ISO HOMEOWNERS 4 - CONTENTS BROAD FORM COVERAGE FORM ANALYSIS

(July 2020)

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This is an analysis of the ISO (Insurance Services Office) Homeowners Program’s Contents Broad Policy form, 05 11 edition. The Insurance Services Office’s HO 04 form insures a tenant of a dwelling or an apartment, or the owner-occupant of a dwelling or of a building containing an apartment that is not otherwise eligible, for a homeowners policy.

Example: Jon Kleever is a third-generation butcher who took over his family-run, specialty meats shop. Jon and his family own a two-story building that contains the shop on the ground floor and a large apartment on the upper floor. Jon has a commercial policy that covers the building and the store furnishings, equipment, and inventory. Jon also owns a HO 04 policy to cover his personal property in the family’s apartment.

Coverage under the HO 04 parallels the ISO Form HO 02 with the major exception that it does not include dwelling coverage. The tenant’s form, however, does protect building additions and alterations that are owned or made by an insured tenant.

Example: Bonnie rents space in a building that used to house a book printer and publisher. It has been converted to a set of very spacious loft apartments. After getting the building owner's permission, Bonnie and her roommate build an elaborate, permanent partition and shelf-unit. They build it out of aged mahogany and it has a decorative, mosaic panel. After the landlord inspects her work, he gives her the name of his insurance agent. He tells Bonnie that she should get insurance on the apartment and make sure that special, additional coverage is added for the beautiful new partition.

AGREEMENT

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

DEFINITIONS

This portion of the Contents broad 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" that 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 04 Contents broad form policy also makes use of the following, defined terms:

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

a. These terms refer to legal liability for “bodily injury” or “property damage” that is related to:

(1) The use or ownership of these items

(2) Maintaining (including repairing) a vehicle or craft

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

(4) An insured's negligent supervision related to vehicle/craft

(5) An insured's vicarious liability related to vehicle/craft

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.

(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.

3. "Business"

This term refers to a trade, occupation, or profession. “Business” also refers to such activity even when it occurs only on a part-time or occasional basis. 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 $2,000 in compensation during the 12-month period before the homeowner policy period.

Note: This refers to the value of compensation, NOT merely cash. So, the details surrounding an activity greatly affect how the activity is classified. There are a number of other considerations that might affect how an activity qualifies as a business such as:

Does the reference to total income mean gross or net receipts?
Is the reference to total income in the 12 months before the inception date affected by the basis of collecting income?
What sort of records will the insurer insist upon or what questions would be asked to determine the extent of a suspected activity?

These issues are ones that will likely only be addressed when a loss occurs and then an insurer may be as confused as the insured over what qualifies as a business.

IMPORTANT: The definition of business has been modified by mandatory ISO Form HO 06 54–Home-Sharing Host Activities Amendatory Endorsement. The form also adds several, unique terms that affect coverage. Optional form HO 06 64– Broadened Home-Sharing Host Activities Coverage Endorsement can be used in place of HO 06 54, so it should also be examined.

ISO Homeowners Optional Coverage Endorsements

ISO Homeowner Mandatory and Optional Home-Sharing Endorsements

4. “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.

5. The Contents broad form homeowner policy considers all of the following to be insureds (with notes on any exceptions):

· The named insured and his or her resident spouse

The named insured and/or his or her resident spouse’s resident relatives (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.

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

Example: Denny’s 30-year-old band mate is having a hard time. His latest girlfriend threw him out, making him homeless. He stays at Denny’s home for a month while he searches for a new job and an apartment. The band mate is NOT an insured under Denny’s policy.

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.

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

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

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

The Contents broad form policy’s definition of insured includes a clarification. 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.

6. “Insured location”

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

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

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

· Any premises that is related to a property that is covered by a Contents broad 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 premises which is rented and used by an insured (as long as no business activity is involved).

7. “Motor vehicle”

A motor vehicle is a vehicle that is self-propelled, runs on land or on water, and includes any trailer that is towed or carried by such a vehicle.

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

8. “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.

9. "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.

10. "Residence employee”

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

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

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

Example: Glenn’s mom comes by each week to clean his home and do laundry. She does this to keep busy and to keep in touch with her son. She is NOT a residence employee.

11. “Residence Premises"

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

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

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

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

IMPORTANT: This definition has been modified by the introduction of the ISO’s mandatory HO 06 48-Premises Definition Amendatory Endorsement. The HO 06 49-Broadened Residence Premises Definition Optional Endorsement can replace the HO 06 48 so it should also be examined.

ISO Homeowner Mandatory and Optional Residency Definition Endorsements

ISO Homeowners Optional Coverage Endorsements

SECTION I - PROPERTY COVERAGES

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 is 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.”

2. Limit for Property at Other Residences

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 $1,000 applies.

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:

· To 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 rebuilt.

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

This limitation of 10% is not applicable for the first 30 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 at more than one location.

b. Self-Storage Facilities

There is a limitation 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 $1,000 or 10% of the amount written under Coverage C.

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 and therefore has the full Coverage C limit 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.

Example: Kara inherited more than $10,000 worth of furniture from her mom’s estate and none of it could fit in her two-bedroom home. She rented a large storage locker and kept it there. Since the Coverage C limit on her home was only $60,000, a maximum of $6,000 in coverage is available for the stored property.

Note: This is a new property sublimit applicable to households that are using such facilities for property overflows. This represents a reduction in coverage.

3. Special Limits of Liability

The policy includes a number of classes of personal property that have specific monetary limitations. One should notice that the categories involve different classes or property that, due to their nature, is 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. $200 SUB-LIMIT

This sub-limit 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. $1,500 SUB-LIMIT

This sub-limit applies to all sources of loss that involves the following property:

· 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. $1,500 SUB-LIMIT

This sub-limit applies to any type of watercraft. The sub-limit also applies to related trailers, furnishings, equipment, and outboard engines or motors.

d. $1,500 SUB-LIMIT

This sub-limit applies to trailers or semi-trailers that are not used with any form of watercraft.

e. $1,500 (Theft) SUB-LIMIT

This sub-limit 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. $2,500 (Theft) SUB-LIMIT

This sub-limit applies to theft losses involving firearms and related equipment.

This limitation would include property such as:

ammunition
weapon loaders
scopes
gun locks
gun safes
miscellaneous firearm accessories including parts

g. $2,500 (Theft) SUB-LIMIT

This sub-limit applies to loss by theft of:

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. $2,500 SUB-LIMIT

This sub-limit applies to property, located on the "residence premises," that is commonly used in business activity

i. $1,500 SUB-LIMIT

This sub-limit applies to property located away from the "residence premises," that is 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

Example: Besides his primary home, Dirk has a cabin with about $20,000 worth of electronic recording equipment. It is used in his business as an independent recording studio. Only $1,500 of the equipment is eligible for coverage under his homeowner policy.

j. $1,500 SUB-LIMIT

This sub-limit applies to 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: The electronic item must be portable and can have multiple power sources as long as one possible source is the motor vehicle. The accessories that go with this equipment are addressed in item k. below.

k. $250 SUB-LIMIT

This provides a specific limitation of coverage for these items rather than having them be a part of the $1,500 sublimit for electronic equipment described in item j. above. The sub-limit applies to 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.

4. Property Not Covered

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

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

Example: A coin collection that is covered by a separate, specialty policy.

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.

c.Motor vehicles

The reference to motor vehicles applies to related equipment, and parts. 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.

· Designed to assist the handicapped.

Example: Betty and Barney Caremore have a son who is confined to a motorized wheelchair. The Caremores’ HO 04 policy provides coverage in case of a loss to this motorized equipment.

d. Aircraft and parts

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

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

e. Hovercraft and parts

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

f. Property of roomers, boarders, and other tenants

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 in an apartment regularly rented or held for rental to others by an "insured"

This wording preserves protection for property that is used by the insured instead of giving full coverage to property that is used by other persons such as renters.

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

i. "Business" data

The data can be stored in any of the following:

· Books of account, drawings, or other paper record

· Computers and related equipment.

Related Article: ISO Valuable Papers Coverage Form

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

j. Credit cards, electronic fund transfer cards or access devices used to withdraw, deposit or transfer funds. But the policy makes an exception for the coverage available under its Additional Coverage section.

k. Water or steam.

Related Court Case: Pool Collapse Damage Not Covered

The intent of this exclusion appears to prevent coverage of the expense of water utility service from the policy. However, it may also have an unintended application.

IMPORTANT: This coverage has been modified under mandatory HO 06 54–Home-Sharing Host Activities Amendatory Endorsement. The form also adds several, unique terms that affect coverage. Optional form HO 06 64–Broadened Home-Sharing Host Activities Coverage Endorsement may be used in place of HO 06 54 so it should also be examined.

ISO Homeowners Optional Coverage Endorsements

ISO Homeowner Mandatory and Optional Home-Sharing Endorsements

B. Coverage D – Loss of Use

This portion of the Contents broad form policy provides coverage for Additional Living Expenses, Fair Rental Value and Civil Authority.

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.

A time limit controls the payment of these expenses. Payment will last until the damaged home is repaired or replaced, or until the insured has found a new, permanent residence, whichever occurs first.

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.

Example: The Liv-well family rents a two-family home and, with the homeowner’s permission, rents half of the home to a young married couple. The Liv-wells are covered by a HO 04 policy. One day Timmy Liv-well sneaks one of his mother’s cigars and lights it. He takes a puff and drops the cigar after being seized by a coughing fit. Timmy runs outside, fearing he is about to throw-up. Meanwhile, the cigar smolders and its lit end severely burns the top of the acrylic table. The burning table fills the entire house with black, acrid smoke. Both the Liv-wells and their renters have to live elsewhere for the week it takes to air-out and clean the home. In this case, the Homeowners Form 4 will assist with the increase in living expense plus the loss in rent.

Payment under additional living expenses or fair rental value will be for the shortest of the time required to repair or replace the damage; or, if “you” permanently relocate, the least amount of time necessary for “your” household to settle elsewhere.

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.

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. In other words, “your” renter decides to break the lease and find another place to live. The Contents broad form policy will not pay for any loss of rental income in this instance.

ISO Homeowners Optional Coverage Endorsements

ISO Homeowner Mandatory and Optional Home-Sharing Endorsements

C. Additional Coverages

Section I of the Contents broad form policy provides several coverages in addition to coverage parts through and D.

1. Debris Removal

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

· 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.

Debris Removal coverage also pays up to $1,000 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 $1,000 and $500 for a single tree, regardless of the number of fallen trees. While the increased coverage helps, it would still be quite inadequate at a site where debris consists of a large number of felled trees.

2. Reasonable Repairs

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: Glen prepares when he hears news of looting due to reaction to an unpopular political activist convention held near his neighborhood. He buys $600 in heavy-duty locks and window and door security bars and installs them (with his landlord’s permission) on his rented home. The rioters are stopped by police, before they reach his home. He turns in a claim for his expense. His claim is turned down since he did not suffer an initial loss from a covered peril.

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 a resident of the "residence premises"

· Vandalism

· Malicious mischief

· Theft

For all trees, shrubs, plants, or lawns, coverage is available for up to 10% of the limit of liability that applies Personal Property.

No more than $500 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.

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.

5. Property Removed

If covered property is being removed from premises that are endangered by a covered peril, the property moved is protected against 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 Contents broad 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.

6. Credit Card, Electronic Fund Transfer Card or Access Device, Forgery, and Counterfeit Money

a. In all of the following cases, an “insured” has coverage up to $500:

· If an “insured” has a legal obligation to pay, resulting from the theft or unauthorized use of credit cards issued to or registered in an “insured’s” name.

· If an “insured” has a loss which results from the theft or the unauthorized use of an electronic fund transfer card or access device which is issued to or registered in an "insured's" name and is used for deposit, withdrawal or transfer of funds.

Note: This is especially important when so much of our banking is done by ATMs and, increasingly, electronically. If an ATM card or access device to a banking device is stolen, someone might access the insured’s savings or checking account. If that happens, there is coverage under the policy for a maximum of $500. However, this protection appears to be of no use with newer exposures such as thieves who capture account information via wireless methods.

· If an "insured" has a loss caused by forgery or alteration of any check or negotiable instrument.

· If an “insured” has a loss through the good faith acceptance of counterfeit U.S. or Canadian paper currency.

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

b. The instances when credit cards and electronic fund transfer cards are covered include some exclusions. There is no coverage under the following circumstances:

· Any loss involving a resident of the insured household.

· If the illegal act is committed by a person who has been entrusted with either type of card.

· If an "insured" has not complied with all terms and conditions under which the cards are issued.

Note: All losses that are connected to multiple acts that either are or are alleged to be committed by a single person is treated as a single loss. This is an important distinction. If an “insured’s” checkbook is stolen and fraudulent checks start cropping up everywhere and the above limitation did not exist, the insurance company would be responsible up to the coverage limit for each and every check that is written. Assuming that the series of fraudulent checks are all written by one person, this would be considered a single loss, subject to the maximum coverage of $500. This limitation would also apply to a series of fraudulent ATM or electronic transactions.

There is no coverage under this item if either of the following applies:

· If the loss is related to the “insured’s” business

· If the loss is related to the “insured’s” own dishonesty

c. Defense - under the Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money - With respect to coverage under the credit card, electronic fund transfer card or access device coverage, when a suit is brought against an "insured" for liability, the insurance company providing coverage will provide a defense at its expense and by a lawyer of its choice. When a suit is brought for the enforcement of payment under the forgery coverage, the insurer has an option to pay for the defense of an "insured" or an "insured's" bank against any suit.

7. Loss Assessment

The insurance company will pay up to $1000 for “your” share of a loss assessment charged during the policy period against you by a corporation or association of property owners. 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 this policy.

Ineligible Assessments - This additional coverage excludes protection against loss due to earthquake and also the land shock waves or tremors that occurs before, during or after a volcanic eruption. Further, no coverage is available for assessments made against an insured or a corporation or association of property owners by any governmental body.

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

Regardless of the number of assessments, $1,000 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.

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.

8. Collapse

The Contents broad form policy includes an explanation of what is meant by collapse. Under parts a. through d. of this paragraph, 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. However, neither a building nor 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.

This additional coverage protects against direct physical loss to covered property involving collapse of a building or any part of a building caused only by one or more of the following:

(1) Perils insured against in personal property (Coverage C).

(2) Hidden decay

(3) Hidden 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 of contents, equipment, animals, or people

(5) Weight of rain that collects on a roof

(6) Use of defective material or methods in construction, remodeling, or renovation if the collapse occurs during the course of the construction, remodeling, or renovation.

Loss to an awning, fence, patio, deck, pavement, swimming pool, underground pipe, flue, drain, cesspool, septic tank, foundation, retaining wall, bulkhead, pier, wharf, or dock is not included under items (2) through (6) above unless the loss is a direct result of the collapse of a building.

There is no coverage for collapse due to hidden vermin or hidden decay IF the insured knows that these conditions exist prior to any collapse loss.

Example: After several days of heavy snow, the roof above Henry’s porch collapses from the weight of accumulated snow. This loss would be eligible for coverage.

This coverage does NOT increase the limit of insurance that applies to the covered property.

Related Court Case: “Deck Collapse Triggers Liability Dispute”

9. 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 building, storm door or storm window covered under Additional Coverage Item 10. Building Additional and Alterations.

· Glass or safety glazing material breakage but only if it is part of a building, storm door or storm window covered under Additional Coverage Item 10. Building Additional and Alterations 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 a 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. A dwelling being constructed is not considered vacant. However, if the vacant building is damaged by earth movement coverage does apply.

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

10. Building Additions and Alterations

This coverage feature makes up to 10% of the policy’s Coverage C limit available to pay for loss to structural improvements or installations that an insured either makes or acquires. However, the betterment must exist in an area that is only used by the named insured. This protection is an additional source of protection.

Example: Wanda rented a unit in a converted warehouse that had very high ceilings. Getting the building owner’s permission, she purchased a movable staircase and had a small loft built and attached to it. Both the ladder and the loft are covered under this provision.

11. Ordinance or Law

a. This coverage feature allows an insured to use a maximum of 10% of the Additional Coverage 10. Building Additions and Alterations 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 building addition or alteration is damaged or destroyed, the policy provides up to 10% of the Building Additional and Alterations Coverage limit to deal with the increased loss costs created by local laws to handle the manner in which damaged or destroyed items are rebuilt or replaced.

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

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.

12. 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.

SECTION I—PERILS INSURED AGAINST

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

1. Fire or Lightning

2. Windstorm or Hail

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

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

Related Article: Dwelling Policy Program Perils

3. Explosion

Related Article: Dwelling Policy Program Perils

4. Riot or civil commotion

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

5. Aircraft

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

6. Vehicles

7. 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.

Example: Each unit in the apartment building where Jenna lives has a fireplace. Jenna decides to start a fire; she locates the flue and moves it to its open position. Shortly afterwards, smoke accumulates and billows throughout the apartment and Jenna borrows a neighbor’s fire extinguisher to put the fire out. Her neighbor then explains that, while the flue appears to work, the building owner never maintained any of the fireplaces and most of the building’s flues are blocked. The smoke damage is eligible for coverage.

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

8. Vandalism or malicious mischief

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

ISO Homeowners Optional Coverage Endorsements

ISO Homeowner Mandatory and Optional Home-Sharing Endorsements

9. Theft

The theft peril includes attempted theft and property that is no longer located at a given place when its disappearance is likely caused by its theft. The following theft losses are not covered:

· Any committed by an “insured”

· Theft that occurs to or in a dwelling that is under construction

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

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

The policy has additional restrictions for theft losses that occur away from the “residence premises.” The following situations are restricted as follows:

· There is no coverage for property located at any other residence owned by, rented to, or occupied by an "insured," except while an "insured" is temporarily living there.

· Property of a student who is an "insured" is not covered while at a residence away from home unless the student has been at that residence at any time during the 90 days immediately preceding the loss. The location must be used for the purpose of attending school.

· Watercraft, including their furnishings, equipment and outboard engines or motors is not covered when stolen.

· Trailers and campers do not qualify for coverage against theft.

ISO Homeowners Optional Coverage Endorsements

ISO Homeowner Mandatory and Optional Home-Sharing Endorsements

10. 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.

Example: Kyle lives in a basement apartment. The building owner is doing some repairs and renovations to an upstairs unit. While attempting to move a refrigerator, it tips over and crashes through the floor, through Kyle’s ceiling and into Kyle’s living room. The demolished TV set and living room furniture are eligible for coverage under the falling object provision.

11. Weight of Ice, Snow, or sleet

This covers damage only to items which are located within a building.

12. Accidental Discharge or Overflow of Water or Steam

The damage referred to under this peril is for water or steam that comes out of sources such as appliances, air conditioners, sprinkler systems, heating systems or plumbing. There is no coverage when the discharge or overflow is caused by or results from freezing except as provided by the Contents broad form policy’s freezing peril.

While coverage is not granted for damage to the source of the escaped water or steam, protection does extend to repairs that are necessary due to having to tear out property to get access to a hole or rupture.

Example: Pete was upset at the lack of pressure in his shower and then he discovers why. He hears the sound of rushing water behind a wall. He calls a plumber who turns off the home’s water main. He has to tear out a substantial amount of drywall to replace several sections of pipe. His coverage will handle the drywall repair, but not the cost of replacing the damaged pipes.

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

Finally, to prevent confusion over coverage, the policy also clarifies that the water damage exclusion found in Section I concerning surface and below surface water does not apply to this additional coverage.

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

This refers to such damage involving 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.

14. Freezing

This refers to such damage involving a plumbing, heating, air conditioning, or automatic fire protective sprinkler system or of a household appliance.

This coverage requires that an insured takes care to maintain heat in the building, 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 sprinkling 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. 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

15. Sudden and Accidental Damage from Artificially Generated Electrical Current

This 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. 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

16. Volcanic eruption

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

SECTION I—EXCLUSIONS

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.

Under this part, the exclusions apply to all parts of the Contents broad 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 E.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. IF a fire 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 explosion, fire, or theft damage.

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

3. Water

The Contents broad form policy does not cover a loss caused by flood, surface water, waves, tidal water, tsunami, overflow of a body of water, or spray from any of these, whether or not driven by wind and also storm surge. Loss caused by water which backs up through sewers or drains or which overflows from a sump is also not covered. If water below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, patio foundation, swimming pool, or other structure there is also no coverage.

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

This source of loss is excluded regardless of whether it is connected to human, animal or natural (force of nature) activity.

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

· Dams

· Levees

· Seawalls

· Other boundaries

· Other containment systems

Note: 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 addresses 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 reasonable care to protect his or her property.

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 Contents broad 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 Contents broad form policy states that 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.

Example: Angie and Jim are invited to a huge birthday party. Angie is ill and can’t make it, but Jim goes and gives his friend their prank gift – a fake boa constrictor that bursts out of a gift-wrapped, spring-powered box. The friend is startled into falling backwards over furniture and his eye is injured by the fake snake. He sues both Jim and Angie, but both are denied coverage for a deliberate act.

9. Governmental Action

This policy does not allow coverage for property that is described in Coverage 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.

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 special form HO coverage is limited in its response. It won’t pay an "insured" more than the amount of that "insured's" interest applying the time of loss. It also will pay no more than the limit of liability for the covered property.

B. Deductible

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

C. Duties after Loss

If an insured fails to perform the duties required in the aftermath of a loss, 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.

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.

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

3. Notifying the credit card or electronic fund transfer card or access device company in case of loss under Credit Card, Electronic Fund Transfer Card Or Access Device, Forgery And Counterfeit Money Coverage.

Please see this analysis’s discussion of this coverage in item 6. Additional Coverages.

4. 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.

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

This acts as a notice that the insured must be an active and willing participant in the claims process.

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 support the values reported in the inventory.

Related Article: Actual Cash Value Guide.

7. As often as is required by the insurance company, the insured must:

· Show the damaged property.

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

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 property involved, including the existence of all property liens

c. Other insurance which may cover the loss

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

e. Any specifications of damaged buildings and detailed repair estimates

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

g. Receipts for additional living expenses incurred and records that support the fair rental value loss

h. Any evidence or affidavit that supports a claim under the credit card, electronic fund transfer card, or access device, forgery, and counterfeit money coverage, which verifies the amount and the cause of loss.

The requirement under this conditions boils down to this: shortly after the insurer makes its request: the insured must provide all pertinent details about the loss; the information must be supported by any available documentation and the information must be truthful. Inadequate or dishonest information can relieve the insurer from having to settle the claim.

D. Loss Settlement

This policy responds to losses involving covered property on an actual cash value basis. In other words, settlements will take loss of value due to age and use into consideration. All payments are subject to the policy’s applicable policy limits.

E. Loss to a Pair or Set

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

1. Repair or replace any part of the pair or set which will restore the pair or set to its value before the loss; or

2. Pay the difference between actual cash value of the property before and after the loss.

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, and

· 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.

G. Other Insurance and Service Agreement

This represents a broader intent than a 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. This part states that, 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.

H. Suit Against Us

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. In earlier editions, the insured only had one year after the loss date to file legal action against his insurer.

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.

Example: Craig’s wrist was injured when Laura knocked him down while rushing to catch a flight for her vacation. They were on the same flight, so she was able to provide him with contact information. Frustrated by the time it was taking to have his medical bills handled, Craig files a lawsuit. Laura’s insurer responds that he is prevented from filing the suit since they are in the middle of arbitrating the cost of the treatments claimed in the bills he submitted.

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, 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 of damaged property.

L. 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

Related Court Case: Bailee Clause Does Not Bar Coverage

M. 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 Contents broad 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.

N. 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.

O. Volcanic Eruption Period

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

P. Policy Period

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

Q. Concealment or Fraud

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

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.

Related Court Case: Material Misrepresentation Voids Policy

R. Loss Payable Clause

Under this condition of the Contents broad form, when a loss payee appears on the policy declarations, that party is included in the definition of “insured” in regard 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 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 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.

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

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

B. Coverage F - Medical Payments to Others

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

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

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

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

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

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

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

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

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

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

SECTION II - EXCLUSIONS

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

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

A. “Motor Vehicle Liability”

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

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

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

c. Coverage is also excluded when the “motor vehicle” (as defined by the 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

(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. on an “insured location” and in dead storage

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

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

(1) The vehicle is assisting a handicapped person

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

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

d. 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

Note: Item d. (2) was expanded under the 05 11 Edition of the HO Contents form Policy. Item (2) (b) is the added item.

(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.

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

An accident with one of the above is eligible for coverage; hint, it’s the smaller vehicle.

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 policy responds to hazards caused by certain motorized property.

e. 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.

This form is designed to tightly control the exposure to any imaginable liability related to motor vehicles.

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

B. “Watercraft Liability”

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

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

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

b. rented to other persons

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

d. used in a “business.”

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

a. Stored

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

(1) Shorter than 26 feet

(2) Longer than 26 feet but neither owned by nor rented to an insured.

In other words, a loss involving a short sailing boat could be covered. Also, a loss involving a long sailing boat which an insured borrows (or may just be temporarily operating at the time of loss) may be covered.

c. Not a sailing vessel. However, if powered, the power must be from:

(1) an inboard or inboard-outdrive engine or motor. That engine or motor must be:

(a) no more than 50 horsepower and the engine must NOT be owned by an insured, or

(b) greater than 50 horsepower and the engine must NOT be owned by or rented to an “insured”

(2) an outboard engine or motor that:

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

(b) has greater than 25 horsepower and an insured must NOT own the engine/motor,

(c) has greater than 25 horsepower and an insured gets the engine/motor during the policy period,

(d) has greater than 25 horsepower and an insured gets the engine/motor before the policy period,

but only if:

(i) the insured declared the engine or motor the policy’s inception date

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

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

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

Related Article: AAIS Boatowner Coverage Form Overview

C. “Aircraft Liability”

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

D. “Hovercraft Liability”

This exclusion is a twin of the exclusion for aircraft liability. This 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 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

Related Court Case: “Porch Brawl Triggers Coverage Dispute”

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

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

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

2. Business

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

Example: Troy sues Brenda because he was injured when he slipped on a throw rug in the hallway of her apartment. Brenda files a claim with Troy’s medical bills for treating his injuries. Brenda’s insurance company denies the claim when they find Troy was rushing out of the apartment with his winnings. Brenda runs a sports betting parlor out of her apartment and Troy was a regular customer.

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) A second exception is made 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.

IMPORTANT: This coverage has been modified under mandatory HO 06 54-Home-Sharing Host Activities Amendatory Endorsement. The form also adds several, unique terms that affect coverage. Optional form HO 06 64-Broadened Home-Sharing Host Activities Coverage Endorsement may be used in its place so it should also be examined.

ISO Homeowners Optional Coverage Endorsements

ISO Homeowner Mandatory and Optional Home-Sharing Endorsements

3. Professional Services

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

4. Insured’s Premises not An Insured Location

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

a. Is owned by an insured

b Another party rents to an insured

c. An insured rents to other persons

5. War

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

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

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

c. Destruction, seizure or use for a military purpose

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

6. Communicable Disease

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

Note: This may well be a coverage issue that is scrutinized due to losses connected to the Covid19 virus.

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

There is no coverage and there are no exceptions.

Related Court Case: Sexual Misconduct Claim Denied

8. Controlled Substance

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

· Marijuana

· All narcotic drugs

Note: This exclusion is quite broad. It 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: Insurer's Denial Justified Under Public Policy

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:

· Motor Vehicle Liability

· Watercraft Liability

· Aircraft Liability

· Hovercraft Liability

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

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

1. Any Liability:

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

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

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

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

Note: This exception merely restores coverage for liability losses which could have been lost by being mentioned under a written contract. In other words, the liability coverage under this 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.

This form 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 policy’s Coverage Part C - Personal Property.

Example: Sally had enjoyed her annual Halloween Party until the dancing and drinking got out of hand. A former boyfriend, who drank too much, lost his balance, and crashed into Sally’s Entertainment System Cabinet, destroying her large screen TV. Sally’s Liability coverage policy will not cover the loss.

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

4. Bodily injury to any person eligible to receive any benefits that are provided on a volunteer basis or required to be provided by any “insured” under any worker’s compensation law, non-occupational disability law, or occupational disease law. Again, this is a precaution against obligating the 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 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 policy’s definition of insured.

The form’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 Contents form policy.

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

a. Workers compensation law

b. Non-occupational disability law

c. Occupational disease law.

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

· Nuclear reaction

· Nuclear radiation

· Radioactive contamination

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

4. To any person who regularly resides on any part of the "insured location."

The only exception is a residence employee.

Example: Let’s revisit Denny and his band mate friend. In the third week of staying with Denny, he trips over a threshold and falls hard to the apartment floor. Denny’s insurer, once they learn how long he has been staying with Denny, denies coverage. Denny sues his insurer. Depending upon circumstances, a court may rule in either’s favor.

ISO Homeowners Optional Coverage Endorsements

ISO Homeowner Mandatory and Optional Home-Sharing Endorsements

SECTION II—ADDITIONAL COVERAGES

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

C. Damage to Property of Others,

The policy covers 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 $1,000. 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. 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 $1000 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."

Example: A minor fire breaks out in a furnished basement of a four-unit apartment building. The basement is used by all of the tenants for lounging, socializing and entertaining. The building’s owner sends a $700 bill to each of his renters, including George. The bill is for the tenants to share the cost of replacing the damaged carpet and sofa. George’s insurer will not reimburse George for the assessment since there is no indication what caused the fire and the tenants are not part of an association.

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 $1000 is the most the insurer is obligated to pay for a loss stemming from 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 Contents form policy makes a maximum dollar amount available for any single, eligible loss. The total amount paid under Coverage E for all damages related to a single loss will not be more than the Coverage E insurance limit entered on the declarations. The stated limit IS NOT affected by the number of:

· "Insureds"

· Claims made

· Persons injured

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

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 policy does try to limit its exposure to loss by defining all claims or expenses connected to a covered occurrence as a single loss and by construing all losses that result from a continuous and substantially same set of harmful conditions as a single loss.

C. Duties After Loss

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

Under this condition, the insured is obligated to:

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

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

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

c. The claimants and witnesses names and addresses.

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

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

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

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

a. To make settlement

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

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

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

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

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

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

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

F. Suit Against Us

1. Action can be brought against the insurance company but not until there has been full compliance with all of the terms under this section of the Contents 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 cannot be brought against the insurance company until the actual obligation of the "insured" has been determined by either a final judgment or under an agreement signed by the insurance company.

G. Bankruptcy of an Insured

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

H. Other Insurance

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

I. Policy Period

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

J. Concealment or Fraud

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.

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

· Nonrenewal or cancellation reasons

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

· An insured’s recourse concerning a cancellation or nonrenewal

· How such notices must be mailed

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

· How much advanced notice is required for cancellations or nonrenewals

· The timing of such notices, etc.

E. Assignment

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

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

F. Subrogation

This part of the policy still gives an "insured" the choice to waive all of his or her rights to recover against any person who is legally responsible for a loss that is paid under this policy. 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 definition of insured could alter radically, so in this section the term insured is changed. Whoever was a member of the named insured’s household at the time of the death is an insured but only while a resident of the residence premium. Also, whoever has temporary custody of the named insured’s property is an insured but only until the appointment and qualification of a legal representative.