actual or model) and watercraft (actual or model). In addition, any trailer or semitrailer attached to or carried on a vehicle described earlier is also a motorized vehicle even if it becomes detached. By model, it is meant to apply only to those that are incapable of moving either persons or goods.

17. Occurrence

There are three specific requirements for an occurrence. First, there must be an accident. This means that the incident(s) cannot have been planned. There can be repeated accidents and still be the same occurrence. Second, bodily injury or property damage must result from the accident(s). Last, the bodily injury or property damage must happen during the policy period.

18. Pollutant

Any solid, liquid, gaseous, thermal, or radioactive irritant or contaminant, including acids, alkalis, chemicals, fumes, smoke, soot, vapor, and waste. Also, electrical, magnetic, or electromagnetic particles or fields – visible or invisible plus sound.

Waste includes materials to be recycled, reclaimed, reconditioned as well as disposed of. This is a very broad definition.

Related Court Case: Candle Soot Excluded As Pollutant

19. Property damage

Physical injury or destruction of tangible property. It is also the loss of use of tangible property. The loss of use can apply even if the property has not been physically damaged.

20. Terms

Refers to any written policy components including exclusions, conditions, defined words, etc.

21. Vermin

Refers to a wide variety of creatures that tend to be ideal candidates as pests that damage property because of their tendency to infiltrate structures as a source for dining or housing. Policy examples include raccoons, possums, skunks, porcupines, snakes, armadillos, and bats but these are only examples.

22. Watercraft

This term refers to items that are designed for traveling over water, whether powered by engines, motors, or wind. There’s no reference to manually powered, small craft (such as canoes, rafts, or rowboats). The term does not apply to motor vehicles, aircraft, or hovercraft. The term also does not apply to models of hovercrafts, aircraft or watercraft that are neither designed nor used for moving people or property.

PROPERTY COVERAGES

PRINCIPAL PROPERTY COVERAGES

1. Coverage C—Personal Property

a. What is covered

The AAIS Contents Broad Form policy protects the following:

· Personal property that belongs to or property that, while not owned by an insured, is in the insured’s possession.

· (At the named insured’s option) personal property that belongs to guests, domestic workers, or other persons, but only when the property is in the same residence as an insured

Coverage for damage to personal property owned by a domestic employee or a guest may be covered at the option of the insured. Why is an insured given the option to allow coverage? One situation that comes to mind is the availability of other insurance and the seriousness of a given loss. If there were a very large loss, the insured may wish to have all available coverage for his or her own property. If there were no option, the loss to a guest or domestic employee could be reimbursed and leave a shortfall in coverage for an insured. Of course, the insured would likely consider whether the guest or employee had their own coverage available before exercising this option.

b. Limitation on Property at Residential Premises Other Than the Described Location

Under Coverage C, a maximum of 10% of the policy’s Coverage C limit subject to a minimum of $1,000 is available for losses involving an insured’s property that is typically located at a residence that is NOT described on the policy (therefore is not at a described location).

Example: Tammy likes her new apartment, but she previously was renting the upper level of a two-family home. With much less space, she has had to store nearly a third of her belongings in her parent’s basement. She has a limit of $36,000 under her new tenant’s policy. Unfortunately, that means that the stored property is only protected for a maximum of $3,600.

Note: There are exceptions. This limitation doesn’t apply to property that is being moved to a newly acquired, primary residence. Neither does it apply to property that is moved to another location (either another residence or into storage) because the described location is, temporarily, unfit for use (usually due to repairs, renovation, etc.). The full Coverage C limit applies for 30 days from the date the named insured begins to move. After that, coverage for personal property in a newly acquired principal place of residence is limited to 10%, subject to a $1,000 minimum of the Coverage C limit.

c. Coverage C—Limitations on Certain Property

Certain types of property are subject to sub-limits. The special limits that apply do not increase the Coverage C limit. The indicated limit is the total limit per occurrence for all items in that class.

1) $250 limitation

· Money

· Bank notes

· Bullion

· Gold other than gold ware and gold-plated items

· Silver other than silverware and silver-plated items

· Platinum other than platinum ware and platinum-plated items

· Stored value cards (including magnetic strip scrip and gift cards)

· Numismatic property (coins, currency, medals, and similar property)

Example: Mitch and Brenda come home from a weekend getaway to find their apartment was burglarized. Their contents policy had a limit of $36,000. They reported a loss of $4,200 consisting of:

$1,200 leather coats

$1,700 silver

$1,300 appliances

All of the possessions were new as they were acquired after their recent marriage. They receive a check for $2,750 since a maximum of $250 applied to the $1,700 silver loss.

2) $1,500 limitation

· Securities

· Stamps

· Letters of credit

· Notes other than bank notes

· Personal records

· Tickets

· Accounts

· Deeds

· Evidence of debt

· Passports

· Manuscripts

Note: This special limit applies regardless of the medium on which these items exist and includes the cost of research or other expenses necessary to reproduce, replace, or restore the item.

3) $1,500 limitation

· Electronic devices

· Accessories including films, tapes, wires, discs, records, or other media for use with such devices

· Antennas

Note: This limitation on electronic devices and accessories applies while the devices are in or on a motorized vehicle or watercraft but only if they can operate from the vehicle or watercraft’s electrical system and also from another source of power.

4) $1,500 limitation

· Electronic devices

· Accessories including films, tapes, wires, discs, records, or other media for use with such devices

· Antennas

Note: This limitation on electronic devices, accessories and antennas applies only if the items:

1. Are used away from the premises;

2. Are used mainly for business purposes; and

3. Are not in or on a motorized vehicle or watercraft if the devices can operate from the vehicle or watercraft’s electrical system and also from another source of power.

5) $1,500 limitation

This limitation applies to watercraft, including their trailers, furnishings, equipment, engines or motors and semi-trailers. This limitation is inapplicable to hovercraft or to model watercraft as long as the models are not designed to carry cargo or people.

6) $1,500 limitation

Trailers and semi-trailers not mentioned above are subject to this limitation.

7) When the loss is due to THEFT

· $2,500 for loss to:

o Jewelry

o Watches

o Precious and semiprecious stones

o Gems

o Furs

· $2,500 for loss to:

o Silverware

o Gold ware

o Pewter ware

o Items plated with gold or silver

· $2,500 for loss to guns (and related equipment)

INCIDENTAL PROPERTY COVERAGES

The Contents Broad Form homeowner policy includes a number of coverages that are in addition to the protection described under Coverages A, B, C and D. They are called incidental coverages since they are not part of the primary coverage parts. While the amount of insurance indicated for these incidental coverages is in addition to the limits of insurance shown for Coverages A, B, C and D, there are several instances where the amount of recovery is quite limited.

1. Association Deductible

The Contents Broad Form policy provides up to $1,500 per occurrence (unless increased on the declarations), for the named insured’s share of a deductible made by a residential association of homeowners, condominium owners, or similar groups. Coverage applies only when all of the following apply:

The deductible is charged against the named insured because of ownership or tenancy of the described location during the policy period;
The deductible involves direct loss to the property that would be considered covered property under this policy, if owned by the named insured or is covered property under the named insured’s association insurance;
The loss involves direct damage that is due to a peril covered under this policy (earthquake and tremors before, during and after a volcanic eruption are specifically NOT covered)

Finally, the Policy Period condition does not apply to this coverage.

Example: Melinda rents a home located in Tres Great Landings. She had a contents broad form homeowner policy from Big Sky Mutual that expired on October 10. She replaced that coverage with Unspoken Calamity Property and Casualty. On October 7, a storm demolished the gatehouse at the entrance to the development. On November 9, Melinda, along with the rest of the homeowners, received a notice from the Tres Great Landings Homeowners Association, charging her $469 as the portion of the deductible that applies to the gatehouse (per that agreement, the legal responsibility for such charges belong to tenants when a home is rented out). Although the deductible charge was made on November 9, Big Sky Mutual covered the deductible.

2. Collapse

Note: A mandatory Amendment of Policy Terms endorsement has changed this item.

a. There is coverage for direct physical loss to covered property involving the collapse of a building or a part of a building only if caused by one or more of the following:

· Any of the perils described under the Contents Broad Form Policy’s “Perils Insured Against” section. The protection, naturally, applies to covered personal property.

Example: A wall collapses in the apartment building where Fred lives. All of the contents of his living room are destroyed and he turns in a claim for $4,300 (under a contents policy with a $36,000 limit). His insurer pays him $3,100, rejecting the portion of his claim that involved merchandise from his home business.

· Hidden insect or vermin damage or hidden decay*

· Weight of contents or people (also animals)*

· Weight of rain pending on a roof*

· Failure of defective materials/methods during a construction or repair job*

Note: Collapse damage caused by the items with an asterisk above that involve the following property is not covered unless the damage is the direct result of the collapse of a building and none of the following property is considered building even if they are attached to a building:

Awnings	Docks	Foundations	Retaining walls
Bulkheads	Drains	Patios	Swimming pools
Cesspools, or septic tanks	Fences	Paved areas	Underground pipes
Decks	Flues	Piers	Wharves

In other words, the damage has to be due to a building, affected by one of the items with an asterisk, collapsing on top of the listed property. Further, with regard to collapse triggered by insect/vermin activity or due to decay, coverage does not apply if a named insured either knew of or should have been aware of such problems. Having such knowledge transforms these incidents from accidents to maintenance issues.

b. Collapse must be due to any of the following and it must be abrupt:

· Caving in

· Falling in

· Falling down

· Giving way

of the building (not the structures listed above) or a part of the building. The building must become uninhabitable or unusable because of the collapse.

A building is not considered to have collapsed in the following situations:

· No collapse has occurred but the building (or even part of the building) looks like it could collapse because it is showing signs of collapsing such as bulging, leaning, settling and similar conditions.

· The building or any part of the building is considered in danger of collapsing

· Part of the building that has broken or separated away from a part of the building but has not yet collapsed.

Important: Nothing stated above limits coverage under a direct loss covered by a Coverage C peril. The policy’s Bacteria, Fungi, Wet Rot, Dry Rot exclusion is inapplicable to this provision.

This coverage provides additional coverage but not additional limits.

PERILS INSURED AGAINST

COVERAGES C AND D

This section of the policy lists the perils which are insured. The policy coverage applies only when a listed peril physically damages property described under Coverages C. The coverage exceptions are explained under the Exclusions That Apply To Property Coverages section. Although not mentioned in the introduction to this section, the listed perils must also be the cause for any claim for indirect loss (Coverage D).

Related Article: Dwelling Policy Program Perils

The eligible perils are:

a. Fire or Lightning

b. Windstorm or Hail

Note: Under certain circumstances, there is no coverage for loss to either of the following:

· When damage to the interior or to the interior’s contents caused by dust, rain, sand, sleet, snow, or water, driven by wind or not, that enter through an opening in the structure not made by the direct force of wind or hail; or

· Damage to watercraft or their trailers, furnishings, equipment or engines or motors, unless inside a fully enclosed building.

Naturally, an insurer wants its insureds to use common sense and protect their property. If the first stipulation didn’t exist, then coverage would be available for losses that could be prevented by closing doors, windows and by moving personal property indoors.

Related Article: Windstorm or Hail—A Discussion

c. Explosion

Related Article: Explosion—A Discussion

d. Riot or Civil Commotion

Related Article: Riot or Civil Commotion—A Discussion

e. Aircraft

Spacecraft and self-propelled missiles are included under this peril.

Example: Joe comes home to his apartment, dead tired from a double-shift at work. Just as he leans over to pick up a remote, he notices that his living room table and large screen TV have been obliterated by a charred lump of small aircraft engine which has crashed through his ceiling. This loss is eligible for coverage under the aircraft peril.

f. Vehicles

Note: Vehicle damage to fences, driveways, or walks that is caused by a vehicle that is owned or operated by an occupant of the described location is excluded.

Clarification: Even though such losses would likely be accidents, the point of the exclusion is to protect a company from unacceptable exposure. An insured property’s occupants are constantly driving to and from their home. Without the coverage exception, companies would have to pay for many nuisance losses when fences, curbs, etc., receive their dents and dinks from inattentive occupants, not to mention their exposure to a household’s new drivers.

g. Sudden and Accidental Damage from Smoke

There is coverage when boiler, furnace or related equipment release fumes, smoke, and soot or vapor causing sudden and accidental damage. However, there is no coverage for loss caused by smoke from agricultural smudging or industrial operations. Both of these sources of loss result from a home’s proximity to an operation or practice that is longer term and intentional in nature. Agricultural smudging is the practice of creating an oily smoke to cover fruit and fruit trees in order to protect them from frost.

h. Volcanic Eruption

This does not include any loss caused by earthquake or other shock waves or tremors.

i. Vandalism or Malicious Mischief

A coverage exception is made to exclude vandalism or malicious mischief loss to property on the described location if the residence is vacant for more than 60 days in a row just before the loss. However, a residence that is being built is not considered vacant.

Example: Principal Hardnose lives only a few blocks away from his job at Strictly Ruled High School. Principal Hardnose is not very popular, so no one was surprised when, one August night during the Hardnose family vacation, some unknown party bombarded his home with bottle rockets. The rockets severely scarred the home’s exterior woodwork and several windows were smashed. The rockets that crashed through the windows damaged some interior walls and floors:

Scenario 1: The vandalism damage was covered because the Hardnoses were away on their annual two-week vacation.

Scenario 2: The vandalism damage was not covered as the Hardnose Family moved their furnishings out of the house and it lay vacant while the family was on a three-month, out-of-state sabbatical and the loss occurred in the 3rd month of their absence.

The above exclusion of vandalism coverage when the residence is vacant for 60 days or more also extends to acts that follow (ensue) from a deliberate act related to the vandalism and/or malicious activity.

j. Theft

This peril expands the term to include attempted theft and loss of property from a known place so that it is likely that theft occurred.

Note: There is no coverage for any of the following:

· Theft in or to a residence while it is being built. This includes the theft of materials or supplies that are intended to be used in the construction of the residence. This exception applies until the residence is occupied for its intended use

· Theft by an insured

· Loss of a precious or semiprecious stone from its setting

· Loss as a result of the theft of a credit or debit card or other electronic transfer or access devices, except as provided under Incidental Property Coverages

· Theft from a part of the described location while it is rented to others who are not considered insureds

Example: Sharla’s one of the few folks living in the host city that is NOT excited by the Big Game. Since she lives less than a mile from the stadium, she decides to rent out her apartment and spend that week with relatives. She later is upset to find that she can’t be reimbursed from the disappearance of a TV, laptop and other property she discovers after her renter has left.

· Theft of trailers, semi trailers, campers, camper bodies, watercraft or their furnishings, equipment, or engines or motors when not at the described location.

· Theft of property that occurs away from the described location while on a residential premises which an insured owns, rents, or occupies. There are two exceptions. Theft coverage does apply when an insured is only temporarily residing. Theft coverage also applies for the property of an insured that is a full-time student, while the property is in the living quarters occupied by the student at school. However, the exception does not apply if, before the loss, the student has been away for 60 or more days from that location.

k. Falling Objects

There is no coverage for loss to property inside a structure, unless the falling object has first damaged an outside wall or the roof of the structure by impact; nor is there coverage for the object which falls.

Example: An old tree is next to the apartment where Lenny lives. One day a major limb breaks off, crashes through the apartment building roof, demolishing Lenny’s bedroom, and most of its furnishings. Lenny’s loss is covered under this provision.

l. Weight of Ice, Snow, or Sleet

There is coverage when it causes damage to property inside a structure. However, this peril excludes damage to items that, normally, do not belong to a tenant such as awnings, fences, paved exterior surfaces, swimming pools, foundations, docks, wharves, or piers.

m. Sudden and Accidental Tearing Apart, Cracking, Burning, or Bulging

This coverage refers to accidental, violent loss to a heating, air conditioning, or automatic fire protective sprinkling system or water heater. This cause of loss does not respond to damage involving freezing.

n. Accidental Discharge or Overflow of Liquids or Steam

This protection is quite limited since it only responds to discharge and overflow from a plumbing, heating, air conditioning, or automatic fire protective sprinkling system; water heater; or domestic (rather than a commercial-oriented) appliance. Losses involving sumps, sump pump, roof drains, gutters and related equipment are not covered. Further, the following situations are also excluded:

Caused by continuous or repeated seepage, leakage or condensation over weeks, months or even years. There is coverage if an insured could not have reasonably suspected the situation to exist.

Caused by freezing
Damage to both the system and the particular appliance from which the water or steam escaped
Caused by accidental discharge or overflow that originates away from insured premises.

Example: Abby returns home to her basement apartment and finds it flooded. It turns out that the cold-water feed line to her kitchen faucet broke and water sprayed out for several hours. An investigation shows that the line was weakened by being struck by the edges of metal trays that Abby stored in the cabinet that enclosed the kitchen sink. This loss would be eligible for coverage. However, this provision would not include the damage to or the cost of replacing the broken water line.

o. Freezing

This involves situations of damage from frozen house utility systems or regular appliances. If a fire-fighting system is installed in an insured home, damage caused by a frozen sprinkler system is included. Coverage is excluded for any loss on the insured premises unless an insured does of the following:

Maintain heat in the building
Shut off the liquid supply and drain the system, heater, or domestic appliance (when no water-driven anti-fire system exists)
Maintain the water supply (when a water-driven anti-fire system DOES exist)

Parts of the policy’s subsurface and surface water exclusion do not apply to this particular coverage.

p. Sudden and Accidental Damage from Artificially Generated Electrical Currents

This peril is restricted by eliminating coverage for loss to tubes, transistors, and similar electronic features that are components of appliances, computers, home entertainment centers and similar items.

Note: This could create a significant coverage gap for newer or retrofitted homes with increasingly complex, integrated electronics, such as Smart homes, especially since circuitry within the apparatus is not covered.

q. Sinkhole Collapse

In this policy, this term means direct physical loss caused by sudden settlement or collapse of earth that forms the support for covered property. The earth settlement or collapse must be due to subterranean voids created by the action of water on a limestone or similar rock formation. This source of loss is distinct from an event called Mine Subsidence when earth settlement or collapse occurs due to active or abandoned mines.

Important: There is no coverage for the cost of filling sinkholes.

EXCLUSIONS THAT APPLY TO PROPERTY COVERAGES

This section of the Contents Broad Form policy lists the sources of property loss that ARE NOT covered by the policy. The current language strengthens the anti-concurrent causation intent by stating that if any of the following perils cause loss or damage directly or even indirectly, there is no coverage. The loss or damage continues to be excluded even if other events aggravate or contribute to the loss before, after or during the excluded peril. In addition, the exclusions apply no matter how large or small the damage area is.

a. Ordinance or Law

There is no coverage for any loss or increased cost caused by the enforcement of a code, ordinance, or law that regulates the use, construction, repair, or demolition of property or the removal of its debris, except as provided under Incidental Property Coverages. This exclusion extends to any loss in value of any damaged property that results from the enforcement of a code, ordinance, or law.

This exclusion has another important limitation. No coverage is provided for damages or expenses that are related to legal requirements involving the existence or impact of pollutants.

b. Civil Authority

If the civil authorities confiscate, destroy, or seize property that is covered under Coverages A, B or C, there is no coverage. (There is coverage under Coverage D.) However, if the civil authority is destroying the property as a way to create a fire stop, the loss is covered, provided the fire would have been covered by the policy.

Note: Both a. and b. are items that are not a particularly high exposure to tenants, with the exception of tenants with substantial investments in improvements or betterments.

c. Nuclear Hazard

If nuclear reaction, radiation, or radioactive contamination causes a loss, such loss is not covered no matter how the nuclear reaction, radiation or radioactive contamination is caused and whether it occurs in a controlled or uncontrolled circumstance. Any loss that is a consequence of the above is also not covered. Fire, explosion, and smoke often are part of a nuclear incident, but even if these perils are covered under the policy, when they occur as part of a nuclear reaction, radiation, or radioactive contamination loss, they are not covered.

There is one exception. If there is a direct loss by fire that is a result of the nuclear reaction, radiation, or radioactive contamination, it is covered.

d. War and Military Action

War is an absolute exclusion, including undeclared wars and civil wars. Warlike action taken by a military force is not covered even if the action is one of defense by a governmental authority and not offense. There is also no coverage if a loss is caused by internal domestic disputes such as insurrection, rebellion, revolution, and usurped power including the action the government takes to curtail the event. The discharging of a nuclear weapon, intentional or accidental, is defined as a warlike action.

e. Neglect

Insurance policies are contracts that obligate an insurance company to help a customer whose property is damaged or destroyed under described conditions. Insurance contracts are meant to respond to accidental loss so, inherent in the agreement, is the assumption that the insured will act to preserve or protect their property. In case an insured doesn’t act in this manner, the insurer is relieved of any obligation to pay for any damages caused by the insured’s failure. Of course, an insured is not required to go through heroic efforts to save property.

Example: Abby returns home to her basement apartment and finds it flooded. It turns out that the cold-water supply line to her kitchen faucet broke and water sprayed out for several hours. An investigation shows that the line was weakened by being struck by the edges of metal trays that Abby stored in the cabinet that enclosed the kitchen sink. Abby has the broken line repaired, but she’s been crazy busy at work, so she arranges to stay at her boyfriend’s home for a week before reporting the claim. Her insurer denies her payment for substantial, additional damage caused to her property because she failed to attempt to dry out and salvage any of her possessions.

f. Earth Movement

Note: A mandatory Amendment of Policy Terms endorsement has changed this item.

The policy excludes losses due to earth movement no matter how the earth movement is caused – animal, human or act of nature. There are five distinct items included in the definition of earth movement.

Earthquakes
Volcanic eruption shock waves or tremors no matter when they occur
Mudslide or mudflow and landslide
Erosion and subsidence
Other – including but not limited to the earth sinking or rising, expanding, or contracting and even just plain shifting.

There are three exceptions. Sinkhole, as described in the Incidental Property Coverages, direct fire or explosion loss that result from any type of earth movement, and theft, if theft is covered elsewhere in the policy.

g. Water

Under this exclusion, the HO 00 04 Tenants Broad Form policy excludes a wide array of loss involving water.

1) There is no coverage for damage that results from flood, surface water, waves (including tidal wave and tsunami), tides, tidal water, overflow of a body of water, or spray (which occurs from any of the sources mentioned above), driven by wind or not. Further, coverage is excluded for loss if caused by water surge due to storm, tides or a tide created by a storm (storm tide).

2) There is no coverage if a loss is caused when:

a) water backs up through sewers or drains or

b) water overflows (or is in anyway discharged) from within a sump pump, sump pump well, or other type of system designed to remove subsurface water that is drained from the foundation area.

Note: The reference to DISCHARGED water is intended to defeat attempts to gain coverage from, essentially, technicalities.

3) If water below the surface of the ground causes the loss there is no coverage. This term includes (but is NOT restricted to) water that exerts pressure on, or seeps or leaks through or into a building, sidewalk, driveway, foundation, swimming pool, or other structure. It also applies to such water that flows through or into such areas/structure.

Example: Jeremy rents a basement apartment in the home of an old college friend. His friend’s home includes an in-ground pool. The basement is flooded by water that escaped when the liner of the poorly maintained pool cracks. The water forced its way into the home’s basement, ruining most of Jeremy’s property. The loss is excluded by his policy.

4) When a loss is caused by matter that is either contained in and/or has been transported by sources described in paragraphs 1), 2) and 3) above, there is no coverage. The matter is not defined but examples could be sewage, waste, or any other type of debris.

5) The losses caused by items discussed in 1) through 4) are not covered regardless of whether the item:

a) is an act of nature

b) involves water and/or matter that comes from (overtops, escapes from, released from or otherwise is discharged) a containment or control system (such as dikes, dams, levees, floodgates, and similar devices).

6) While the above (and similar) events are excluded, an exception is made for direct loss to covered property caused by a subsequent fire or explosion

7) Another exception is granted for theft that is related to such occurrences mentioned above (as long as the applicable policy provides theft protection elsewhere in the policy).

Example: A creek that flows through the neighborhood near Betty’s apartment building swells past flood stage due to several days of heavy rain. City authorities mandate that the neighborhood be evacuated. Shortly after flood waters reach her apartment building, looters ransack the upper-story apartments. Betty’s loss is eligible for coverage.

h. Power Failure

The policy does not respond to damage caused by a failure of utility service unless the cause occurs on the described location, but the policy will cover any direct damage due to a subsequent covered peril.

i. Intentional Acts

The policy does not cover intentional acts of any insured that acts alone or in collusion with another that results in a loss. The exclusion extends to losses resulting from intentional acts committed by persons acting on the directions of any insured.

Note: Not only must the act be deliberate, but also the intent must be to cause a loss.

Example: After placing a very large bet on a championship basketball game, Flora is enraged when the team she bet on loses at the last second. She kicks over her T.V. and destroys a table and an oak shelf. She turns in a claim for the loss and, later, is further enraged when she discovers the loss is not covered.

When one insured intentionally damages property that is owned or co-owned by another insured, all insureds are barred from collecting payment of that loss. Innocent insureds are not exempt from a clear policy exclusion.

j. Bacteria, Fungi, Wet Rot, or Dry Rot

The policy does not cover loss involving mold, bacteria, and similar substances. Neither does it respond to circumstances that directly create rotted property. If, somehow, rotting, or bacterial mold and similar events trigger a loss from an eligible hazard or peril (source of loss), that damage is eligible for coverage.

LIABILITY COVERAGES

Principal Coverages—Liability and Medical Payments to Others

Unlike the first part of the policy, which concerns itself with damage to property belonging to the insured, this part provides protection for a person’s responsibility for injuring other people or their property. The liability portion of the policy has its own set of coverages, exclusions (with exceptions) and conditions.

1. Personal Liability—Coverage L

Note: A mandatory Amendment of Policy Terms endorsement has changed this item.

The insurer is obligated, up to the limit shown on the declarations, to pay the amounts for which an insured is legally liable because of bodily injury or property damage to others. However, any payment under Coverage L—Personal Liability is subject to all of the following:

· Any loss has to arise out of an eligible occurrence

· The loss has to occur within the policy period

· The bodily injury or property damage must not be excluded under this coverage.

Example: Welcy is late for meeting her cycling club for their annual “Rider’s Round-up.” As she rushes down her apartment stairs, she slams into her neighbor climbing the stairs with groceries. Her neighbor needs stitches for cuts to her face and legs and treatment for a broken arm. Welcy’s policy will handle her neighbor’s subsequent lawsuit for her injuries.

The insurer has the option of investigating and, IF the insurer decides it is appropriate, settling claims or suits. It is also the insurer’s choice regarding who, if anyone, handles the legal defense. In recent years, this insurer right has been causing some controversy as, in certain disputes, a lawyer selected by (or often working as an employee) the insurer is seen as being an advocate of the insurer and not the insured.

The insurer does not have to continue defending an insured after it has paid a judgment or made a settlement that is equal to the limit shown on the declarations.

2. Medical Payments to Others—Coverage M

Under this coverage, the insurer agrees to pay for necessary medical expenses, which are related to an eligible loss that involves bodily injury. Medical expenses refer to a reasonable (as determined by the insurer) amount for medical, surgical, x-ray, dental, ambulance, hospital, and professional nursing services. It also covers items such as funeral services; prosthetic devices; hearing aids; prescription drugs; and eyeglasses or contact lenses.

Example: Let’s return to Welcy injuring her neighbor. The neighbor receives a bill for the injuries mentioned before. She then sent a note to Welcy asking to be reimbursed for her deductible as well as the remainder that is not handled by medical insurance. Welcy’s policy will respond to these expenses.

In order to qualify for coverage, the expense must be incurred or medically determined within three years from the date of an accident-causing bodily injury covered by this policy.

Medical payment coverage is provided for situations that occur either on, or away from, the insured premises. While on the premises, the injured party merely needs to be on the premises with an insured’s permission. In order to qualify for coverage while away from the premises, the bodily injury must:

· Result from a condition on an eligible location

· Result from an activity of an insured

· Be caused by a person who is performing duties as a domestic employee

· Be caused by an animal owned by or in the care of an insured

The above elements are independent of each other. Meeting any single element may qualify an injury for medical payment coverage.

Note: There is no coverage for medical payments for the named insured or for any regular resident of the named insured’s household. However, there is coverage for domestic employees.

Incidental Liability Coverages

The policy includes eight incidental liability coverages and they are subject to all of the terms which apply to principal coverages L—Personal Liability and M—Medical Payments to Others.

Note: These incidental liability coverages do not increase the limits of liability, except under the following:

· Damage to property of others

· Claims and defense costs

· First aid expense

· Loss assessment

1. Business

The Contents Broad Form policy provides some very limited coverage for bodily injury or property damage related to a business use of the insured premises. Specifically, coverage is granted for such injuries or damage created by two types of business activities:

a. The following types of rental activities are covered:

· The occasional rental, as a residence, of the insured premises that is usually occupied by the person appearing on the declarations,

· The rental of other parts of the insured premises for use as a residence as long as no one family unit includes more than two roomers or boarders, or

· The rental of a part of the insured premises for use as a school, studio, office, or private garage.

Examples: The Fernduds rent a single-family residence that is located near a large college. As permitted by their landlord, for the last several years they rent out the home to a group of alumni who attend homecoming. The renters are six former alumni who belonged to the same dorm. They use the house for partying off-campus. Should a loss occur, this situation might get complicated since it could challenge what might be meant as “occasional.”

b. The policy also covers business activities involving younger members of an insured household. Businesses run by persons younger than 21 are eligible for coverage as long as the activity does not include employees and that any loss is related to the activity.

Note: Exclusion g., under Exclusions that Apply to Coverage L and Coverage M, does not apply to this Incidental Liability Coverage. Also note that the business activity coverage is subject to the additional exclusions listed under Coverage L and the additional exclusions listed under Coverage M.

2. Claims and Defense Cost

Note: A mandatory Amendment of Policy Terms endorsement has changed this item.

In a defense action, the insurance company will pay all of the following:

The costs that are taxed to an insured and the costs incurred by the insurance company
The premiums on bonds but only on the amount of the bond that is within the limits in the policy. The insured is responsible for the premium of the bond limits in excess of the policy limits.
The necessary costs incurred by the insured at the request of the insurance company including an insured’s lost earnings caused via time spent away from work (subject to a $250 daily maximum)
The interest accruing on the entire judgment amount following its award. Once the insurance company deposits its policy limits with the courts, it stops paying such interest even if the limits did not satisfy the entire judgment
The portion of prejudgment interest levied against the insured up to the insurers limits. Once a full limits offer is made, the insurer will no longer pay this type of interest.

3. Contracts

There is coverage for damages for bodily injury or property damage under a written contract if either of the following apply:

· The contract directly relates to the ownership, maintenance, or use of an insured premises

· The contract where the liability of others is assumed by an insured was made before the loss

Example: Harvey enjoys his privacy. After a long negotiation, Harvey gets permission to rent a small home and to install a tall privacy fence. One day a jogging neighbor is seriously injured when she trips on a raised, cement fencepost anchor. Harvey’s insurer handles the loss since his rental agreement makes him responsible for losses related to the fence.

The loss causing the bodily injury or property damage must take place during the policy period. Exclusion c., under Additional Exclusions that Apply to Coverage L does not apply to this Incidental Liability Coverage. The other Coverage M and Coverage L and M exclusions still apply to contracts.

4. Damage to Property of Others

This coverage is often called voluntary property damage. Its purpose is to handle smaller losses without being concerned about an insured’s legal liability. Under this provision, the insurer will pay replacement cost for property damaged by the insured without regard to legal liability.

Example: Judy Songluv is celebrating the Grammy awards presentation by throwing a huge party at her home. As part of the festivities, she borrows PA equipment from a musician friend so she and her guests can perform karaoke. During the party, Judy is in a hurry to get from her kitchen back to her living room. She trips and falls against a speaker stand. The stand and speaker tip over and the speaker hits the floor and bursts into pieces. The policy should cover this loss up to the coverage limit.

Note: The limit for this coverage is $1,000 (per each eligible incident).

The exclusions that apply to coverages L and M aren’t applicable to this coverage. However, there are certain circumstances under which the insurance company will not pay for damage to property:

a. If the property is covered under the property section of the policy. However, if the property section limit does not satisfy the loss, this coverage will pay the excess up to the limit of the coverage.

b. If the property is owned by an insured, or owned by, rented to, or leased to another resident of the named insured’s household or by a tenant of an insured.

c. When the loss is caused intentionally by an insured that has reached the age of 13

d. Involving an insured’s business activities or a premises owned, rented, or controlled by an insured other than an insured premises

e. When the loss arises from the ownership, operation, maintenance, use, occupancy, renting, loaning, entrusting, supervision, loading, or unloading of motorized vehicles, aircraft, hovercraft, or watercraft.

Example: Adam and the Playersums are neighbors in an apartment complex. Adam, a recent college grad, is friends with the Playersums’ teenaged son, Joey. Adam lets Joey use his moped. Joey loses control while riding through the complex’s parking lot and he strikes another tenant. Adam’s policy will NOT cover this loss.

There are two exceptions. Property damage that arises from motorized vehicles not owned by the insured and which are meant for recreational off-road use or handicap assistance is covered. There is also coverage if the nonowned vehicle is a service vehicle for the insured premises or for nonbusiness purposes at another premises. However, these exceptions apply only when the vehicles are not required to be registered by a governmental authority.

5. First Aid Expense

If the insured incurs first aid expenses caring for persons injured by bodily injury under the policy, the insurance company will pay for those expenses provided the persons are not insureds under the policy.

6. Loss Assessment

There is coverage for the named insured’s share of an assessment made by his or her homeowners, condominium, or similar residential association if the assessment is due to either of the following:

· Bodily injury or property damage eligible for insurance under Coverages L and M of this policy

· Damages or legal fees the association has a legal obligation to pay for the acts of a director, officer, or trustee but only if they result from the exercise of his or her duties performed on behalf of the association. These individuals must be elected by the association and serve without compensation.

There is no coverage if the assessments charged against the named insured are due to a requirement by any governmental body or authority upon the residential association.

Example: An insured lives in a large apartment complex. The complex’s tenant’s association levies an assessment of $430 per tenant. The assessment is to cover the medical expenses of a child who was injured when tripping over a speed bump that had just been installed in the complex’s parking lot. This instance would be covered by the Contents Broad Form homeowner policy.

Also, coverage is barred if the assessment involves property other than what appears as the described location.

Coverage applies if the assessment is made during the policy period. This means that coverage is based not on the occurrence of the loss that causes the assessment but, instead, is based on the timing of the assessment charge. As a way to prevent confusion, the Policy Period condition of the liability section does not apply to this coverage.

The limit for this coverage is $1,500 per occurrence. Regardless of the number of assessments, this limit is the most that will be paid for either of the following:

· A single accident, including repeated exposures to similar conditions

· A particular act of a director or trustee. (An act involving more than one director or trustee is considered a single act.)

7. Motorized Vehicles

a. This very long, complex provision concerns the policy’s limited-basis coverage for bodily injury or property damage that is a result of the ownership, maintenance, use, loading, or unloading of the following:

· A motorized vehicle that is in dead storage and is at the insured premises

This exception is granted because such vehicles represent a premises rather than an auto exposure.

· A motorized vehicle that services the insured premises provided any occurrence takes place on an insured premises. Insured premises in this case does not include premises that are used by the named insured in connection with other insured’s premises. It also does not include cemetery lots or burial vaults.

· A motorized vehicle designed only for off public roads use and is used to service the insured premises or premises of another

· A motorized vehicle that assists a handicapped person

· A motorized recreational off-road vehicle that is not owned by an insured but is used by an insured (not required to be on premises)

· A motorized recreational off-road vehicle that is owned by an insured provided any occurrence takes place on an insured premises but not a connected premises to the insured premises or a cemetery lot or burial vault

· A battery operated, very low speed (15 m.p.h. or less) motorized vehicle that is not a motor-driven bike, moped or golf cart

· A motorized golf cart owned by the insured and not designed to seat more than four persons, nor designed to exceed a speed of 25 m.p.h. but only if the occurrence takes place at one of the following:

o At a golf club or similar establishment and the cart is being stored or parked or is being used by an insured in a manner appropriate for the golf club – on the marked paths and in accordance with club rules. Coverage continues if the cart must travel across public roads but only if traveling where marked and to other parts of the golf club.

o A residential community where golf carts are allowed on the public roads, the community has a property owners association and the insured premises is located within the community.

b. This provision’s wording reiterates that any coverage is barred if, at the time of a loss, the applicable vehicle is subject to registration because it is designed for public road use in order for it to be used at the described location. Coverage is also barred, if the vehicle is part of a speed or performance contest, if it used in business (exception exists for golfing), is rented to others or if an insured is compensated for using the vehicle to transport anyone or anything.

c. Exclusion c. and e. under Exclusions that Apply to Coverages L and M do not apply to this Incidental Liability Coverage and exclusion g. also does not apply but only for golf carts being used at golfing establishments. The other exclusions applicable only to Coverage L and that apply only to Coverage M still apply to motorized vehicles.

8. Watercraft

a. There is coverage for bodily injury or property damage resulting from the maintenance, use, loading, or unloading of watercraft if any of the following apply:

· It is in storage

Example: Jenny rents a home and, included in her agreement is the full, exclusive right to use a pole barn to store her 20-foot outboard motorboat. One day she lets her neighbor’s daughter play on it. Unfortunately, the child slips and falls while attempting to climb off the boat. She suffers severe cuts and a fractured leg. Jenny’s policy will respond to the loss.

· It is less than 26 feet and a sailing vessel

· It is powered by outboard engines of 25 horsepower of less

· The watercraft is not owned by an insured and it is powered by inboard or inboard/outboard engines or motors totaling 50 horsepower or less.

· The watercraft is not owned or rented by an insured; there is coverage under either of the following:

o It is a sailing vessel with or without auxiliary power over 26 feet

o It is powered by inboard or inboard/outboard engines or motors totaling more than 50 horsepower

· When a watercraft is powered by outboard engines or motors that total more than 25 horsepower there is coverage under any of the following circumstances:

o The engines or motors are acquired by an insured prior to the policy period and they are listed on the declarations as insured for personal liability, or if a request for liability coverage is made within 45 days after they are acquired

o The engines or motors are acquired by an insured during the policy period

o The engines or motors are not owned by an insured.

In other words, coverage is restricted to loss situations involving watercraft owned by an insured as long as it is not in active use or is low risk (small, minimally powered craft), or loss situations involving slightly more powerful craft, which is not owned by an insured.

b. This provision’s wording reiterates that any coverage is barred if, at the time of a loss, the applicable craft is part of a speed or performance contest (exception for sailing vessels participating in either a cruise or predicted log contest), if it is rented to others or if an insured is compensated for using the vehicle to transport anyone or anything.

c. Exclusions c. and e. under Exclusions that Apply to Coverages L and M do not apply to this Incidental Liability Coverage. The other exclusions applicable only to Coverage L and that apply only to Coverage M still apply to motorized vehicles.

Exclusions That Apply To Liability Coverages

1. Exclusions That Apply To Coverages L (Personal Liability) and M (Medical Payments to Others)

This policy does not apply to:

a. bodily injury or property damage caused by war or warlike situations including:

undeclared war	civil war
insurrection	rebellion
revolution	warlike act by a military force or military personnel
destruction, seizure, or use of property for a military purpose	discharge of a nuclear weapon (even if accidental)
defense or hindering of hostilities by a military force

b. bodily injury or property damage resulting from an insured owning or leasing an aircraft or hovercraft. There is also no coverage for any person who operates, maintains, uses, occupies, loads, or unloads an aircraft or hovercraft. In addition, if an insured entrusts or loans a hovercraft or aircraft to a person, there is no coverage. Finally, there is no coverage for the insured’s negligence or nonexistent supervision of a person as respect to an aircraft or hovercraft. This exclusion does not apply to bodily injury that may occur to a domestic employee of the insured if the injury occurs in the course of that employee’s duties.

Remember that based on the definition of aircraft and hovercraft, models are covered provided they are not designed to carry cargo or people.

c. bodily injury or property damage resulting from an insured owning or leasing a motorized vehicle or watercraft. There is also no coverage for any person who operates, maintains, uses, occupies, loads, or unloads a motorized vehicle or watercraft. In addition, if an insured entrusts or loans a motorized vehicle or watercraft to a person, there is no coverage. Finally, there is no coverage for the insured’s negligence or nonexistent supervision of a person as respect to a motorized vehicle or watercraft. This exclusion does not apply to bodily injury that may occur to a domestic employee of the insured if the injury occurs in the course of that employee’s duties. This exclusion also does not apply in situations where the policy’s Incidental Liability Coverage provides coverage for Motorized Vehicles or Incidental Liability Coverage for Watercraft.

Example: Willie, who lives in an apartment building, takes a summer-long vacation where he plans to do plenty of hiking and fishing. He takes out a three-month lease for an outboard motorboat. He will use it at several lakes that surround his vacation spot. While traveling out to a part of one lake where he heard fish were plentiful, he collides with a person using a jet ski. The loss is not covered by his policy.

d. bodily injury or property damage that arises from an aircraft or hovercraft even if the insured is considered vicariously liable because the actions of a child or minor caused or led to the injury or property. This exclusion holds whether or not law imposes the liability.

e. bodily injury or property damage that arises from a motorized vehicle or watercraft even if the insured is considered vicariously liable because the actions of a child or minor caused or led to the injury or property. This exclusion holds whether or not law imposes the liability. This exclusion also does not apply in situations where the policy’s Incidental Liability Coverage provides coverage for Motorized Vehicles or Incidental Liability Coverage for Watercraft.

f. bodily injury or property damage resulting from rendering or failing to render a professional service.

Example: Danny is a young lawyer who lives in a stylish, four-unit apartment building. Danny is sued by another tenant in his building. The tenant was recovering from loss of a long-term lease after that tenant followed Danny’s advice about handling a situation with the building owner.

g. bodily injury or property damage that is created by any insured’s business activities whether on or away from the insured premises and whether or not the business is owned or operated by an insured. An exception exists for the limited circumstances insured under the form’s incidental business coverage and when a golf cart is used at a golfing establishment.

Note: This exclusion also applies to other forms of injury to others that may be directly related to an insured’s business activity as well as loss involving expectations related to such activity (i.e., activity related service, etc.).

h. bodily injury or property damage that is connected to locations that, while not shown as a described location, an insured owns, rents, or controls.

Note: There is coverage for bodily injury to a person in the course of performing duties as a domestic employee.

i. bodily injury or property damage expected by, directed by, or intended by an insured, as a result of a criminal act of an insured, or the result of an intentional and malicious act by or at the direction of an insured

Note: A mandatory Amendment of Policy Terms endorsement has changed this item.

This exclusion applies even if the bodily injury or property damage that occurs is different than what was expected by, directed by, or intended by the insured, or if someone suffers the bodily injury or property damage other than the person or persons expected by, directed by, or intended by the insured.

This exclusion makes an exception for bodily injury or property damage that is caused by an insured using reasonable force to protect people or property.

Example: Rhea is tired of her neighbor Benny leaving his trash bag outside of their apartment building’s dumpster instead of placing it inside, as is required. One evening she grabs his trash bag and puts it in front of Benny’s door. In the morning, while rushing to get to work, Benny doesn’t notice the bag. He falls over it and breaks a front tooth as well as suffers a concussion. He sues Rhea after she confesses and apologizes. This loss is not eligible for coverage under Rhea’s policy.

j. bodily injury or property damage because a communicable disease is transmitted by an insured.

This is a broad exclusion with no limitation.

k. bodily injury or property damage due to sexual molestation.

The term insured is not used in this exclusion and there is no further explanation. Since there are no explanations or limitation, this means that if an insured is named in any suit involving sexual molestation there is no coverage even if the insured is not alleged to have perpetrated the molestation.

Related Court Case: Sexual Misconduct Claim Denied

l. bodily injury or property damage that is a result of physical or mental abuse.

There is no requirement that this be a direct result of the abuse, the amount of time that can be between the abuse and the bodily injury and the property damage. It doesn’t even say who must cause the physical or mental abuse. It is a very open-ended exclusion.

Related Court Case: , HO Policy Excludes Physical Abuse of Minor

m. bodily injury or property damage that arises out of corporal punishment.

This exclusion is as equally open-ended as the physical or mental abuse exclusion.

n. bodily injury or property damage arising from any aspect of the illegal drug trade. This includes manufacturing, selling, using, delivering, transferring, or possessing of a controlled substance such as cocaine, LSD, marijuana along with other narcotic and hallucinogenic drugs by a person (does not have to be an insured).

This very broad exclusion should make homeowners wary of activities in or around their home since they would have no coverage even if they had no knowledge of the activity on their premises. This exclusion does not apply to prescription drug use provided the person to whom it was prescribed uses the drugs.

Note: A mandatory Amendment of Policy Terms endorsement has added one more exclusion to this section.

2. Additional Exclusions That Apply Only to Coverage L (Personal Liability)

Coverage L (Personal Liability) does not apply to:

a. bodily injury to any of the persons defined as insureds under definition 13. a.-e. in the definition portion of this policy. This would include the named insured, residents of the named insured’s household, the named insured’s relatives and more. It also means that persons defined as insureds under definition 13.f. are covered for bodily injury. The 13.f. insured definition includes real estate managers, persons accountable for animals and watercraft, etc.

Example: Let’s put a different twist on a previous example. Welcy is late for meeting her cycling club for their annual “Rider’s Round-up.” As she rushes down her apartment stairs, she slams into her HUSBAND who was coming up the stairs. Her husband requires stitches for cuts to his face and legs and treatment for a broken arm. Welcy’s policy will NOT respond to any of his injuries.

b. any claim made or suit that is brought against an insured that is seeking contribution to or reimbursement of damages for which another person may be liable because of bodily injury to an insured.

This exclusion is trying to eliminate coverage that might be gained when one insured may have assisted another in the injury of another insured.

c. liability assumed under a contract or an agreement, except as provided by the Incidental Liability Coverage for Contracts.

Example: Jimmy and his friends love fantasy football and Jimmy is the fantasy league commissioner. He rents his apartment complex’s clubhouse for the league’s fantasy draft party. The rental contract includes a clause that he is liable for damages and injuries that occur while it is rented. When a league member trips on some loose carpeting and severely injures his back, it is eligible for coverage under Jimmy’s policy.

d. loss involving damage to the named insured’s property

e. expendiitures made on owned property to prevent injuries to and damage to property belonging to others.

Although the insurance company appreciates the efforts, an insured should take such measures without expecting payment from the insurance carrier.

f. damage to property that is rented to, occupied by, used by, or in the care of an insured, except for property damage caused by fire, smoke, or explosion

Note: This coverage exception concerning property in the control of an insured is often referred to as Fire Legal Liability.

g. sickness, disease, or death of a domestic employee. This applies only when a written notice is not received by the insurance company within 36 months following the end of the policy period during which the injury occurred. Stated another way, such injury to a domestic employee IS covered but only IF notice of the injury is received no more than 3 years after the end of the policy period during which the loss occurred.

h. bodily injury to a person, including a domestic employee, if the insured has a workers compensation policy covering the injury. Such injury is also not covered if benefits are payable or are required to be provided by the insured under a workers compensation, non-occupational disability, occupational disease, or like law. This exclusion places the coverage onto the workers compensation carrier and prevents double dipping. It also doesn’t protect the employer from shirking his or her legal responsibilities.

i. liability for group, property owner assessments. Eligible groups may consist of any form of residential association. Note that this exclusion does not apply to the limited protection that exists under the policy’s Loss Assessment incidental coverage.

j. bodily injury or property damage that results from an occurrence for which an insured is also an insured under a nuclear energy liability policy. This exclusion is not affected by the serious technicality that coverage does not exist due to an exhausted nuclear energy liability policy. Protection provided by American Nuclear Insurers, Mutual Atomic Energy Liability Underwriters, Nuclear Insurance Association of Canada (including their successors) qualifies as a nuclear energy liability policy.

3. Additional Exclusions That Apply Only to Coverage M (Medical Payments to Others)

Coverage M (Medical Payments to Others) does not apply to bodily injury to:

· Persons living on the insured premises including those who meet the definition of insureds. An exception exists for domestic employees.

· Persons (including domestic employees) suffering bodily injury when the incident either is or should be protected by workers compensation, disability (other than workers comp), occupational disease or any similar law. This exclusion operates in incidents when no coverage is carried at the time of a loss, but such coverage was supposed to be available.

· A domestic employee if the injury occurs off of the premises AND is not related to his or her duties to any person who qualifies as an insured

Example: Franklin is the personal assisted to Sharla, a very successful writer. He works in the very large home that Sharla rents. On his day off, Franklin is visiting the nearby town and he is injured when he trips on a broken sidewalk. He ends up needing surgery for a torn ligament. His medical expenses are not covered by Sharla’s tenant’s policy.

· That results from and all consequences of nuclear reaction, nuclear radiation, or radioactive contamination, however caused.

WHAT MUST BE DONE IN CASE OF LOSS OR CLAIM

This section of the policy discusses a very important part of the policy, the promise of the insurer, under described circumstances, to pay for a loss (including defending a lawsuit). Since the policy is a contract, both the insurer AND the insured have responsibilities. The manner in which an incident is handled by an insured is a critical matter. It increases the policy’s ability to function as intended. The policy lists the responsibilities separately, under the major coverages and it also makes references to parties that represent an insured.

1. PROPERTY COVERAGES

a. Notice

When a loss occurs, the insured is obligated to do all of the following:

· Promptly notify the insurance company or the insurance company’s agent

Note: The company providing coverage has a right to ask that the notification be in writing.

· IF the act that causes the loss is a crime, the insured must promptly notify the police

· Notify the credit, debit, or similar funds-handling card company if the loss involves a credit, debit, or similar card

The above actions serve important functions. First, they permit the company to begin the loss investigation process, including any action to protect its rights and to determine if an insured is actually liable for payment under the policy. Quick notification to the police and any credit or debit card companies help to minimize a potential loss by initiating any criminal investigation and terminating a thief’s ability to make continued use of stolen cards. The reporting duty also minimizes fraud on the part of an insured. Persons tempted to make phony claims may be stopped by the requirement of a police report.

b. Protecting Property

The Contents Broad Form policy recognizes the importance of preserving property. An insured is required to extend a good faith effort to protect covered property at and after an insured loss to avoid additional loss. The company agrees to reimburse the insured’s REASONABLE costs incurred for necessary repairs or emergency measures performed solely to protect covered property from further damage. However, the preservation effort must involve covered property that is endangered by a covered peril or a covered peril that has already caused damaged. The insured must keep an accurate record of such costs. However, the insurer will not pay for such repairs or emergency measures performed on undamaged property. This provision does not increase the insurer’s policy limit.

c. Cooperation

The insured must cooperate with the insurer in performing all acts required by this policy. The policy requires that an insured work with, rather than against, the insurer in order to investigate and process a possible claim.

d. Inventory of Damage Personal Property

This is the quantity, description, cost, amount of loss, and actual cash value of the personal property involved in the loss. The insured must give the insurance company copies of all bills, receipts, and related documents to confirm these.

e. Showing Damaged Property

The insured must show the damaged property and allow the insurer to take samples of damaged property for inspection, testing, and analysis. Such requests can be made at the insurer’s discretion and the number of requests should be kept reasonable. Of course, what is considered reasonable is subjective.

Related Court Case: Law Bars Suit Against Public Adjuster

f. Records and Documents

The insured must show records, including tax returns and bank records of all canceled checks that relate to the value, loss, and costs, and permit copies to be made of them as often as the insurance company reasonably requests.

g. Examination under Oath

The insured must agree to be questioned by the insurer with regards to a claim and the questioning can include answering questions under oath. When more than one insured is questioned, the sessions can be taken separately and without any other insureds witnessing the separate sessions.

This duty helps to protect a company against attempts to conspire to file false claims. On the positive side, it may also assist in getting the most details concerning a valid loss.

Note: Insurer Requests - While an insurance company has the right to make requests concerning gathering insured statements, seeing the damaged property, and securing related records, the emphasis is on the insurer making REASONABLE demands. The request must be for the purpose of moving along their claims investigation and a formal decision on accepting or denying the claim.

h. Proof of Loss

If the insurance company requests it, the insured is required to provide the insurer with a signed, sworn proof of loss. The proof of loss must be submitted within 60 days from the date of the insurer’s request and it must show the following:

· The time, place, and the details of the loss

· The (insurable) interest of the insured and the (insurable) interest of all others, such as mortgagees and lien holders, in the property. If a party cannot demonstrate an insurable interest in the damaged property, the insurer is not obligated to make payment to an insured.

· Other policies that may cover the loss, since other policies may have to also provide coverage for an eligible loss

· Changes in title or use

· Available plans and specifications of buildings

· Detailed repair estimates

· An inventory of lost items (the inventory must meet the requirements stated separately in this section)

Further, an insured must document any claim that includes any request for reimbursement for a credit card, debit card or other, similar funds-handling card. Finally, any requests that involve additional living expenses have to be supported by proof of the property’s current market rental value and actual additional living expenses incurred.

i. Assistance with Enforcing Right Of Recovery

This duty requires an insured to help the carrier with any reasonable recovery effort. In many instances where insurers make payments to their clients, other parties are responsible for the damage or injury. When possible, insurers take action to recover payments from these other parties and they often need the insured’s help. This is also known as right of subrogation.

2. LIABILITY COVERAGES

Once there has been an occurrence, the following duties must be performed. It is important to notice the word occurrence is used and not claim. This means that an obligation exists even before a claim is presented. The named insured can choose to have another insured perform the duties but the ultimate responsibility of getting the duties completed remains with the named insured.

a. Notice

While speed in reporting a loss is important, quick notification is useless if it doesn’t include enough information with which to make decisions. Therefore, the notification has some content requirements. Specifically, the notice should include all of the following:

· The name of the named insured

· The policy number

· The time, place, and the details of the occurrence

· The names and addresses of all known potential claimants and witnesses

Further, any notification has to be done in writing and, if not performed by an insured, must be completed by an insured’s legitimate representative (a person with proper authority to work with the insurer on behalf of the insured AND to be held accountable for actions or errors).

b. Volunteer Payments

An insured must not make payments, pay, or offer rewards, or assume obligations or other costs, except at the insured's own cost. This stipulation does not apply to costs that are allowed by this policy, such as minor payments (i.e., first aid) that are permitted under the policy’s incidental coverage section.

The policy allows an insured some leeway to make payments in order to respond to emergencies or to help mitigate problems. However, an insured has to take great care in making payments that fall outside of the parameters permitted by the company. EVEN when an insured agrees to make payments out of his or her own pocket, he or she needs to be aware of the ramifications of such payments. Certain actions may be interpreted as an admission of guilt or responsibility for a loss when that interpretation may be wrong. It is important that an insured not put his company on the hook for a loss when the facts don’t support liability on the insured’s part.

c. Cooperation

d. Notice, Demands and Legal Papers

Insureds are required to provide rapid notification to the insurer of any communications, especially paperwork that is related to an occurrence. Specifically, the insured must send copies of such paperwork to the insurer as quickly as possible. Failure or significant delays can compromise the insurance company’s ability to properly investigate and handle a claim.

e. Assistance with Claim and Suits

At the request of the insurance company, an insured must help the company with any of the following:

· To settle a claim

· To participate with lawsuits, such as appearing at trials and hearings

· With their efforts to recover payments or take other action against separate parties who may be legally responsible for applicable injury or damage

· With efforts to obtain and provide evidence

· To ensure attendance of all witnesses.

Note: This provision actually appears redundant as it is an expansion of the “Cooperation” duty.

f. Other Duties—Damage to Property of Others

In case of damage to property of others loss, the insured must give a signed, sworn statement of loss within 60 days after the loss and must exhibit the damaged property but only if the property is still within the insured’s control.

HOW MUCH WE PAY FOR LOSS OR OCCURRENCE

In this portion of the policy, the company’s obligation to provide insurance protection to the insured is described, including explanations of limits, deductibles, losses to pairs, set and parts and loss settlement terms.

1. Property Coverages

a. Our Limit

Subject to the deductible or any other limitation that may apply, the insurance company providing coverage has the option to pay either the policy’s applicable limit or the amount that is developed according to the policy’s loss settlement terms. The amount that is paid will be the LEAST EXPENSIVE option. The option will be exercised without being affected by the total number of insureds, claimants or financial interests involved with a given occurrence. However, the amount paid will also be subject to the actual insurable interest that exists.

b. Deductible

The deductible that appears in the policies applies to all of the principal and incidental property coverages, except for Refrigerated Property, Fire Department Service Charge and Credit Card; Electronic Fund Transfer Card or Access Device; Forgery and Counterfeit Money losses.

Unless a specific exception is made, the deductible that appears on the policy declarations page applies to losses caused by all covered perils. The insurance company providing coverage will pay the part of the loss that exceeds the deductible.

Important Factors to Remember About the Deductible

· The deductible applies per occurrence.

· The deductible applies separately at each covered location.

· Only one deductible applies at each location.

c. Loss to a Pair or Set

If there is a loss to an item that is part of a pair or set, the insurer has the option of just paying to replace or repair the item, or to pay the difference in the actual cash value of the pair or set just before the loss and the actual cash value just after the loss. In other words, the insurer does not become obligated to compensate such losses by providing the value of a full pair or set.

d. Loss to Parts

When an occurrence involves a loss to a part of an item that consists of several components, the insurer’s obligation is only according to the value of the lost or damaged part or the cost to repair or replace it.

Both the Loss to a Pair or Set and the Loss to Parts provisions are meant to control the insurer’s exposure. In this case, the insurer makes it clear that it is not automatically obligated to treat a partial loss as, for all intents, a total loss. Of course, the loss circumstances and the type of property involved have a great deal to say about the values involved and what is considered to be fair.

Example: Arty is on a picnic with his girlfriend when it starts to rain. They pack up their food and rush to the car. Arty’s girlfriend looks back and sees that they forgot Jessie’s stereo CD player. She runs back, grabs it and heads back to the car. Because of a very wet handle, the player slips and hits the ground. However, it only damages one of the detachable speakers. When Arty turns in a claim, he bases it on the value of the entire unit. His insurer informs him that it would only be obligated to pay for the value of the damaged speaker. Since that amount is below his deductible, the insurer does not process a claim.

e. Loss Settlement Terms

Eligible losses are handled according to actual cash value terms.

Actual Cash Value Terms

Actual cash value includes a deduction for depreciation.

The actual cash value terms are used to settle losses in all instances where items are not eligible for replacement cost settlement. In those instances, the least expensive option among the following is used:

1. to the extent practical, the cost to repair or replace the property with materials of likes kind and quality

2. the actual cash value of the property at the time of loss

2. Coverage L—Personal Liability

The policy’s Coverage L limit appears on the declarations and it acts as the maximum possible amount that the insurer is obligated to pay for a single occurrence. This maximum obligation is not affected by the number of persons who are insureds, the number of parties who sustained injury or damage, or the number of legal actions (claims or lawsuits). Further, the above limit also acts as the maximum when more than one policy period is involved and it applies regardless of the number of claims. Repeated exposure to similar conditions is considered one occurrence as are all bodily injury and property damage from any one accident.

3. Coverage M—Medical Payments to Others

The coverage limit that appears for Coverage M is the maximum amount of protection available for medical expenses paid to a given third party for a single accident.

The payment of a claim under Coverage M does not imply liability under Coverage L. In other words, the policy may cover the medical expenses of an injured person without giving up the right to investigate and decide upon the merits of any related liability claim.

4. Severability

Each insured under the policy is treated individually under the policy with one exception—the limit of insurance applies per occurrence not per insured.

Example: All five members of the Johnson family are sued by Snake Taters. Snake, while attending a party at the Johnson home, stepped on a baseball and fell on their kitchen’s hardwood floor. He was paralyzed by the accident. While all five members are each covered by the policy’s $300,000 Coverage L limit, that limit is the maximum, total amount available for Taters’ lawsuit.
Johnson vs. Taters HO Loss Settlement
Insured	Amount Awarded	Applicable Several Limit
J. Johnson	$85,000	$85,000
P. Johnson	$120,000	$120,000
A. Johnson	$215,000	$215,000
O. Johnson	$15,000	$15,000
R. Johnson	$45,000	$45,000
Total Awarded		$480,000
Total Paid Under Policy		$300,000

5. Insurance under More Than One Coverage

If more than one coverage of this policy applies to a loss, no more than the actual loss itself will be paid. This condition assures that a person is not allowed to benefit from the fact that coverage under the policy exists from more than one area.

6. Insurance under More Than One Policy

a. Property Coverage

Depending upon the source of coverage that is available (in addition to this policy), the policy may respond to the loss on either a proportional or an excess basis.

When there is other insurance that applies to the loss, the insurance company providing coverage under this form is only obligated to pay its share of the loss. This policy’s share is based upon the portion of coverage it provides in relationship to the total amount of coverage available from all sources of coverage, which apply to the loss.

Example: Lana bought a luxury refrigerator for her apartment. She was also talked into the appliance store’s SUPERGUARANTEE Warranty. It would replace any product in full for the first year after the day of purchase. Lana’s apartment catches on fire and she submits a claim of $5,000, which includes $1,200 for the refrigerator. The insurance company pays Lana $3,100 which takes into account the ACV value of the loss property less $1,200 for the fridge. The insurer advises her to submit a separate claim under her warranty.

Loss, cost, or expenses that are covered under a government fund or a home warranty type plan are not considered insurance under this provision.

When a loss also is covered by the master policy of an association or corporation of property owners, this insurance responds on an excess basis. In other words, this policy would provide coverage ONLY AFTER any available protection from the master policy is exhausted. While this is an important provision, it is likely to be a rare occurrence since master policies are unlikely to provide coverage for property owned individually. This provision does not affect the application of this policy’s Association Deductible Incidental Property Coverage.

b. Coverage L - Personal Liability

This insurance is excess over other valid and collectible insurance that applies to the loss or claim. However, this condition does not apply to insurance written specifically to act as a second or additional tier of coverage above this policy's limits.

If the other insurance is also considered excess, this policy will pay only its share of the loss. The part of the loss that will be paid is that part of the loss that the applicable limit under this policy bears to the total amount of insurance covering the loss.

This condition attempts to make any liability protection provided by this policy act only after another source of coverage responds to a loss. It adds an option of responding on a proportional basis when the other source of coverage provides its protection on an excess basis. Unfortunately, not all circumstances can be foreseen by policy conditions so there are times that insureds and insurers will dispute how coverage is to apply.

Related Court Case: “Other Insurance Clauses in Consecutive Policies Determined Obligation of Each Insurer” - illustrates how insurers argue other coverage and subrogation issues.

7. Warranties and Service or Maintenance Plans or Agreements

The policy’s available coverage is directly affected when a warranty, service plan or similar agreement applies to an occurrence. In such instances, the policy responds on an excess basis. This provision applies even if such agreements or plans are structured to operate similarly to insurance. Regardless, the policy’s coverage would apply as excess (as opposed to the proportional basis that applies when other sources of insurance are available).

8. Government Funds

The policy’s available coverage is directly affected when a government fund also applies to an occurrence. In such instances, the policy responds on a proportional basis. Specifically, this policy would apply coverage based on the share of total protection that its limit represents as a proportion of total available protection.

PAYMENT OF LOSS

1. Property Coverages

Losses are adjusted between the named insured (including resident spouse) and the insurance company. The insurance company is obligated to pay an insured loss within 60 days after receiving an acceptable proof of loss and coming to a written agreement on the amount of the loss.

The 60-day payment also applies if there is a dispute between the insured and the insurer and the appraisal condition is exercised. In such instances, the insurer has to make payment within 60 days after the filing of an appraisal award. Unless there is a loss payee, payment is made to the named insured.

If a covered loss makes the described location unfit for use for more than one-month, additional eligible expenses will be paid on a monthly basis. The insured must submit proof of the extra living expenses.

The insurance company has some flexibility in paying for an eligible loss. The settlement may be paid in money; or the insurer may choose to rebuild, repair, or replace the property. The insurance company is obligated to give the insured notice of its intent within 30 days after the insurance company receives an acceptable proof of loss.

The insurance company has a right to take all or part of the damaged property at the agreed or appraised value. If the insurance company pays for or replaces property, it then belongs to them. This last option is another way to make certain that an insured is indemnified for, rather than enriched by a loss. Insurers also salvage property as one way to help recoup their loss payments.

2. Liability Coverages

Once a person has been granted a judgment against an insured or insurance company, the insured and the claimant have reached an agreement, that person can recover under the policy based on the extent of coverage the policy provides. Note: That extent is based on the limits section of the policy.

3. Damage to Personal Property of Others - At the option of the insurance company, a loss may be handled and paid either with an insured or with the actual owner of the damaged or destroyed property. These handling options are mutually exclusive.

Note: If it is not clear, the above reference to owner is to the owner of the damaged or destroyed property (not the owner of the policy paying the coverage). This insurer option could help to mitigate adverse feeling between the insured and the property owner.

POLICY CONDITIONS

CONDITIONS APPLICABLE TO ALL COVERAGES

1. Assignment

No insured or other party can sign this policy and its coverages over for use by any other party unless, first, getting the insurance company’s permission (in writing).

2. Cancellation and Nonrenewal

The named insured has the right to cancel this policy at any time. It can be accomplished by sending written notice to the insurer which includes the (future) termination date. A past date can’t be used since the insurer is due premium for the coverage it has already provided.

The insurance must supply the insured with advance, written notice of its intent to end coverage by either cancellation or of its decision to let the policy expire. The notice has to be sent to the address that appears on the policy declarations and the carrier must have documentation (such as proof of mailing) that a notice has been delivered.

The insurance company’s notification obligation is substantially affected depending upon how long coverage has been in force. If a decision to cancel or nonrenew is made sooner than 60 days, the policy may be terminated by providing advanced mailing notice of a minimum of ten days.

Once coverage hits the 60-day mark, cancellation can only take place at a policy’s anniversary with several important, following exceptions:

· The premium has not been paid by the required time

· The policy was provided based on the insured either providing false information or by withholding important information and this situation would have prevented the insurer from agreeing to accept the application.

· A material change or an increase in the likelihood that a loss may occur.

This condition goes on to say that, if the policy is canceled for nonpayment of premium, the company providing insurance will give the named insured at least 10 days’ notice before the cancellation is effective. If the policy is to be canceled for any other reason after it has been effective for 60 days or more, the insurance company is obligated to provide at least 30 days notice before cancellation. If the company providing coverage elects to non-renew the policy, it is obligated to provide at least a 30-day notice.

Important: Generally, this provision is pre-empted by state law regarding cancel or nonrenewal reasons, amount of notice and proof of delivery. It is critical that state law is followed concerning any decision to cancel or non-renew a homeowner policy.

If any return premium is owed, it will be refunded at the time of the cancellation or as soon as is practical. Payment of the unearned premium has no bearing on cancellation.

3. Change, Modification, or Waiver of Policy Terms

Only the insurance company has the option of waiving or changing this policy’s terms and such waiver or change must be in writing. If the insurance company providing coverage under this policy adopts a revision that broadens coverage without additional premium, the broadened coverage will apply to this policy as of the date the insurance company adopts the revision in the state in which the described location is located. This condition applies only to revisions adopted 60 days prior to or during the policy period shown on the declarations. This condition does not apply to changes in a policy that both broaden and restrict coverage whether in an edition change or an endorsement.

Instances when the insurance company requires the insured to provide an appraisal or to participate in questioning where an oath must be made to support the answers do not mean that any policy terms have been waived.

4. Conformity with Statute

Terms in conflict with the laws of the state in which the premises shown on the declarations is located, are changed to conform to such laws. This provision is rarely relied upon since amendments or endorsements are added to policies based on the described location’s state. However, there are instances where the condition is relied upon such as when a law changes after the policy issuance and prior to the attachment of a revised amendatory endorsement.

5. Death

If the named insured or the named insured’s in-resident spouse dies, the legal representative of the person who died becomes an insured with respect to the deceased insured’s premises and property but only for the coverage provided by the policy at the time of that person’s death.

Recognizing that the status of the residents in the household change in the policy once the named insured or spouse dies, the definition of insured is changed for the time of transition following the death. The definition of insured is expanded to include members of the deceased person’s household who were members at the time of death but only while residing at the described premises. In addition, if a person is granted temporary custody of the covered property belonging to the deceased, that person is an insured but only for that property and only until a legal representative is appointed.

6. Inspections

The insurer reserves the right to inspect the property it insures and it can do so with its own personnel or it can have another organization make an inspection on its behalf. The condition also warns the insured that, while an inspection and related information about the results of the inspection may imply a type of warranty or guarantee about the fitness of the insured location, that is not an assumption that should be made.

This provision makes the insured aware that a company inspection cannot be used as evidence of the worthiness of the property. A company has their own underwriting rules and philosophy for providing coverage and will not permit its actions to be used to the benefit of other parties. This also prevents the company from being held liable to other areas of authority concerning the property.

7. Misrepresentation, Concealment, or Fraud

Any intentional concealment or misrepresentation on the part of any insured can void the policy for ALL insureds. If an insured lies or hides a significant fact or any circumstance that relates to the insurance that is granted by this policy, this will cause the insurance to bar coverage for any insured. Therefore, such instances or acts will bar coverage even for innocent insureds. This negative consequence may take place due to incidents that occur either before or after any loss.

Simply put, the company should be able to rely on the statements made by the insured in making its decision to insure a person or property. If the statements are seriously in error, the insurance contract has no right to exist and the company has no obligation to honor it.

Related Court Case: Do Misrepresentations Bar Homeowners Coverage?

8. Subrogation

When an insurer pays damages, it may ask the insured to transfer his or her right to attempt to recover damages from another party. The insured must agree, in writing, to do so and to fully cooperate with the insured in pursuing the recovery. This act of seeking payment from a party responsible for a loss is called subrogation. This right is very valuable to an insurer. In fact, if an insured negatively affects this right to recover payment after a loss has occurred, the insurer may no longer be obligated to pay for the loss.

The insured may waive all rights to recover before a loss occurs—but this waiver must be in writing. Signing this waiver BEFORE a loss does not affect coverage under the policy.

Subrogation problems do arise under homeowner policies. Many insurers aggressively assert and protect their rights to subrogate against other parties. In some instances, insurers are taking legal action against their clients who harm this right.

Note: Subrogation does not apply to losses involving medical payments made to other parties or to the Damage to Property of Others, Incidental Liability Coverage.

CONDITIONS APPLICABLE TO PROPERTY COVERAGES ONLY

1. Abandonment of Property

An insured may not abandon property to the insurer without the insurer’s permission.

Of course, if the insurer agrees to accept the damaged property, the act is NOT abandonment.

2. Appraisal

If the insurer and the named insured do not agree over the value of the covered property or the amount of the loss, each party has 20 days (after receiving a written request from the other party) to select an appraiser. The two appraisers will select an umpire.

If, within 15 days, they do not agree on an umpire, the two appraisers may ask a judge of a court of record of the state where the described location is located to make the selection. If the two appraisers agree in writing, that sets the amount of the loss. However, if they do not agree, the differences are submitted to the umpire and then the written agreement of any two of the parties sets the amount of loss. Each party will pay its appraiser and the two parties will share the cast of the umpire and related expenses equally. Remember – the appraisal is about the amount of the loss not whether or not coverage applies.

3. Loss Payable Clause

If the form includes a loss payee with an insurable interest in any covered contents, that loss payee (appearing in the declarations) is granted status as an insured. However, any coverage is only to the extent of the amount and nature of their interest in any personal property that is protected by this policy. A copy of any termination notice or non-renewal sent to the insured will also be sent to the applicable loss payee.

4. No Benefit to Bailee

This policy is not intended to provide protection for the direct or indirect benefit to parties who are paid to assume custody of the covered property. In other words, such persons or organizations should secure their own insurance instead of piggybacking onto an insured’s coverage.

5. Policy Period

The policy period sets the time frame in which a loss must occur in order for it to be covered under the policy.

6. Recoveries

There are instances when the insurer pays for a loss and then the property is recovered. Similarly, after the insurer’s payment, damage payments are received from those responsible for the loss. When this happens, the named insured and the insurer are obligated to inform each other. The costs of the recovery efforts are paid first. (The policy isn’t clear as to who is paying the cost – does the cost come out of recovery prior to the dispersal or does the party who secured the recovery pay the cost?)

The named insured can decide to keep the property or give it to the insurer. If the recovery is not wanted, then nothing changes but if the named insured wants the property, claim payments received from the insurer, or some lesser agreed upon amount, must be returned to the insurer. If the named insurer did not receive a complete payment for the claim, due to a deductible or a coverage limitation, the recovery is prorated based on the interest of each party in the loss.

What is important about recoveries is that they are resolved in a manner that is fair to the insurer and the insured. One party should not significantly benefit from the recovery of property or money if it comes at the expense of the other party.

7. Suit Against Us

A suit against the insurer cannot be filed without Property Coverage’s terms being complied with. Further, the suit must be filed within two years after the loss.

Note: If applicable state law makes this time period invalid, the suit must be filed according to that state’s mandated time frame.

8. Volcanic Eruption

All volcanic eruption action that occurs within a 72-hour (3-day) period is considered a single occurrence.

CONDITIONS APPLICABLE TO LIABILITY COVERAGES ONLY

1. Bankruptcy of an Insured

Bankruptcy or insolvency of an insured does not relieve the insurance company of its obligations under this policy.

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

When there is a loss, the injured person or his or her representative must provide the insurance company with a written proof of claim as soon as it is practical. The insurer has the right to request the statement be made under oath. The insurer must also receive permission or authorization to receive copies of medical records.

In addition, the person who was injured must agree to allow the insurers chosen doctors to conduct medical exams on a reasonable schedule.

Note: Although all of this may sound reasonable – the injured party is not a part of the insurance contract so this may be difficult to enforce.

3. Policy Period

This policy’s protection only extends to the bodily injury or property damage losses occurring within the applicable policy period.

4. Suit Against Us

The insured is not permitted to file suit against the insurer without, first, complying with all of the policy’s terms. Further, the amount of the insured’s liability must have been determined by either of the following:

A final judgment against the insured as a result of a trial
A written agreement between the insured, the claimant, and the insurer

Note: No person has a right under this policy to join the insurance company or to speak for the insurance company in actions related to determine the amount of an insured’s liability.

HO 0004–AAIS CONTENTS BROAD FORM HOMEOWNERS ANALYSIS

TABLE OF CONTENTS

AGREEMENT

DEFINITIONS

PROPERTY COVERAGES

INCIDENTAL PROPERTY COVERAGES

PERILS INSURED AGAINST

EXCLUSIONS THAT APPLY TO PROPERTY COVERAGES

LIABILITY COVERAGES

Principal Coverages—Liability and Medical Payments to Others

Incidental Liability Coverages

Exclusions That Apply To Liability Coverages

WHAT MUST BE DONE IN CASE OF LOSS OR CLAIM

HOW MUCH WE PAY FOR LOSS OR OCCURRENCE

PAYMENT OF LOSS

POLICY CONDITIONS

CONDITIONS APPLICABLE TO PROPERTY COVERAGES ONLY

CONDITIONS APPLICABLE TO LIABILITY COVERAGES ONLY