HO 00 05–ISO HOMEOWNERS 5 - COMPREHENSIVE FORM COVERAGE ANALYSIS

(March 2022)

This is an analysis of the ISO (Insurance Services Office) Homeowners Program’s Comprehensive Policy form, 03 22 edition. Differences between it and the 05 11 edition program will appear in bold.

HO 00 03–ISO Homeowners 3 - Special Form Coverage Analysis

Homeowners Coverage Archive

Note: This article contains several discussions of earlier edition HO policy forms.

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

AGREEMENT

Under this provision, the insurance carrier agrees to provide homeowners insurance (as described in the following policy pages) in exchange for the named insured paying the policy premium AND complying with the required policy provisions.

Note: The named insured has to meet BOTH conditions in order to qualify for coverage.

Examples:

Larry had faithfully paid his HO insurance premiums for 12 years when he turned in a claim. His house was completely destroyed by a fire. The insurance company denied his claim. Their investigation revealed that Larry burned down his own home in order to pay off gambling debts with the insurance proceeds. Paid premium? Yes. Complied with policy? No. Coverage? No.

Mary sent in a HO insurance claim for some severe storm damage. She sent in a perfect proof of loss with supporting documents and a complete inventory of damaged personal property. Her insurer turned down the claim since she let the policy lapse for nonpayment several months earlier. Paid premium? No. Complied with policy? Yes. Coverage? No.

DEFINITIONS

This portion of the Comprehensive Form policy defines the terms that are critical to understanding how the policy responds to coverage situations. The following is a summary of the defined terms that, throughout the policy, appear in quotation marks:

A. "You" and "your"

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

"Our," "us" and "we"

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

B. The HO 05 Comprehensive form policy also makes use of the following, defined terms:

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

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

Maintaining, using, being within, operating, using, or unloading or loading a craft (aircraft, watercraft, hovercraft) when involving any person. (03 22 change).	An insured permitting another party to use a vehicle/craft (entrustment)	Maintaining, using, being within, operating, using, or unloading or loading a motor vehicle when involving any person meeting the policy’s “insured” definition. (03 22 change).
An insured's vicarious liability related to vehicle/craft	An insured's negligent supervision related to vehicle/craft

The specific change in B.1.a. is that the policy now makes a distinction to restrict liability for motor vehicles to insured parties when it is extended to any person in the earlier editions of the form. (03 22 change).

b. The vehicle and craft definitions go further, describing the following:

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

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

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

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

2. "Bodily injury"

This term refers to sickness, disease, or bodily harm, and includes any resultant death. Further, both the cost of care required by and any loss of services caused by any of these conditions also qualify as bodily injury.

3. "Business"

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

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

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

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

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

· Mutual exchanges of home day care services

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

Note: The business definition refers to the value of compensation, NOT merely cash. So, the details surrounding an activity may substantially affect how a given activity is treated.

Example: Janie is an active photographer and sometimes she is asked to take photos. Sometimes she receives payment or takes photos in exchange for items or services. She is concerned about her coverage should her hobby be involved in a loss. She meets with her agent and asks the following:

· If her hobby compensation exceeds $5,000 in any 12 months before a policy period, does it retain its status as a business forever?

· Does the reference to total income include “non-monetary” compensation?

· Does the reference to total compensation take gross or net receipts into consideration?

· Is the reference to total compensation in the 12 months before the inception date affected by the basis of collecting income?

Her agent shares that, frankly, these issues may likely only be addressed when a loss occurs. He tells Janie to track any compensation and they may have to discuss adding an endorsement or buying separate coverage.

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

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

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

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

5. “Employee”

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

works for an “insured” on a direct basis, or
works for an “insured” through a leasing arrangement between an “insured” and a company that leases employees.

6. Home-sharing host activities

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

Example: Jarla has rented a bedroom from The Kellys for two weeks. She’s paid them a fee that covers the rent as well as to reimburse them for the use of a printer and stands. Besides attending an arts festival, Jarla is also an exhibitor and she is finishing up some pieces to be displayed at the fest. This all qualifies as a home-sharing host activity.

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

7. Home-sharing network platform

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

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

8. Home-sharing occupant

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

Example: Harlen asks Frieda, his long-term companion, to go on a month-long vacation. Harlen uses a smart phone application to lease Thander’s spacious Arizona home. Neither Harlon nor Frieda have ever visited a desert climate. While only Harlen is on the short-term lease, Frieda also would be treated as a home-sharing occupant under Thander’s policy.

9. The Comprehensive Form homeowner policy contains a multi-part definition of persons who qualify as insureds and there are a number of exceptions.

a. The term initially refers to:

Example: Henry’s 4,700 square foot home is insured with a Comprehensive Form homeowner policy. While visiting a friend, they decide to play tennis. During intense play right at the net, Henry swings at a line drive and smashes his friend’s wrist, breaking it. The friend claims that Henry did it on purpose to win the game and he sues. Henry, the named insured, would be covered under his policy.

Your relatives if residents of "your" household

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

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

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

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

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

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

Example: Lynn is a very busy freelance artist who works from her home. She hires Cameron, a local dogwalker, to handle duties for “Blaze,” Lynn’s Husky. During a walk, a bicyclist passes Cameron and Blaze, the dog lunges at the cyclist who is bitten as well as injured by being knocked of his bike. The biker sues Cameron. Cameron would be treated as an insured under Lynn’s HO policy.

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

Any person working for an insured while operating a motor vehicle that qualifies for homeowner coverage
Any person who has the insured’s permission to use an eligible motor vehicle, but only while on the insured premises.

The Comprehensive Form policy’s definition of insured continues. It also states that, whenever the word “insured” immediately follows the word “an,” the phrase refers to one or more “insureds.” In other words, an “insured” means one or more persons who have covered status under the policy.

10. “Insured location”

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

The residence premises (please refer to the discussion of this defined term below).
Parts of other premises or structures that are used by an insured as long as these locations are shown on the policy declarations page OR have been acquired by the insured as a residence during the policy period.

Example: Richie’s home is covered by a Comprehensive form policy. The lot next door, which Richie also owns, contains a large garage. Unfortunately, since that lot was never listed on the policy, it does not qualify as an insured location.

Any premises that is related to a property that is covered by a Comprehensive form policy AND which is used by an insured.
A premise that IS NOT owned by an insured but is an insured location while it’s used by an insured as a residence.
Vacant land that is owned by or rented to an insured EXCEPT farmland.
Land that contains a structure that will eventually be an insured’s (1 through 4) family residence.

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

Other situations that qualify as an insured location include:

- An insured’s individual or family cemetery plots or burial vaults

- Part of a premises which is rented and used by an insured but only if for non-business purposes

11. “Motor vehicle”

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

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

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

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

12. “Occurrence”

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

Related Court Case: Negligent Misrepresentation Not "Occurrence"

13. "Property damage"

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

Note: What is meant by property damage may face changes in light of the Covid19 pandemic.

14. "Residence employee”

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

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

Example: Greta decides to help her good friend Paul. Paul was trying to finish a room renovation in time to welcome his new baby. Greta loans Paul her full-time handyman to help him for a few days. During the days he is assisting Paul, the handyman still qualifies as a residence employee under Greta’s policy.

15. “Residence Premises"

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

One-, two-, three- or four-family house, (the insured MUST live in one of the units)
The part of ANY other building where an insured lives as well as any other structures and grounds that exist at that location.

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

C. With regard to the HO 05 Comprehensive Form Policy, there is a special consideration.

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

SECTION I - PROPERTY COVERAGES

A. Coverage A - Dwelling

This coverage section protects the following types of property:

· The residence that appears on the declarations page

· Any structures that are attached to the described residence

· Any materials or supplies that are located either next to or on the residence premises.

However, any material or supplies have to be for the purpose of adding to, altering, or repairing the residence or other structures described on the declarations.

Example: Pamela is renovating a home that is covered by a Comprehensive form policy. She is installing ironwork that requires use of a blowtorch and puts the torch down as she leaves for lunch. The torch falls over, onto carpeting. Because the torch’s tip is still extremely hot, the carpet catches fire and the room is quickly engulfed. The drywall and lumber that are being stored in the room is destroyed. Even though it was not yet part of the home, the building material was intended to be part of the house; therefore, it qualifies for coverage.

Note: Remember that the residence should be a one- to four-family dwelling in order to qualify for homeowner coverage. Also, be aware that land, even land on which covered property sits, is NOT covered by the Comprehensive form policy.

Example: A very wet spring leaves the ground completely soaked. The insured has a large, old, Chinese Elm in his side yard. Due to the soaked ground and the lack of root support, the Elm falls over and lands upon a large shed. It destroys the shed and leaves a gaping hole in the lawn. While the shed is covered, the damage to the lawn (caused by the tree) is not.

Care should be taken when insuring a dwelling to determine the proper replacement cost of the dwelling itself (minus any land value). Sometimes the lot upon which the dwelling is built may be more valuable than the dwelling. In these circumstances, the home's market value is substantially influenced by its land value. The market value of such a home becomes a factor that should be discounted when determining the insurable value of the home.

Coverage B - Other Structures

1. Other structures on the "residence premises" are protected under this coverage part. An “other structure” is, literally, a structure that is other than the primary residence premises. Therefore, besides having some other use, an “other” structure must also exist separately from the primary residence. In other words, an “other” structure cannot be attached by any significant means to a primary residence. The policy states that, in order to qualify as an “other” structure, the structure has to clearly sit apart from the dwelling. If the structure is connected to the dwelling by anything more substantial than a utility line or a fence, it will be considered as part of the dwelling.

Example: Greta Cargo’s cottage home is covered by a Comprehensive form policy with the following limits:
Coverage Part	Insurance Limit
A	$180,000
B	$18,000
C	$90,000
D	$54,000
Greta loves her cottage home (including a small, built-in garage) as well as her deluxe, lattice gazebo (worth nearly $18,000) that sits 25 feet behind her home. Greta enjoys having breakfast in the gazebo but hates that she has to dress before walking between the gazebo and the house. Greta hires a local carpenter who builds two walls that are attached from her cottage’s back door to the front panel of the gazebo. Now Greta may travel back and forth between the structures in complete privacy. However, the gazebo is now part of the dwelling and not a separate structure. The financial consequence is that, instead of having the entire Coverage B limit available to cover the gazebo, the Coverage A limit has to cover the cottage and the gazebo together.

Besides gazebos, other examples of structures covered under Coverage B are:

Play sets
Storage or utility sheds
Detached garages
Pole barns
Unattached decks
Tree houses
Unattached car ports
Playhouses
Above ground pools.

2. Situations that are NOT covered

As it is with Coverage A, the insurance under Coverage B does not apply to land, including the land upon which the other structure sits.

The wording regarding uncovered situations states that no coverage is available for other structures:

that are used to conduct a business
which an insured rents to any person who is not a tenant of the dwelling, or
that is used to store business property.

There are a couple of important exceptions to these exclusions. First, the policy will cover a rental to a person who is not an insured under the policy IF the structure is used only as a private garage.

Another exception is granted when the garage is used to store business property (EXCEPT FOR GAS OR FUEL) that is owned by an insured or by a tenant who lives on the residence premises. The prohibition for fuel does not apply to fuel that’s in a vehicle’s fuel tank.

Example: Glenn lost his garage in a fire. He is worried about his insurance coverage. At the time of the fire, the garage was filled with thousands of dollars’ worth of P.A. equipment. He owned the property and used it in his business as a local sound engineer. He gets good news and bad news. While he is relieved to find that the garage is covered, the destroyed business property is NOT eligible for protection.

3. The limit of insurance for Coverage B is restricted. The maximum amount of coverage available is ten percent of the applicable dwelling’s insurance Limit. The Coverage B limit is an additional amount of insurance protection. Payment under Coverage B DOES NOT affect the amount of Coverage available under Coverage A.

Coverage C - Personal Property

1. Covered Property

Personal property owned by or used by an “insured” is covered anywhere in the world.

Personal property owned by others can be covered but only if the insured asks that it be covered and either of the following applies:

The property is on the part of the “residence premises” occupied by an insured
The property belongs to an insured’s guests or to a "residence employee," and the property is at a residence being occupied by an “insured.”

Example: Clara Sweethart’s home suffers a kitchen fire during a weekend when her son has invited several of his college friends over. The friends’ luggage and clothing are ruined by soot and smoke. Clara’s claim for damages includes the loss of the luggage and clothing since she feels responsible to her guests.

2. Limit for Property at Other Locations

a. Other Residences

There is a special limitation for personal property that is usually located away from the insured’s primary residence. Under this circumstance, either the greater of 10% of the Coverage C insurance limit or $1,500 applies. (The dollar amount under the previous HO Edition was $1,000). (03 22 Change).

Are there any exceptions to this special limitation for property that’s typically located away from the residence premises? Yes. The limitation DOES NOT apply in either of the following situations:

· During the first 30 days after an insured acquires a new principal residence and starts to move their belongings to the new residence,

· Personal belongings that have been moved from a residence that is not fit to house the property because the residence is being renovated repaired or remodeled after being damaged in a covered loss.

This limitation of 10% is not applicable for the first thirty days from the time an insured begins to actually move personal property to a new residence. The limitation is meant to provide a modest amount of coverage to personal property that is never a part of the property that is kept at the insured dwelling. The coverage amount is kept at a minimum so that a single homeowner policy is not used to cover significant personal property exposures that exist for more than one location.

The limitation encourages property owners to buy additional, separate insurance to cover such situations. However, the policy language also wants to preserve full coverage in certain instances such as when the personal property is moved to either a temporary location or to a new, permanent location. Neither instance significantly increases the overall exposure for which insurers initially accept and assign premiums.

b. Self-Storage Facilities

There is a limitation under the Comprehensive form policy for personal property that is kept in a self-storage facility. The property must either be owned or used by an “insured.” The limit is the greater of $1,500 (increased from $1,000 in the previous HO Program edition - 03 22 Change) or 10% of the amount written under Coverage C.

Example: Tara recently divorced. She bought a dream home and insured it under a Comprehensive Form HO policy. Tara’s an industrial artist and, over several months, has created a lot of large projects. After running out of space, she rented a locker at a storage facility to store them. She mentions to her insurance agent that, at a guess, she probably has about $32,000 in property kept in her locker. Her agent makes an appointment to discuss additional coverage since, as is, her policy would only provide a maximum of $14,800 (10% of her policy’s Coverage C) in protection.

Property that is in storage because the insured dwelling is being repaired, renovated, or rebuilt and, because of this activity, the dwelling is not suitable for containing the property is not subject to this limitation. In such cases, the full Coverage C limit is available. In order to prevent a compounding of limitations, stored property that is usually located away from the insured’s primary residence is not subject to this limitation because it would be subject to the Other Residence limitation in item a. above.

This coverage was introduced under the ISO Homeowners Program 05 11 Edition. It is a substantial reduction of coverage. Earlier editions did not include a limitation so the entire, applicable, Coverage C limit would have been available.

3. Special Limits of Liability

The Comprehensive form includes a number of classes of personal property that have specific monetary limitations. You should notice that the categories involve different classes or property that, due to their nature, are highly susceptible to loss or destruction. These limitations are sub-limits that do not increase the personal property insurance amount that appears on the policy declarations.

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

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

money	bank notes	bullion
gold other than goldware	silver other than silverware	platinum other than platinumware
coins and medals	scrip	stored value and smart cards

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

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

· securities

· accounts

· deeds

· evidences of debt

· letters of credit

· notes other than banknotes

· manuscripts

· personal records

· passports

· tickets and stamps.

Note: This limit applies to valuable papers no matter the medium in which they exist (i.e., paper or electronically). This modest limit includes the cost to research, replace or restore the information from the lost or damaged material.

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

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

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

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

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

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

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

This sub-limit increased from the 05 11 edition amount of $1,500. The limited coverage applies to jewelry, watches, furs, precious stones, and semi-precious stones that are stolen. Loss of such property caused by other eligible perils would not be subject to this limitation.

f. $3,000 SUB-LIMIT

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

This sub-limit applies to the following:

· loss by theft of firearms and related equipment

This sub-limit would include property such as:

· ammunition

· weapon loaders

· scopes

· gun locks

· gun safes

· miscellaneous firearm accessories including parts

g. $3,000 (Theft) SUB-LIMIT

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

This sub-limit applies to the following property, but only with it involves theft loss:

· silverware

· silver-plated ware

· goldware

· gold-plated ware

· pewterware

· platinumware

Note: This includes flatware, hollow-ware, tea sets, trays, and trophies made of or including silver, gold, pewter, or platinum.

h. $3,000 SUB-LIMIT

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

This sub-limit applies to the following:

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

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

i. $1,500 SUB-LIMIT

This sub-limit applies to the following:

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

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

j. $1,500 SUB-LIMIT

This sub-limit affects portable electronic equipment:

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

Note: A given electronic item must be portable and can have multiple power sources as long as one possible source is the motor vehicle.

k. $250 SUB-LIMIT

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

This is a specific limitation of coverage for items closely related to portable electronics referenced in item j. above.

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

- in or on a motor vehicle, and

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

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

Example: Wendy came back to her car after a wonderful, very long dinner with friends. She was dismayed to see that her car windows were smashed in and all of the car’s contents were stolen, including more than $800 in gaming components. When she turns in a claim for that property under her HO policy, she’s saddened further to find that only $250 of that part of the loss is eligible for coverage.

l. $2,000 SUB-LIMIT

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

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

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

Related Article: Personal Articles Floater

4. Personal Property Not Covered under Coverage C - Personal Property

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

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

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

b. Animals, birds, or fish

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

Example: The Smith family was wakened by a serious storm. Hurriedly, the family rushed into their fortified basement. When the storm blew over, they found their house completely flattened. Sadly, they also discovered their family pets. The animal loss is not eligible for coverage.

c. Motor vehicles

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

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

(1) Portable electronic audio, visual and data devices but only if they can be powered by a source that is NOT a motor vehicle’s electrical system.

Note: The exclusion of property that is powered exclusively by the motor vehicle is intended to eliminate coverage for equipment that should be covered more appropriately elsewhere such as under an auto policy which generally provides more complete coverage for permanently installed electronic apparatus. Although the exception is positive be aware that the items covered are subject to the sublimits 3.j. and 3.k. described above.

(2) This exclusion has another important exception. There is coverage for certain motor vehicles. The homeowner policy covers motor vehicles which are not subject to motor vehicle registration and meet one of the following criteria:

· Have the single purpose of servicing an "insured's" residence.

Example: A golf cart modified to carry lawn and garden supplies.

· Designed to assist the handicapped.

Example: Motorized wheelchair

The Comprehensive form policy states that the above exceptions to the motor vehicle exclusion apply only for vehicles used to service a residence premises and that vehicles for handicapped persons be designed to assist the handicapped. However, it’s uncertain whether this language tweaking will have any practical effect.

One reason for such precise language is to try to avoid gaps or overlaps between auto and home policies.

d. Aircraft

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

Note: This section of the Comprehensive Form policy may become more important and may face changes with the proliferation of drone ownership and use.

Example: Henry is an avid model plane hobbyist. He has expanded his collection and owns a small drone. It is powerful enough to lift items weighing up to 5 pounds. He has been known to pick up and deliver items and transport them among many homes in his neighborhood. The drone is NOT eligible for coverage when it is lost during a home burglary.

e. Hovercraft and parts.

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

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

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

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

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

There is an exception for such property that belongs to an insured’s relatives. The purpose of this exclusion is to make sure that the homeowner policy is not used to cover persons who should buy their own tenant’s or homeowners insurance.

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

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

Property covered under the Landlord Furnishings in Additional Coverages is an exception.

The policy’s intent is to restrict coverage to protect property that is used by the insured instead of giving full coverage to property that is used by other persons such as renters. This exclusion dovetails with the protection found under Additional Coverages, Landlord’s Furnishings.

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

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

j. "Business" data

The data can be stored in any of the following:

· Books of account, drawings, or other paper records

· Computers and related equipment

The policy refers to computers and related equipment instead of the obsolete reference to electronic data processing, tapes, wires, records, discs, and other software media.

Example: You have an insured who takes home the only accounting records from his business and stores them on his personal computer. When all the information on his computer is wiped out during an electrical storm, there is no coverage available for the restoration of his business data.

Related Article: ISO Valuable Papers Coverage Form

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

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

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

l. Water or steam.

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

Related Court Case: Pool Collapse Damage Not Covered

Example: The Jonkuls are away at a state park for most of a day. They return to find that the hot water supply line to their kitchen faucet had burst and sprayed water for hours. Their next water bill is more than double its normal amount. That expense is not eligible for insurance reimbursement.

m. Virtual currency

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

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

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

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

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

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

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

(4) Hemp Derived Goods and Products

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

(Defined term, newly added - 03 22 Change)

Coverage D - Loss of Use

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

1. Additional Living Expenses

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

Note: The extra expenses must involve the cost of maintaining an insured’s normal way of life such as renting hotel or motel rooms, laundry service, eating out or even gas expense if it can be attributed to being created by an insured loss.

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

A time limit controls the payment of these expenses. Payment will last until the damaged property is repaired or replaced, or until the household has found a new, permanent residence, whichever occurs first. This part of the additional coverage was slightly edited, likely in an attempt for more clarity. (03 22 Change)

2. Fair Rental Value

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

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

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

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

3. Civil Authority Prohibits Use

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

Example: Kimmy’s neighbor’s home is raided by the police because it was being used as a meth lab. The police arrange to have the home decontaminated. Because the process is dangerous, the police orders Kimmy’s family to live elsewhere for a couple of weeks. While that is the same coverage period provided by the Comprehensive Form policy, no coverage is available. The reason for the move is not a situation that qualifies for coverage.

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

4. Loss or Expense Not Covered

There is no coverage available due to the cancellation of a lease or an agreement.

Example: A windstorm fells a tree against Laura’s home, which caves in a large section of wall. It is a spacious, ranch-style home and she rents out a master bedroom. The renter finds a new apartment because of delays in repairs. Laura can’t make a claim for her loss of three months’ rent.

Though no specific reference was added, it is likely that this provision would include arrangements deemed to be home-sharing host activities.

The policy language advises that the ending of a given policy period does not affect the application of these coverages under a given loss.

E. Additional Coverages

Section I of the Comprehensive form policy provides several coverages in addition to coverage parts A through D.

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

1. Debris Removal

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

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

Example: Chuck’s home caught fire and the responding fire department tossed a lot of their smoke and fire-damaged furnishings onto Chuck’s front yard to make sure that the fire threat was extinguished. The costs to remove the furnishings from the yard qualify for coverage under his policy.

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

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

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

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

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

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

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

- Damage a covered structure

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

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

Note: The limit for any one loss is $1,500 for any one tree but only $3,000 for all fallen trees (increased from previous limits of $500 and $3,000 respectively). (03 22 Change). While the increased coverage helps, it would still be quite inadequate at a site where debris consists of a large number of felled trees. Though the coverage amount is modest, it still offers some protection to events that are commonplace, so it should be a valued feature.

2. Reasonable Repairs

If covered property is damaged by a covered peril, this additional coverage will pay the reasonable cost an insured incurs for protecting the property from additional damage. Coverage includes reimbursement for repairing other damaged property. Remember, in order to qualify for this additional coverage, the expenses must involve covered property that is damaged by an eligible cause of loss. This coverage does NOT increase the limit of insurance that applies to the covered property AND the insured is still obligated to protect the property from further damage per other policy conditions.

Example: Buying and installing tarpaulins to cover a roof that was breached by a felled tree limb.

3. Trees, Shrubs and Other Plants

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

· Fire or lightning

· Explosion

· Riot

· Civil commotion

· Aircraft

· Vehicles not owned or operated by residents the insured household

· Vandalism

· Malicious mischief

· Theft

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

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

4. Fire Department Service Charge

This coverage pays up to a maximum of $500 for an insured who has a contract or agreement to pay a fire department a service charge when the fire department is called to save or protect covered property from a covered peril. However, the property MUST be located beyond the limits of the city, municipality or protection district furnishing the fire department response.

This is considered to be additional insurance and no deductible applies to this coverage.

Related Article: Fire Department Service Charges

5. Property Removed

If covered property is being removed from premises that are endangered by a covered peril, the property moved is covered for any direct damage for a maximum of 30 days. This additional coverage does not affect the insurance limit that applies to the covered property. However, it does provide temporary protection that is much broader than the normal policy coverage.

Note: Many sources of damage are excluded by the Comprehensive form policy; however, during a maximum 30-day window during which endangered property has been removed, coverage applies to ANY source of DIRECT damage, such as transportation perils.

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

6. Loss Assessment

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

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

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

Example: Randi lives in Airy Acres, an exclusive development. She receives a letter saying that she, along with all of the other homeowners in Acres, is being assessed $950. Two weeks earlier, the area experienced earthquake tremors. It turns out that the lining of the development’s in-ground pool was cracked by the activity. The association’s property policy does not cover the loss, so the assessment was made. Randi sends in her share to the association and then files a claim to her insurer. She’s in no mood to go swimming when she learns that the assessment doesn’t qualify for reimbursement since it was excluded.

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

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

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

7. Collapse

This protection applies to items eligible under Coverage A and Coverage B. This provision is one that has long caused confusion. It’s length is likely due to the ongoing difficulty in providing a clear explanation of coverage intent.

a. The provision opens with a statement that coverage is only meant to respond to loss involving abrupt collapse. Since the form is making this distinction, it may have made more sense to title this item - 8. Abrupt Collapse.

b. The Comprehensive form policy includes an explanation of what is meant by collapse. Collapse is explained as an abrupt falling down of an entire building or part of a building. The collapse has to be severe enough to make the building or part of the building unusable for residential purposes.

c. Neither a building nor a building part that is in danger of collapsing NOR a part of a building which remains standing is considered as being in a state of collapse. The nonexistence of a collapse condition applies even when the remaining structure shows evidence of cracking, bulging, and sagging, bending, leaning, settling, shrinking, or expanding.

Example: Claude has lived in his home for 8 years and, during that time, it has been insured with a Comprehensive Form HO policy. He notices that large cracks have appeared in the floor of his home’s attached garage. He contacts his insurance agent about making a claim. His agent gives him the bad news that, as the cracks are due to settling, it would not be covered by his policy.

d. This additional coverage protects against tangible damage to covered property from the total or partial collapse of a building caused only by one or more of the following:

(1) Perils insured against in the Comprehensive Form’s Coverage A and Coverage B

(2) Hidden decay, however, if an insured has knowledge of decay, resultant collapse loss is disqualified from coverage

Example: Jared was incensed that the insurer that provided his Comprehensive Form HO policy had sent a letter turning down his claim. His home had more than $7,000 in damages from the collapse of a staircase and a wall. The letter included the insurer’s justification. Jared had revealed to the insurer that he knew the area underneath the stairs was damaged by an ongoing plumbing leak that he never had repaired.

(3) Unseen insect or vermin damage

Note: Under items (2) and (3), coverage is barred if any insured is aware of such damage before a collapse occurs.

(4) Weight, whether consisting of contents, equipment, animals, or people

(5) Weight of accumulated rooftop rainwater

(6) Use of poor-quality material or improper methods for construction, remodeling, or renovation. However, any resultant collapse has to occur in the midst of such activity.

e. If property such as awnings, bulkhead, cesspools, decks, dock, drains, fence, flues, foundation, patio, pavement, pier, retaining wall, septic tank, swimming pool, underground pipe or wharf suffers a collapse loss because of the sources specifically listed under items (2) through (6) above, no coverage applies. An exception is granted for such when it is because of the direct total or partial building collapse.

f. This coverage does not affect the amount of listed coverage applicable to any given class of covered property.

Related Court Cases:

“Collapse Held Covered Only According to its Popular Meaning”

“Insect Damage Not Collapse Unless Total”

8. Glass or Safety Glazing Material

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

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

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

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

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

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

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

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

9. Landlord's Furnishings

The Comprehensive Form Policy protects against damage to a landlord’s furnishings that is caused by the perils shown under Coverage C - Personal Property unless the loss is due to theft.

A maximum of $3,000 per apartment is available to protect the insured’s property that is located in areas of the residence premises that are rented (or are available for rental) to other persons. This additional coverage part also states that the $3,000 per apartment limit is the maximum that can be recovered, regardless of the number of appliances, carpeting or household furnishings that are damaged or destroyed in a single loss.

(Increased from previous limit of $2,500 - 03 22 Change.)

Note: This wording appears to address the situation of premises suffering a loss to more than one area that is either rented or available for rent. It acts to control this loss exposure. However, this coverage part could be found to be ambiguous since the term, apartment, is not defined.

The damage to a landlord’s furnishings must be caused by these perils:

a. Fire or lightning

Related Article: Dwelling Policy Program Perils

b. Windstorm or hail

What Windstorm or Hail Does Not Include

Windstorm or hail does not include loss to property contained in a building when the loss is caused by rain, snow, sleet, sand, or dust. This is the case unless the direct force of wind or hail damages the building, causing an opening in a roof or wall and the rain, snow, sleet, sand, or dust enters through this opening. Note that a closed window or door is considered part of a structure’s wall. While blowing a door open is not “creating an opening,” blowing a door off its hinges would qualify as “creating an opening.”

Coverage Restriction for Windstorm or Hail

This peril includes loss to watercraft of all types and their trailers, furnishings, equipment, and outboard engines or motors, but only while those items are inside a fully enclosed building.

Related Article: Dwelling Policy Program Perils

c. Explosion

This protection includes both internal and external explosions.

Related Article: Dwelling Policy Program Perils

d. Riot or civil commotion

In other words, this is basically vandalism coverage involving large crowds. Note that the reason for the riot or commotion is unimportant.

e. Aircraft, including self-propelled missiles and spacecraft

This peril will likely see new developments with emerging risk of drones. Losses involving personal use of drones typically have to do with invasion of privacy or accidental injuries.

f. Vehicles

g. Smoke

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

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

h. Vandalism or malicious mischief

Stephanie’s home is insured under a Comprehensive Form HO policy. She rents out part of her home that was converted to a small apartment which includes a sleeping area, bath, and a small kitchen. Her tenant reports a loss that affected much of the apartment’s furnishings owned by Stephanie. It turns out that the tenant’s ex-boyfriend, upset over being dumped, broke into the apartment, and slashed its upholstered items and broke tables and a countertop range. The Landlord Furnishings provision should cover part of the loss.

Related Court Case: Insurer Had to Pay for Clean-Up Costs – Has an interesting twist on interpreting this peril.

i. Falling Objects

The peril of falling objects does not include loss to property contained in a building unless the roof or an outside wall of the building is first damaged by a falling object. Any damage to the falling object itself is not included.

j. Weight of ice, snow or sleet that causes damage to property contained in a building.

This coverage is for personal property, not for building damage. If a heavy accumulation of snow caused a section of a roof to fall in and, miraculously, didn’t damage any personal property, no coverage (under this section) is granted for the loss.

k. Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire protective sprinkler system or from within a household appliance.

This long-winded peril does not include loss to the system or appliance from which the water or steam escaped. There is no coverage when the discharge or overflow is caused by or results from freezing except as provided by this Additional Coverage’s freezing peril. No coverage is available for damage on the "residence premises" caused by accidental discharge or overflow which occurs off the "residence premises." Finally, this peril excludes damage from mold, wet rot, or fungus UNLESS such damage is hidden by walls, floors, or ceilings of a covered structure.

This peril is clarified further with the notation that none of the following is considered to be a plumbing system or a household appliance:

· Sumps

· Sump pump or related equipment

· Roof drains

· Gutters

· Downspouts or similar fixtures or equipment.

l. Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire protective sprinkler system, or an appliance for heating water.

As with the accidental discharge or overflow of water or steam peril, there is no coverage for loss due to freezing. For instance, if a home’s steam heating system burst and no longer provided heat throughout the home, an additional, independent loss could be created by other parts of the covered property becoming subject to freezing temperatures. This peril merely excludes coverage from this event.

m. Freezing of a plumbing, heating, air conditioning, or automatic fire protective sprinkler system or of a household appliance

In order for protection to apply to freezing loss, this peril requires that an insured either takes care to maintain heat in the building or must shut off the water supply and drain applicable appliances of water. However, the water supply and adequate heat MUST be available if the home has a protective sprinkler system. Ironically, the requirement to maintain water supply and heat for a sprinkler system would prevent an insurer from denying a loss to an appliance that freezes up and causes personal property damage.

Example: The Fieldstones come back from their three-week ski vacation and find a mess in their home. During their time away, their area experienced extended sub-zero weather. A water supply pipe for their sprinkler system froze, burst, and flooded their home. Fortunately, the damage to their home is covered under their Comprehensive Form HO policy.

n. Sudden and accidental damage from artificially generated electrical current.

This very broad peril is modified so that it doesn’t apply to certain items that are commonly damaged, but can be easily protected, from this peril. It also does not protect against routine replacement of items that can get “blown out” by a power surge. Tubes, transistors electronic components or circuitry that are a part of any of the following are specifically not covered for damage that would otherwise be covered under this peril:

· Appliances

· Fixtures

· Computers

· Home entertainment units

· Other types of apparatus

o. Volcanic eruption other than loss caused by earthquake, land shock waves or tremors.

101. Ordinance or Law

a. This coverage feature allows an insured to use a maximum of 10% of the Coverage A limit to pay for increased replacement or repair costs that are caused by a law or ordinance. The law or ordinance has to be the type that controls any of the following:

· Covered property that is damaged by a covered cause of loss and which has to be constructed, demolished, remodeled, renovated, or repaired

· Destroying and rebuilding an undamaged part of covered property when a law or ordinance requires its demolition because another part of the covered property was damaged by a covered peril

· Renovating and removing or remodeling an undamaged part of covered property when a law or ordinance requires such action because similar work must be performed on another part of the covered property which was damaged by a covered peril

In other words, if a covered residence is damaged or destroyed, the policy provides up to 10% of the Coverage A insurance limit which deals with the increased loss costs created by local laws to handle the manner in which damaged or destroyed real property is rebuilt or replaced.

Example: The top floor of Ned’s home is demolished by straight line winds. He receives a reminder notice of a local ordinance. Because more than 45% of his home was damaged, all of the home’s plumbing must be replaced with PVC pipes. This adds $11,000 to the cost of his repairs. Ned’s home is insured for $175,000, so he has up to $17,500 to help with this substantial, added cost.

b. Part or all of this coverage may be used by an insured to pay for the increased cost to remove debris created while constructing, demolishing, renovating, remodeling, repairing, or replacing property described in 11a.

c. This coverage does not include the following:

· Any decreased value of covered property that is created by the ordinance or law

· Any costs required of an insured for handling, testing, and/or monitoring pollutants (as is described in the policy) related to a loss to covered property or which occurs at the covered location.

This coverage is an additional amount of insurance, so payment under this provision does NOT affect the amount of coverage that appears under Coverage A - Dwelling.

11. Grave Markers

This coverage option permits an insured to use up to $5,000 to pay for a headstone or mausoleum that is damaged by any of the perils that qualify under Coverage C - Personal Property. The coverage applies to such property, whether it is on or away from the insured premises. However, any payment under this coverage part reduces the amount available under the Coverage Part that responds to a given loss.

SECTION I—PERILS INSURED AGAINST

A. Coverage A - Dwelling, Coverage B - Other Structures and Coverage C - Personal Property

The insurer’s obligation under these coverage parts is to protect eligible property for any source of direct loss. This means that indirect loss does not qualify for coverage under Coverages A, B and C.

This portion of the policy goes on to list sources of loss that are excluded. Specifically, no coverage is provided for:

1. Causes of loss that are listed under Section I - Exclusions.

Note: The excluded sources are ordinance or law, earth movement, water, power failure, neglect, war, nuclear hazard, intentional loss, and governmental action. There is also no coverage for various concurrent causation events.

2. Loss involving any of the following:

a. Loss caused by freezing of a plumbing, heating, air conditioning, or automatic fire protective sprinkler system or of a household appliance, or by discharge, leakage, or overflow from within the system or appliance caused by freezing.

However, there is coverage if the insured takes the time to do either of the following:

· Keep the building heated

· Shut off the systems’ or appliances’ water supply and drain the system/appliance.

Language also states that, if the building has an automatic fire sprinkling system, the system must remain active and the property must be heated so that it doesn’t interrupt the sprinkling system’s operation.

This exclusion also specifies that sumps, sump pumps or related equipment, roof drain, gutter, downspout or similar fixtures or equipment are not considered to be plumbing systems or household appliances. Therefore, freezing losses related to such equipment or drainage systems are NOT subject to this exclusion.

b. Loss caused by cold weather conditions such as freezing, thawing, pressure or weight of water or ice, whether driven by wind or not, to any for the following:

(1) Fence, pavement, patio deck, swimming pool

(2) Footing, foundation, and other structures or devices that support a building or structure

(3) Retaining wall or bulkhead which does not support a building or structure

(4) Pier, wharf, or dock.

This exclusion clarifies that such property is constantly exposed and particularly vulnerable to loss from freezing, so they are not eligible for coverage. Providing protection to such property against freezing conditions and the pressures of wintry conditions would be akin to a maintenance contract rather than an insurance policy. Property such as patios, pools, wharves, and fences are virtually certain to be worn down and damaged by cold weather conditions. The homeowners policy is intended to cover accidental events, not virtual certainties.

c. Any thefts

(1) No coverage exists when it involves property theft related to any use of a covered residence that qualifies as under the policy’s definition of a home sharing host activity. (03 22 Change).

(2) No coverage is available for property theft that occurs in a dwelling or to a dwelling during the time that dwelling is being constructed, including theft of materials or supplies intended for that dwelling’s construction.

Once the dwelling is finished AND is occupied (as a residence), this exclusion becomes inapplicable.

Note: Under part 2. of Coverage A, there is insurance for building materials; however, such coverage does not include THEFT protection.

Building materials and supplies are VERY attractive targets for theft. This exclusion forces other parties (insureds and building contractors) to:

· take precautions to safeguard such property,

· deliver and incorporate material as needed, or

· seek specific coverage for the exposure (such as endorsing additional coverage or buying a builder’s risk policy)

If either party decides to store such materials on the insured premises, they also have to handle the risk of it being stolen.

d. There is no coverage for any of the following:

· Mold

· Fungus

· Wet rot

But the policy does make an important exception. The policy WILL provide coverage for mold, fungus, or wet rot if the damage is hidden in the home’s walls, ceilings, or floors. However, the hidden damage has to be due to the accidental discharge or overflow of water or steam from a plumbing or air conditioning system, a household appliance, or a fire sprinkler system. Coverage for hidden damage from accidental discharge and overflow also exists when caused by several sources located away from the residence premises, such as storm drains, water pipes, steam pipes, or sewer lines.

This exclusion also specifies that sumps, sump pumps or related equipment, roof drain, gutter, downspout or similar fixtures or equipment are not considered to be plumbing systems or household appliances. Therefore, hidden rot or decay losses related to such equipment or drainage systems do not qualify for coverage.

e. All of the following are also barred from coverage under the Comprehensive form policy:

(1) Wear and tear, marring, deterioration

Example: An insured turns in a claim for his garage door which, a day earlier, suddenly slammed down on the ground and is damaged beyond repair. Investigation of the loss found that the 15-year-old garage door spring had suddenly broken and the door fell with the loss of support. The damage resulting from the aged steel spring breaking is not covered.

(2) Inherent vice, latent defect, mechanical breakdown (this refers to ANY quality or characteristic found in property that causes it to damage or destroy itself)

(3) Smog, rust or other corrosion, or dry rot

Note: Dry rot does not have the exception that applies to wet rot in item 1.d. above.

(4) Smoke from agricultural smudging or industrial operations

Example: Klara and her neighbors live next to a factory owned by Sausalita Sally Inc. She turns in a claim after she spends $1,110 to have the outside of her home power washed. The damage was due to the smoke from Sausalita’s operations. The factory has been repeatedly cited for using inadequate filters for its factory exhausts. Klara’s Comprehensive form policy will not cover this loss.

(5) Discharge, dispersal, seepage, migration, release, or escape of pollutants. However, the pollution damage IS COVERED if it is caused by one of the eligible perils insured against under Coverage C - Personal Property. Pollutants are described as any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste includes materials to be recycled, reconditioned, or reclaimed.

The difficulty with this exclusion is that it can be applied very liberally. An insured will find it hard to make a claim for a loss involving common substances found in homes that are classified as pollutants, if the loss was not triggered by the sources of loss named under Coverage C, such as fire, wind, or explosion.

(6) Settling, shrinking, bulging, or expansion, including resultant cracking, of pavements, patios, foundations, walls, floors, roofs, or ceilings; footings (the part of the foundation that sits directly upon earth) and bulkheads (a retaining structure of wood, steel or reinforced concrete that protects a shore or harbor).

(7) Birds, rodents, or insects

(8) Animal activity related to nesting, infestation, secretions and waste discharge or release.

(9) Animals owned or kept by an "insured."

Exception to 2.e.

This paragraph explains that the dwelling, other structures, and personal property are all covered for damage caused by the accidental discharge or overflow of water or steam from the following:

· A storm drain, water pipe, steam pipe or sewer pipe that is located away from the residence premises

· A plumbing, heating, air conditioning or fire sprinkler system or household appliance on the residence premises.

Coverage includes the expense of tearing out and replacing any necessary part of the covered structure when the action is needed to repair the system or appliance.

It is IMPORTANT to note that coverage for demolishing and replacing property is available ONLY when water or steam has actually damaged the property.

The Comprehensive form Policy does not protect damage to the source of the escaped water or steam. Further, under this provision, a sump, sump pump, roof drain, gutter, down spout, or similar property is NOT considered to be a plumbing system or a household appliance.

Exclusion A.3. that is provided in the section called Section I – Exclusions, does not apply to any water loss that IS covered under items d. and e. within this Section I – Perils Insured Against section.

Finally, this section states that it will cover ensuing losses from items excluded in 2.a.- 2.e. that are not PRECLUDED by any other policy provision. While “preclude” has a common definition that makes it a synonym of “exclude” or “except,” it is not commonly used. Adding this term along with the many references to exclusions and exceptions may make it even more difficult for this statement to be easily understood by insureds. This is especially so considering that the term “preclude” is making its debut in the same paragraph that contains “ensuing,” another term that confuses insurance purchasers.

It is very important to note that items excluded in 1. in this Section I – Perils Insurance Against Section are not subject to this exception. This follows with the anti-concurrent nature of those exclusions.

B. Under Coverage A - Dwelling Coverage and Coverage B - Other Structures

This portion of the policy goes on to list sources of loss that are excluded. Specifically, no coverage is provided for loss caused by or involving:

1. Vandalism and malicious mischief.

a. No coverage exists when it involves vandalism or similar loss related to any use of a covered residence that qualifies under the policy’s definition of a home sharing host activity. (03 22 Change).

b. This exclusion takes effect if the insured premises is vacant for 60 days before the loss. Further, the exclusion bars coverage for losses that ensue when caused by intentional and wrongful acts committed during vandalism or malicious mischief.

“Vacant” does not apply to homes that are under construction (including projects involving remodeling, renovation or repairing).

Example: Kelly has a Comprehensive form policy which runs from 8/1/21 to 8/1/22. On March 1, she moves to Bolivia for 6 months, taking her furnishings and personal property. On July 4th, several neighborhood bad boys break into the house through a basement window. They trash the interior and, just as they are leaving, one of the miscreants empties a can of charcoal lighter fluid into the living room and lights a match. Because the home was vacant for more than 60 days AND the fire loss was caused by vandals, the entire loss is ineligible for coverage.

2. Collapse

No protection exists for this source of loss, EXCEPT for the detailed description of coverage for collapse that is found in the policy’s Additional Coverage Section (please refer above to item E.8. under Section I-Property Coverages). The exclusion wording makes another, reference to what is meant by collapse and it restates precisely the situations that are ineligible for coverage.

C. Under Coverage C – Personal Property

This portion of the policy goes on to list sources of loss that are excluded. Specifically, no coverage is provided for:

1. Broken fragile items such as (but not exclusive to) bric-a-brac, eyeglasses, glassware, marble, porcelains, or statuary.

The exclusion does NOT apply when the broken items involve bronzes, cameras, jewelry, photographic lenses, or watches. Further, protection is granted when such breakage is due to:

a. Fire or lightning, windstorm, or hail

Related Article: Dwelling Policy Program Perils

b. Smoke

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

c. Explosion, riot, or civil commotion

Note that the reason for the explosion, riot or commotion is unimportant.

d. Aircraft, vehicles, vandalism, and malicious mischief

e. Either total or partial building collapse

f. Water, but only when due to circumstances that are NOT excluded under other parts of this policy.

g. Theft (including theft attempts)

h. Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire protective sprinkler system, or an appliance for heating water.

2. Damage related to temperature or atmospheric extremes.

An exception exists. Coverage is provided when damage to covered property is directly due to the action of hail, rain, sleet, or snow.

3. Damage in the course of property refinishing, repairs, or renovation – but doesn’t apply when this activity involves furs, jewelry, or watches

4. Damage to watercraft that collides, sinks, swamps or is stranded

This exclusion applies to the watercraft and its trailer, equipment, motors/engines, and furnishings.

The exception to this exclusion is when the collision is with a land vehicle.

5. Damage due to any person, group, organization or government unit’s actions or decisions, including failing to act.

However, an exception exists for damage for ensuing loss as long as the policy does not, elsewhere, exclude that source of loss.

Example: An insured turns in a claim for flood damage to his home’s major appliances and furniture. He later explains that he had hours to move the property away from the flood but a manager at the area’s only truck rental refused to rent a truck when he shared that he planned to enter the neighborhood threatened by imminent flooding. The insurance company denies the loss because flood is an excluded loss.

6. No coverage exists when it involves vandalism or similar loss related to any use of a covered residence that qualifies under the policy’s definition of a home-sharing host activity. (03 22 Change).

EXCLUSIONS—SECTION I

There is no insurance protection for either direct or indirect loss that is due to any of the sources of loss that appear in this policy section. The loss is excluded:

· regardless of any other cause or event contributing concurrently or in any sequence to the loss, and

· regardless of whether the damage is localized or widespread.

Another feature meant to clarify the exclusions is the mention that several sources of loss are excluded regardless of whether it is connected to human, animal or natural (force of nature) activity. This addition appears to be the type that, rather than make a point clearer, may result in creating new angles of attack for parties seeking coverage loopholes. For instance, would a loss that occurred because of some mechanical or computer-related error be interpreted as a human cause of loss?

A. Under this part, the exclusions apply to all parts of the Comprehensive form policy. Specifically, there is no coverage for:

1. Ordinance or Law

This exclusion refers to any loss or expense created by the enforcement of any ordinance or law regulating the construction, repair, or demolition of a building or other structure, regardless whether a physical loss takes place.

However, this exclusion does not apply to the coverage granted under Additional Coverage 11. Ordinance or Law.

Besides construction-related costs, the exclusion also applies to any loss in property value or to any pollution-related loss (including expense associated with monitoring, testing, or remediation of polluting events).

2. Earth Movement

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

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

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

3. Water

The Comprehensive form policy does not cover a loss caused by any of the following:

a. Flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind.

b. Water which backs up through sewers or drains or which overflows from a sump.

c. Water below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool, or other structure.

d. The excluded situations mentioned under in items a. b. and c. above also apply to damage caused by waterborne material. So, a distinction exists between damage caused by water and damage caused by items borne (carried) by water. The reference, allegedly, is intended make the exclusion definitive in barring coverage for damage caused by debris-laden water or sewage. This exclusion applies regardless of whether it is connected to human, animal or natural (force of nature) activity.

Example: A stream near Courtney’s house floods after a week of steady rain. The side wall of her shed is caved in by a large tree trunk that was carried by flooding water. Courtney files a claim for both the water and trunk-related damage. Her insurer denies the entire claim, explaining that they consider all of the loss to be due to flooding.

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

· Dams

· Levees

· Seawalls

· Other boundaries

· Other containment systems

The exclusion applies to all property that is referenced under the policy’s personal property section (Coverage C) while it is on any premises controlled by a named insured (whether the control is via ownership, possession, rental, occupied, etc.). Further, the exclusion is not affected by the fact that a given loss was, on any level, due to weather conditions. A narrow exception exists for such property that is not located on any premises controlled by a named insured.

Example: James used to be an avid outdoors enthusiast but has given it up. A friend has just discovered the joy of the outdoors and James lends her several thousand dollars’ worth of equipment for her to use for a camping adventure. The friend’s campsite is destroyed during a flashflood and all of the equipment is lost. James is upset, but later is buoyed when he finds that, although the loss involved flooding, the property is eligible for coverage under his Comprehensive Form HO policy.

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

4. Power Failure

This exclusion involves losses caused by a failure of power or other utility service. However, the failure has to take place off the "residence premises." If a covered cause of loss (such as fire) occurs on the "residence premises," after the excluded power failure, the policy will pay only for that ensuing loss.

5. Neglect

This exclusion bars coverage for any failure on the "insured’s" part to use all reasonable means to save and preserve property at and after the time of a loss. This exclusion fits perfectly with the intent of insurance to cover losses that are accidents or, in other words, which are beyond the control of the policyholder. It is logical to exclude payment for losses that could have been prevented by an insured taking care to protect his or her property. Remember, though, that the exclusion is for failure to take ordinary, rather than heroic, measures.

6. War

War is considered to include any of the following and any consequence of any of the following:

war	undeclared war	civil war	warlike act by military force or personnel
rebellion	revolution	insurrection	destruction, seizure or use for a military purpose

Even if a nuclear event is completely accidental, discharge of a nuclear weapon will be treated as a warlike act.

7. Nuclear Hazard

This exclusion consists of the event as defined and to the degree explained in the nuclear hazard clause of SECTION I—CONDITIONS.

8. Intentional Loss

This exclusion refers to any loss that is due to any intentional act of any insured covered by the Comprehensive form policy. An intentional act includes any act that is meant to create a loss. Any conspiracy to commit such an act also qualifies as an intentional act. The exclusion applies even to innocent insureds (insureds who do not participate in an intentional act, including its planning). Adding the reference to innocent insureds is a response to decisions in various jurisdictions that obligated insurers to settle certain intentional losses.

Related Court Case: Accidental Injury from Deliberate Act Covered

9. Governmental Action

The policy does not allow coverage for property that is described in Coverage parts A - Dwelling, B - Other Structures and C - Personal Property, which is destroyed or seized under the orders of any government unit or public authority. There is a very important exception connected to this exclusion. If the government action or order is related to a fire or the prevention of the spread of fire, any loss caused by the fire IS eligible for coverage.

B. The Comprehensive Form Policy bars protection to the property described under Coverages A and B for the sources of loss listed below.

While excluding several additional sources of loss, this section grants an important exception. The Comprehensive form policy states that ensuing losses may be covered if they are not PRECLUDED by any other policy provision. According to Webster’s Encyclopedic Unabridged Dictionary, preclude is defined as something to prevent the presence, existence, or occurrence of; make impossible or to exclude or debar from something.

The Comprehensive form policy does not provide coverage for:

1. Weather conditions

This exclusion only applies if weather conditions contribute in any way with a cause or event excluded under Section I—Exclusions, Paragraph A. The lead-in language that applies to the following 9 exclusions explains that direct and indirect loss is not covered. Loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.

2. Acts or decisions

The acts or decisions exclusion includes the failure to act or decide on the part of any person, group, organization, or governmental body.

3. Faulty, inadequate, or defective

This includes planning, zoning, development, surveying, siting, design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction materials used in repair, construction, renovation or remodeling, or maintenance of part or all of any property whether on or off the "residence premises.”

Such losses are barred from coverage whether they occur on or off the premises.

SECTION I—CONDITIONS

A. Insurable Interest and Limit of Liability

Regardless of the number of people who have an insurable interest in the property covered, the insurance company providing the comprehensive form HO coverage is limited in its response. It won’t pay an "insured" more than the amount of that "insured's" interest applying at the time of loss. It also will pay no more than the limit of liability for the covered property.

Specifically, the Comprehensive form policy is only obligated to pay the policy limit that applies to a covered person who has suffered a loss to covered property.

B. Deductible

This section merely says that the insurer will pay the portion of an eligible loss that exceeds the applicable deductible and that payment is subject to the given limit of insurance.

When, in a given situation, more than a single deductible applies to a loss; the insurer will only use the highest, applicable deductible.

This provision also states that this item may be pre-empted by specific deductible language that applies to other coverage parts.

C. Duties After Loss

This provision reinforces an insured’s prime obligation to strictly comply with its requirements. It mentions that if an insured fails to perform the duties, and if that failure adversely affects the insurer, the insurer is no longer obligated to provide coverage. An insured's cooperation is critical to an insurance company's ability to perform under the insurance contract.

Related Court Case: Uncooperative Insured Can’t Seek Arbitration

In case of a loss to covered property, the named insured, the insured seeking coverage, or a representative of either party is responsible for:

1. Giving prompt notice to the insurance company or the insurance company’s agent.

Related Court Cases:

Notice to Broker Was Not Notice to Insurance Company

Notice to Independent Agent or Broker Held Not to Be Notice to Insurer

2. Notifying the proper authorities in case of loss by theft.

3. Protecting the property from further damage

If repairs to the property are necessary, the insured is required to:

Make reasonable and necessary repairs to protect the property
Keep an accurate record of repair expenses because most are covered under the policy.

If a homeowner kept materials or supplies on hand to help protect the covered property from loss, the policy should also protect such property if it were stolen or destroyed by a listed or eligible cause of loss.

Example: The Barkersons’ home was vulnerable to loss when, during a thunderstorm, the roof was breached by a fallen tree. The Barkersons hired a handyman neighbor to make some temporary repairs and to cover the hole in the roof. The neighbor bought the necessary supplies and made the repairs. Later, after receiving the neighbor’s repair bill for $2,700, the insurer advised the Barkersons that, as the bill had absolutely no details regarding materials, costs, or labor, it would only pay $900 for the work. The insurer based its offer after inspecting the repair job and making an estimate based on local material and labor costs.

5. Cooperate with the insurance company in the investigation of a claim.

This item acts as an important reminder that the insured must be an active and willing participant in the claims process.

Related Court Case:

Breach Of "Cooperation" Condition by Insureds Held to Warrant Insurer's Denial of Burglary Claim

6. Prepare an inventory of damaged personal property.

The inventory must show the quantity, description, actual cash value and amount of loss. The “insured” should also attach any bills, receipts and related documents that will justify the figures reported in the inventory.

Example: Berny’s claim for a large fire loss is denied by his insurer. After several requests from his insurer to provide more information on this lost personal property, Berny refuses to share more than what he did immediately after the loss, sending a video of his possessions. It did not include any other documentation such as date of purchase, individual purchase costs or receipts. Berny merely claimed that his loss should be valued at $52,000.

This condition is unchanged from earlier editions of the Comprehensive form policy.

Related Article: Actual Cash Value Guide

7. As often as is required by the insurance company, the insured must do all of the following:

a. Show the damaged property.

b. Provide the insurance company with the records and documents that they request and allow them to make copies.

c. Submit to and sign an examination while under oath and without being in the presence of any other "insured.”

This condition may appear to be heavy-handed, but the insurer is in the vulnerable position of having to rely on the insured concerning the scope of the loss. The insurer is merely asserting its chances of getting accurate information for investigating a claim. Unfortunately, this condition often becomes a battleground between insurers and claimants. The interests of insureds may have been better served if this condition contained some wording that obligated an insurer to exercise courtesy and reasonableness when enforcing this provision.

8. The named insured must send to the insurance company, within 60 days after its request, a signed, sworn proof of loss which to the best of the named insured’s knowledge describes the following:

a. The time and cause of loss

b. The interest of all "insureds" and all others in the applicable property, including all available information on any property liens

c. Other insurance which may cover the loss

d. Information concerning any status changes affecting the property’s legal ownership (title) or occupancy that took place during the policy term

e. Any details on the damaged buildings regarding repair estimates and specifications

f. The inventory of damaged personal property described in an earlier part of this section

g. Additional living expense receipts and other information that can document a loss involving fair rental value

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

D. Loss Settlement

Any mention of replacement or repair cost does NOT include any expense created by any ordinance or law. The only exception is the coverage described under Additional Coverage E.10. Ordinance or Law. In light of this clarification, covered property losses are settled in the following manner:

1. The following types of property are paid at actual cash value at the time of loss but not more than the amount required to repair or replace:

a. Personal property

b. Awnings, carpeting, household appliances, outdoor antennas, and outdoor equipment. The exclusion is not affected if such property is attached to structures.

c. Structures that are not buildings (such as permanently installed playsets)

d. Grave markers and mausoleums.

Actual cash value is generally considered to be today’s replacement cost of the item minus depreciation.

Example: Jenny’s house is destroyed in a tornado. As part of her settlement, she receives $50 for the loss of her refrigerator/freezer. She thinks this amount is unfair and she provides documentation on that model’s current value. Her insurer agrees and sends her another $300 for that part of her loss.

2. Dwellings and other structures are covered at replacement cost without deduction for depreciation. However, any payment would be conditional upon the following:

a. At the time of loss, if the amount of insurance in this policy on the damaged building is 80% or more of the full replacement cost of the building immediately before the loss, the insurance company will pay the cost to repair or replace, after application of deductible and without deduction for depreciation. In no case will the insurance company pay more than the least of the following:

(1) The limit of liability under this policy that applies to the building

(2) The replacement cost of the portion of the damaged building, based on the building’s function and use of similar materials

(3) The amount sufficient to either repair or replace the damaged building

Under this section, it does not matter if the covered property is rebuilt at a new location. Such a move would be considered inconsequential to the operation of the policy settlement. The payment under the policy would be limited to the maximum eligible cost that would exist if damaged property were rebuilt at its original location. The additional cost would belong to the policyholder.

b. The relationship of the amount of coverage carried on a damaged building to that building’s full replacement cost is critical. When a loss occurs, if the insurance limit is less than 80% of the building’s full replacement cost (before the loss), the insurance company isn’t obligated to pay more than the limit of insurance under the policy; further, the insurer is limited to paying the greater of:

(1) The damaged building portion’s actual cash value

(2) That proportion of the cost to repair or replace, after application of deductible and without deduction for depreciation of the part of the building damaged, based on the ratio between the part of the limit carried on the policy and the amount equal to 80% of the replacement cost of the building.

c. The calculation of the 80% of the full replacement cost figure should not include the value of any of the following:

(1) Excavations, footings, foundations, piers, or any supports beneath the covered structure’s lowest basement floor

(2) If there is no basement then those supports described in c. (1) that are beneath the ground located within the foundation walls

(3) Underground flues, pipes, wiring, and drains

d. The insurance company pays no more than actual cash value until the actual repair or replacement is complete. Once it is complete, the insurance company will settle the loss according to the provisions discussed above. If, however, the cost to repair or replace the damage is less than 5% of the amount of insurance in this policy on the building and less than $5,000 (Up from $2,500 - 03 22 Change), the loss will be settled according to the provisions listed above, regardless of whether actual repair or replacement is complete.

e. An insured has the option not to worry about replacement cost loss settlement provisions and ask that his or her loss or damage to buildings be settled on an actual cash value basis. However, if the “insured” changes their mind, they have up to 180 days from the date of the loss to ask for any additional amount due according to a settlement based on the replacement cost. If the insured misses this 180-day window, the actual cash value settlement basis is their only reimbursement.

In several instances, there is specific mention that any payment obligations include a given policy’s applicable deductible. (03 22 Change).

This condition emphasizes the point that it is very important to accurately document the replacement cost of the covered property. Property that doesn’t comply with the Comprehensive form policy’s replacement costs provisions is subject to a tedious and complicated settlement process.

E. Loss to a Pair or Set

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

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

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

Example: Lorelei planned to sell a tea set she inherited from her grandmother. She had it on display in her home during a burglary. The thieves did not steal the set, but during the theft, they knocked over part of the set and the creamer and a cup were smashed. The insurer is unable to find replacements for the set. Lorelei is able to sell the incomplete set and her insurer pays the difference between it and what research indicated would’ve been the selling price of a complete set.

Note: This condition DOES NOT say whether the insurer has the option of paying the least or most expensive of the two options. However, it would be consistent with other settlement provisions of the policy that an insurer is likely to select the least expensive option.

F. Appraisal

If the “insured” and the insurer disagree on the amount of loss, either party can demand that the loss be appraised. In this process:

· each party chooses a competent, impartial appraiser no later than 20 days after getting the other party’s request for an appraisal,

· the two appraisers will choose an umpire

· each party has to share the cost of the judge and pay the entire expense for their own appraiser.

If the appraisers cannot agree upon an umpire within 15 days, either the insurer or the “insured” can ask that a judge be selected by a court of record in the state where the "residence premises" is located.

The appraisers have to submit separate opinions on the loss amount and an agreement (submitted to the insurer in writing) between any two persons (among the appraisers and the judge) becomes binding on both the insurer and the policyholder.

469_C406 Despite Coverage Dispute, Appraisal Is an Obligation

G. Other Insurance and Service Agreement

This represents a broader intent than the traditional other insurance provision since it addresses other sources of protection.

1. If a covered loss is also protected by other insurance, the insurer’s payment obligation is shared with the other coverage source. Specifically, the insurer becomes obligated to pay only its share of the loss. The share is determined by taking the total amount of available insurance and determining the insurer’s percentage of coverage.

2. If any valid service agreement applies to the covered property, this insurance is triggered once the amount available under the service agreement is paid. Service agreement refers to the following:

· Service plan

· Property restoration plan

· Home warranty

· Other warranties.

This condition applies even if, rather than being called a warranty or plan, the other source of coverage calls itself insurance.

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

Example: Joey’s home is covered by a comprehensive form policy. A few months after moving into his home, a fire starts in his garage. They discover that a malfunctioning pilot on his water tank overheated and caused the fire. The total fire loss is for $5,900. Joey’s insurer deducts $700 for the loss since the appliance warranty he purchased with the home will handle part of the loss.

H. Suit Against Us

This condition states that an insured can’t sue the insurer without fully complying with the terms and conditions under Section I of the policy. Further, any suit has to be filed no later than two years after the loss date. The intent of this provision is to make certain that an insured takes every course of action that is available and to use a lawsuit only as a last resort. It should be to everyone’s advantage if conflicts can be resolved without having to go to court. However, suits happen and if this alternative is chosen, the insured must file the action within two years of the loss date.

I. “Our” Option

“Our” refers to the insurance company. This condition obligates the insurer to either repair or replace the damaged property within 30 days after receiving the “insured’s” signed, sworn proof of loss. The insurer also has the option to use material that is similar in type or quality to repair or replace the damaged property. In other words, the insurance company is not obligated to pay a loss with cash. The insurance company can actually replace the damaged property with new or like property.

J. Loss Payment

The insurance company will adjust all losses with the named insured. The insurance company will pay the named insured unless some other person is named in the policy or has a legal right to receive payment. All losses will be payable 60 days after the insurance company receives the named insured’s proof of loss and after one of the following occurs:

1. The insurance company reaches an agreement with the named insured

2. An entry of final judgment is entered

3. The insurance company receives filing of an appraisal award.

This condition explains to the insured that the insurance company is only obligated to deal with persons who have a valid interest in the loss and not with disinterested third parties such as lawyers or independent brokers or specialists.

K. Abandonment of Property

The insurance company is not required to accept any property which is abandoned by the named insured. In other words, an insurance company is not automatically responsible for taking care of or disposing damaged property.

Example: Penny’s garage freezer’s wiring went bad and the short circuit burned it out. Penny receives a $300 payment on the four-year-old freezer and the insurer explains that the cost includes depreciation. Penny requests that her insurer take the freezer and she is told that she will have to get rid of the freezer on her own.

L. Mortgage Clause

1. When the policy’s declarations page includes a mortgagee, that mortgagee will be paid along with the named insured for any eligible loss involving property covered under dwelling coverage (Coverage A) or other structures coverage (Coverage B). The payment will be made according to the mortgagee’s insurable interest and, if there is more than one mortgagee, will reflect any order of precedence.

2. If the insurance company denies the named insured’s claim, that mortgagee may preserve its right to a loss payment by taking corrective action as described below:

a. The mortgagee notifies the insurer of any change in ownership, occupancy, or substantial change in risk of which it is aware

b. The mortgagee pays any premium due if the named insured fails to make the premium payment

c. The mortgagee provides the insurer with a signed, sworn statement of loss within 60 days of being told that this has NOT been done by the named insured.

In other words, when a mortgagee exists, an insured’s failure to comply with the policy conditions does NOT endanger the mortgagee’s recovery for a covered loss IF the mortgagee agrees to fulfill the policy conditions in place of the named insured. Further, if there are disputes involving a claim, the mortgagee assumes the ability to exercise the rights to appraisal or legal action against the insurer. However, the mortgagee is also obligated to the same terms: specifically, to comply with ALL policy provisions and to be subject to the same two-year time frame for filing a lawsuit.

3. If the insurer cancels or does not renew the policy, the mortgagee will be notified at least 10 days before the date cancellation or nonrenewal takes effect.

IMPORTANT: While this is the time frame appearing in the policy, the time limit and notification requirements are determined by laws of the state in which the policy is issued.

4. If the insurance company pays the mortgagee for any loss and denies payment to the named insured, the insurance company receives the mortgagee’s subrogation rights.

The insurer reserves the option of paying the mortgagee the entire principal balance on the mortgage along with any accrued interest. If the principal and interest are paid, the insurer acquires a full assignment and transfer of the mortgage. The transfer includes all securities that are held as collateral for the mortgage.

5. However, any subrogation won’t affect the mortgagee’s full claim.

M. No Benefit to Bailee

Through this policy provision, an insurer denies any policy benefit to entities (personal or commercial) that charge or receive a fee for providing any of the following services:

· holding property

· storing property

· moving property

no matter what appears in any other provision of the Comprehensive form policy.

N. Nuclear Hazard Clause

"Nuclear hazard" refers to the following:

· nuclear reaction

· radiation

· radioactive contamination

regardless of the incident being controlled and no matter how the event is caused. Any consequence of a nuclear hazard is also considered a nuclear hazard.

Losses created or involving a nuclear hazard are not considered to be a fire, explosion, or smoke loss, even when these three perils are included within Section I of the Comprehensive form policy.

This policy does not apply under Section I to loss caused directly or indirectly by nuclear hazard. The one exception is that direct loss by fire resulting from the nuclear hazard is covered.

O. Recovered Property

The named insured and the insurer are obligated to tell each other when, after a loss has been paid, property involved in the claim has been recovered. What happens next is up to the named insured. The named insured may allow the company to have or keep the property or the property may be kept by (or returned to) the named insured. If the property is returned to the named insured, any payment has to be adjusted to reflect the condition or value of the property. In other words, the named insured may have to return part or all of any loss payment.

P. Volcanic Eruption Period

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

Q. Policy Period

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

R. Concealment or Fraud

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

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

S. Loss Payable Clause

The purpose of this provision is to change the way the policy operates when a loss payee appears on the policy declarations. When a loss payee appears, the loss payee is included in the definition of “insured” with regards to the covered property. Further, the loss payee is entitled to written notification if the policy is cancelled or not renewed.

SECTION II - LIABILITY COVERAGES

A. Coverage E - Personal Liability

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

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

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

Example Chad just received a letter with a request to pay $1,593 in medical bills for a recent incident. Chad was at the airport, rushing to the gate for his connecting flight home. Chad noticed that another person had stopped in front of him. As he quickly swerved around, he lost the grip on his coffee cup. The full cup of hot coffee burst against the arm and waist of the other party. She suffered serious burns on both areas where the coffee landed. Chad calls his agent who assures him that his insurance will handle the accident.

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

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

B. Coverage F - Medical Payments to Others

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

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

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

Example: Jim Frailnode is hosting a party in his home when one of his neighbors is severely scalded by Jim’s wife spilling grease from a fondue pot onto his legs. The neighbor sends in a laundry list of treatments, including several chest x-rays and an MRI. The x-rays and MRI charges are the cheapest in the state. Although these charges are the least expensive available, the expenses are not eligible for reimbursement because the treatments are not connected to the burn accident; so, though they’re reasonable, they’re unnecessary.

The policy’s Medical Payments to Others coverage applies to third parties, so the named insured, that insured’s resident family members and other regular household residents don’t qualify for medical payments. An exception exists for a named insured’s residence employees. Even those who are considered third parties, coverage exists only under the following circumstances:

1. To those that the named insured permits to be on an "insured location"

2. To those who are not on an "insured location," who suffer "bodily injury" resulting from any of the following:

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

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

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

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

SECTION II - EXCLUSIONS

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

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

A. “Motor Vehicle Liability”

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

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

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

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

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

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

(2) Rented to other persons

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

Example: Celia lives in a neighborhood next to a large hardware store. Many of her neighbors are, like her, elderly and many no longer have cars. Celia has a riding mower with a flat trailer she uses to help with landscaping. She frequently charges neighbors $10 for them to use the mower and trailer to carry home heavy supplies that they buy from the hardware store. This use of the mower and trailer would not qualify for coverage if a loss occurred.

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

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

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

Example: Joey likes that his home is “the gathering place” for his children’s friends. He’s usually happy to see and hear kids enjoying themselves, at least until recently. His large home includes a three-car garage. One space is reserved for a classic car restoration project and the car is on blocks with its battery removed. While playing hide and seek, a child is seriously hurt when she runs into a corner of the car and the trunk hood slams down on her arm. Joey’s policy will respond to this loss.

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

c. Riding mowers that are used to mow a lawn when a loss occurs (03 22 Change)

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

(1) The vehicle is assisting a handicapped person

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

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

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

(1) The vehicle is NOT owned by an insured

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

Example: Yeardly is testing out the repairs that she made on her ATV. She is in her driveway when she starts it and, as she puts it into gear, it suddenly accelerates. Before she can turn it off, she hits her neighbor, Sheila, who was just picking up her newspaper. She hit the neighbor in a part of the driveway that they share. This accident would be covered.

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

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

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

f. A motorized golf cart which is owned by an insured and which is built for carrying four or fewer persons and is not capable of traveling faster than 25 mph on level ground. Further, the golf cart MUST be operated within the legal boundaries of the following:

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

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

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

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

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

Example: Babette was visiting a friend in WornDown Acres, a housing community consisting of retired citizens. Use of golf carts on its streets is permitted by their property association. Babette was turning a last corner before her friend’s house. She lost control while making a turn and she hit a pedestrian. Her HO policy will not cover the accident. Babette lives next door to WornDown Acres but is not a resident of the community.

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

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

B. “Watercraft Liability”

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

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

b. Rented to other persons

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

d. Used in a “business.”

Example: Lester lives in a small town that’s a popular tourist attraction due to its lake. It’s a great place for fishing! Lester’s a fishing veteran and he knows how to choose excellent fishing spots. There are many small lodges around the lake. Lester uses his outboard boat to travel all along the lake, making note of good of places where fish activity is high. He writes up a brief newsletter called “Lester’s Hot Fishin’” which he delivers to the lodges that are paid subscribers. Lester’s outboard, which is listed on his HO policy, is not eligible for coverage because of this use.

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

a. Stored

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

(1) shorter than 26 feet

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

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

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

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

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

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

(a) is not a craft that the insured owns

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

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

but only if:

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

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

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

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

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

C. “Aircraft Liability”

Unlike the motor vehicle and watercraft exclusions, there are no exceptions. The size, wingspan, aircraft type does not matter. Losses related to aircraft are not covered by the Comprehensive form Policy.

D. “Hovercraft Liability”

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

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

1. Expected or Intended Injury

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

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

Example: Peter’s 18-year-old son, Jasper, decides to play a prank on Tommy, his best friend. Jasper sneaks over and places a large pile of firecrackers underneath the window outside Tommy’s bedroom. Jasper lights the pile and runs off. The fireworks are so powerful that they seriously burn the siding on Tommy’s home and break the window. The explosion also violently startles Tommy who falls out of his bed and onto his pet pit bull who had been sleeping next to the bed. The dog, already frightened by the firecrackers, attacks his owner when he lands on top of him. When Peter contacts you about the bills he received for property repairs and medical treatments, you’ll have to share the bad news that they all were due to an intentional act and aren’t eligible for coverage.

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

2. Business

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

There are a couple of exceptions to the business exclusion.

b. The exclusion is not applied to:

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

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

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

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

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

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

Note: The exception makes no mention of partners.

Related Court Case: Business Pursuits Exclusion Debated

3. Professional Services

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

4. Insured’s Premises not An Insured Location

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

a. Is owned by an insured

b. Another party rents to an insured

c. An insured rents to other persons

5. War

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

a. War that has not been formally declared, civil conflicts, insurrection, rebellion, or revolution

b. Activity similar to war that involves military forces or personnel

c. Related to destruction, confiscation or use for any military purpose.

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

6. Communicable Disease

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

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

There is no coverage and there are no exceptions.

Example: Hallie Slapshot was quite upset to hear from her insurer that her claim wasn’t eligible for coverage under her Comprehensive form policy. Hallie, a teacher, was at her wit’s end for one Friday class. Her fifth-grade class was wild the entire day with kids continually talking and bickering. Hallie decided to tell her children to sit and be quiet for the last half hour of the school day. When Paul Prestglass knocked several books onto the floor, Hallie whipped over to his desk, picked Paul up and whacked him solidly on his bottom. Hallie was ashamed of herself immediately, but Paul’s parents weren’t interested in her “feeling bad.” The Prestglasses filed suit, asking for $30,000. Although Hallie’s policy has liability limits of $300,000, corporal punishment is excluded from coverage.

Related Court Case: Policy’s Sexual Molestation Exclusion Upheld

8. Controlled Substance

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

Controlled Substances include, but are not limited to:

· Cocaine

· LSD

· All narcotic drugs

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

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

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

Related Court Case: Damages Sought in Death from Illegal Drug

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

Note: Medical marijuana use has not been tested. It is a specifically listed controlled substance and continues to be illegal under the Federal Food and Drug Law yet it can be prescribed in a number of states.

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

· A. “Motor Vehicle” Liability

· B. Watercraft Liability

· C. Aircraft Liability

· D. Hovercraft Liability

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

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

1. Liability:

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

Example: Phil just got a request from his homeowner association to pay $859 to the Pristine Community Fund. The association is collecting the money to clean up the association’s community house. Phil pays the assessment and then sends in a claim to his insurer. Fire & Calamity, Inc.’s adjuster phones Phil and tells him that the assessment doesn’t qualify for coverage.

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

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

(2) An insured takes over some other person’s liability before an "occurrence" unless the loss is excluded somewhere else in the Comprehensive form policy.

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

2. Property Damage to property owned by an insured.

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

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

Example: The Jordans regret a big mistake. They celebrated finishing building their own backyard patio by taking a daylong trip out of town. While away, thieves break in their home and their shed. More than $1,000 in tools was lost that they had rented in order to work on the patio. None of that lost equipment is eligible for coverage.

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

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

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

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

· Mutual Atomic Energy Liability Underwriters

· Nuclear Insurance Association of Canada

or any one of the successors to these companies.

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

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

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

G. Coverage F - Medical Payments to Others

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

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

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

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

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

2. To any person who is a beneficiary of protection that is either voluntarily provided or that is provided under mandate of any of the following:

a. Workers compensation law

b. non-occupational disability law

c. Occupational disease law.

Example: Johnny, a local handyman, was hired by Amy to rebuild a dilapidated shed that was in her backyard. Johnny slips while climbing a ladder to work on the shed’s roof. He falls down on top of a pile of tools and lumber, severely injuring his back and head. The state where they both live demands that Amy buys insurance to protect such workers. While the loss technically qualifies for coverage under the Comprehensive form policy, the state-mandated coverage would take the place of the homeowners policy in responding to Johnny’s injuries.

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

· Nuclear reaction

· Nuclear radiation

· Radioactive contamination

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

4. To these parties:

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

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

(03 22 Change) The only exception is a residence employee.

SECTION II—ADDITIONAL COVERAGES

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

· Claims Expenses

· First Aid Expenses

· Damage to Property of Others

· Loss Assessment

A. Claims Expenses

The policy pays:

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

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

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

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

B. First Aid Expenses

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

Example: Ike and Mason are playing basketball at Ike’s home. They are lifelong friends and were also star basketball players for their town’s rival high schools and both are intensely competitive. During the last of a particularly hard-fought best-of-three matchup, Mason drives for a potentially game-winning lay-up. Ike charges hard for a block. They slam into each other and their momentum carries them into the basketball goal’s rigid steel pole and onto the cement driveway. Their wives take them to a hospital to take care of broken limbs and lost teeth. Ike’s HO policy will handle Mason’s treatment costs, but not his own.

C. Damage to Property of Others

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

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

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

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

· If the property is owned by an "insured”

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

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

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

· That arises from the ownership, maintenance, or use of aircraft, watercraft or motor vehicles, or all other motorized land conveyances

This exclusion does not apply if the motor vehicle is designed for recreational use off public roads, is not subject to motor vehicle registration and is not owned by an "insured.”

D. Loss Assessment

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

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

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

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

· One accident, including continuous or repeated exposure to substantially the same general harmful condition

· A covered act of a director, officer, or trustee.

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

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

SECTION II—CONDITIONS

A. Limit of Liability

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

· Insureds

· Claims made

· Persons injured.

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

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

B. Severability of Insurance

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

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

Example: The Connors throw a huge birthday party for their daughter and it includes a MoonJumper inflatable tent. The tent is the hit of the party. However, it is quite old and, at the time that more than a dozen kids are using it, it violently bursts. Half of the children receive serious injuries requiring emergency room treatment and surgeries. The families of each child separately sue Kim and Perry Connors. The number of injured children and the separate suits do not affect the $500,000 liability limit appearing on the Connors’ HO policy. That amount is the maximum available for the single loss.

C. Duties After Loss

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

Under this condition, the insured is obligated to:

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

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

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

c. The claimants’ and witnesses’ names and addresses.

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

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

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

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

a. To make settlement

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

c. Attend hearings, trials and other activities related to conducting a lawsuit

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

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

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

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

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

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

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

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

2. It is not enough that the injured party provide information from a doctor. They must be willing to submit to a physical exam by a doctor the insurance company’s chooses and the person must do so as often as the insurance company requires. However, the number of exams must be considered reasonable. Note that there is no definition of “reasonable.” Items like this are often a point of contention between injured persons and insurers. While four separate exams may be reasonable to a company claims adjuster, an injured person might question why he would need to be examined more than one or two times.

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

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

F. Suit Against Us

Under this condition:

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

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

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

G. Bankruptcy of an Insured

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

Of course, it would be interesting to challenge this condition. For instance, if an insured misses a premium payment and the policy terminates for nonpayment, but the nonpayment was due to an insured being bankrupt and a loss occurs…. well, it would be interesting to test this condition.

H. Other Insurance

Under this provision, the applicable insurer places itself behind any other available coverage, acting as an excess source. There is an important exception. If the other source of coverage is written specifically as excess liability protection; then this policy responds first (primary coverage).

I. Policy Period

Coverage under the policy’s liability section is only valid for BI or PD that takes place during the policy period.

J. Concealment or Fraud

Whether it occurs before or after a loss, the policy will not protect an insured who, with regard to the insurance provided by the policy does any of the following:

· Conceals or misrepresents any material fact or circumstance and does so intentionally

· Engages in conduct that is considered fraudulent

· Makes false statements.

SECTIONS I AND II—CONDITIONS

A. Liberalization Clause

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

It is very important to note that this clause does not apply to changes introduced in a general program revision which includes both broadening and restricting features. A general program revision can be implemented through either a subsequent policy edition OR though an amendatory endorsement.

B. Waiver or Change of Policy Provisions

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

C. Cancellation

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

2. The insurance company is more restricted in how it may cancel the policy. A written notice must either be given to the named insured or mailed to the mailing address on the declarations. The reason for the cancellation must be stated and those reasons and when they can be used are explained below.

Proof of mailing will be sufficient proof of notice.

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

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

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

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

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

If either of these occurs, the insurance company must provide no less than 30 days notice before the date cancellation takes effect.

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

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

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

D. Nonrenewal

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

Note on the Cancellation and Nonrenewal Conditions: State laws control most aspects of how, when and if a policy can be cancelled or nonrenewed. Individual companies should be thoroughly familiar with the law of each state in which it uses the Comprehensive form policy, since these laws may stipulate what is required for:

· Nonrenewal or cancellation reasons

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

· An insured’s recourse concerning a cancellation or nonrenewal

· How such notices must be mailed

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

· How much advanced notice is required for cancellations or nonrenewals

· The timing of such notices, etc.

E. Assignment

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

Example: The Greebles have been the contract purchasers of a home owned by Josh Hardline for 15 years. The homeowners policy was written in Josh’s name. The Greebles finally made their last loan payment. As soon as Josh received the check, he sent a short letter to Fairkumpany Mutual. The letter had Josh’s signature and requested that the insurance coverage be assigned to the Greebles. Fairkumpany sends the Greebles a statement showing their acceptance of the assignment. With Fairkumpany’s written approval in hand, Josh Hardline’s assignment of the policy to the Greebles becomes effective and the Greebles now own all of the policy rights.

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

F. Subrogation

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

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

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

G. Death

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

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