AAIS PM 0001-PERSONAL ARTICLES COVERAGE FORM ANALYSIS

(May 2020)

Menu (click here to expand or to collapse)

This is an analysis of the 02 06 (original) edition of this form.

AGREEMENT

The policy's opening language states that the policy is subject to all of its terms and will provide the insurance coverages that are described in the policy. Coverage is provided, contingent on receiving payment from the named insured.

These coverages may be affected by various amendments (endorsements) and schedules (detailed property descriptions and limits) that are made part of a policy. The agreement also points out that there are a number of terms and references with special meaning and they are explained in the policy’s Definitions section.

DEFINITIONS

The definitions section appears immediately after the Agreement.

1. You and Your

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

2. We, Us, And Our

The company providing the personal articles coverage.

3. Declarations

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

4. Flood

Any instance involving surface sources of water and the term includes waves, tides, overflows and sprays, regardless of the effect of winds.

5. Insured

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

Relatives of the named insured and relatives of the named insured’s residential spouse are insureds but only when they live in the same household
Non-relatives of the named insured who are under the age of 21, live in the household and are in the care of the named insured or in the care of a relative of the named insured who also lives in the household.

6. Limit

The policy merely defines this as the amount of insurance.

7. Residence

The living space that appears on the personal article form’s declarations.

8. Terms

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

9. Vermin

Refers to a wide variety of creatures which, by their nature, damage property because of their tendency to infiltrate structures as a source for food or housing. Policy examples include raccoons, possums, skunks, snakes, bats and even armadillos.

Related Article: A Review of Animal Related Damage

PROPERTY COVERED

1. Scheduled Personal Articles

a. Coverage–There is coverage for the personal articles that are described within the policy. The protection is for actual damage that is created by an eligible source of loss.

b. Coverage Limitations–The policy explains that it only responds to loss involving described personal articles and that any coverage is subject to the insurance limit that appears under the scheduled personal articles section.

Example: Brent has a Personal Articles Policy from General Property and Casualty. He recently reported a loss involving a Minixview Camera. His loss is denied. While his policy does include a list of photographic equipment, the Minixview camera was not on the list, so was not eligible for coverage.

c. Limits–Item merely advises that the listed amount of insurance is the total possible available to respond to a scheduled personal article loss.

2. Unscheduled Personal Articles

a. Coverage–There is coverage for articles that don’t have to be described anywhere. The protection is for actual damage that is created by an eligible source of loss.

b. Coverage Limitations–The policy explains that it only responds to loss involving unscheduled personal articles when such property belongs to the same type of property that is described in the policy. However, the coverage is subject to the insurance limit that appears under the unscheduled personal articles section.

c. Limits–This item merely advises that the listed amount of insurance is the total possible available to respond to an unscheduled personal article loss. However, there are some additional limitations. The policy will not pay more than $250 or $1,000 for an unscheduled coin or coin collection respectively and no more than $250 per item for losses involving stamps that are not scheduled.

3. Fine Arts Location

This section is a warranty. It commits the named insured to ensuring that any fine arts property is located at the described premises. If the property is moved, the named insured must agree to use resources that have experience in moving such property.

Example: Laynie and Peter are insured by a Personal Articles Policy. They are thrilled that, after years of planning, they were able to get the penthouse apartment in their building. They decide that it will be very easy to make the five-story move and they decide to get some help to transport their insured paintings and statues. Unfortunately, a mover trips during one trip and destroys a painting worth $4,200:

Scenario 1: The mover was the teen-aged son of a neighbor that they paid $50 for help. The loss is not covered by the PA policy.

Scenario 2: The mover was hired from “Blasé Antiques” and he routinely handles expensive property. In this instance, the loss is covered by the PA policy.

4. Described Classes of Personal Articles

This section provides info on classes of property that are eligible for protection under this policy.

a. Bicycles - this class of property is for only bikes, related riding accessories, as well as tools used to maintain/repair bikes

b. Cameras – items that fall under this class include regular and digital cameras, film, video recorders, projectors, printers, microscopes, telescopes, media, developing equipment and other accessories. Other items that are similar are also covered.

c. Coin Collections – this category is composed of paper money, coins, medals/tokens, albums, cases, frames, displays, etc.

d. Fine Arts – a wide variety of property can qualify under this category that includes statuary, paintings, sculptures, rugs, antiques, books, manuscripts, drawings and other property with appreciating value

e. Furs – there are many types of furs and both complete fur and fur-trimmed garments qualify for coverage.

f. Golf Equipment – items in this category include bags, clubs, clothing (regular clothes while in a clubhouse locker), shoes, balls (subject to special limitation) and other accessories that are golf-related.

g. Golf Ball Limitation – Though golf balls are eligible for coverage, that coverage applies only for loss caused by burglary and fire. Any burglary loss must show evidence of forced entry.

h. Jewelry – this category is made up of nearly all types of personal adornment, such as bracelets, earrings, cases, necklaces, watches, rings, and the boxes to store them.

i. Musical Instruments – besides instruments, other qualifying property includes, storage cases, music stands, sheet music, maintenance/cleaning equipment, support stands, and accessories (i.e., sticks, picks, slides, reeds, bows).

j. Silverware – refers to dining ware either made of or plated with silver, pewter, gold or platinum

k. Stamps – composed of postal stamps, books, albums, mounts, displays, postmarked envelopes and similar, related property.

PROPERTY NOT COVERED

Some categories of property are ineligible for coverage under the Personal Articles form. However, the exceptions are often for clarification since there is frequently an overlap concerning property classes. This section acts to direct how coverage applies as follows:

1. Contraband

Illegal (stolen or illegally held) property is ineligible for coverage. There’s no valid insurable interest in either stolen property or in property that, even if actually owned by an insured, is possessed in violation of the law (such as smuggled property).

2. Cameras – Professional Use

Generally, this category is eligible, except if the property is used for business purposes.

Example: Harriet’s Spykon 4000 was insured under a Personal Articles Form and she dropped and smashed the camera. She turned in the claim and was denied coverage when the insurer found that Harriet was paid $1,200 to take wedding and reception photos.

3. Musical Instruments – Professional Use

Instruments that an insured uses in any type of business activity are disqualified from coverage.

Example: Pam is a wonderful singer and guitarist. She owns several electric guitars, amps and other gear that are all scheduled on a PAF. She reports that she lost $2,500 of the property:

Scenario 1: After finishing performing in a band for a church function on a voluntary basis – COVERED

Scenario 2: After finishing performing in a band for a private wedding on a paid basis – NOT COVERED

4. Unmounted Gemstones, Precious Metals and Silverware

As a clarification under the jewelry category of property, there’s no protection for stones that are not mounted in settings (rings, watches, necklaces, bracelets, earrings, etc.), nor is protection available (under this category) for valuable metals (gold, silver, platinum, etc.) or for silverware that qualifies for separate coverage under this policy’s described personal articles section.

5. Writing Instruments, Smoking Implements, Flasks and Jewelry

This property does not qualify for coverage under the personal article form’s protection provided for silverware. The exclusion applies to pens, pencils, cigar and cigarette holders, lighters, pipes and items that would fit the form’s definition of jewelry.

6. Coin Operated, Aerial Surveying and Commercial T.V. Cameras and Camera Dealers/Manufacturers

Such equipment and such parties are ineligible for coverage. Regarding cameras, the exclusion extends to any accessories that are used with such equipment. These exposures need to be protected by separate, commercial forms.

7. Coin Collections and Stamps in Transit

Coin and stamp collections fail to qualify for personal article form protection during the time that they are transported by mail or by any commercial carrier. An exception applies to stamps and coins that are sent by registered mail.

8. Coins and Stamps (Not Part of a Collection)

Maverick coins and stamps, even if they are of collectible value, do not qualify for coverage.

This exclusion is problematic only when an item has significant value. The point is to provide an incentive to list such property which protects the owner and provides necessary premium to the insurer.

9. Motorized Conveyance

No coverage applies to motor-driven bikes, cycles, scooters, skateboards carts, mopeds, etc., even if their age or other characteristics make them antique or collectible.

10. Bicycle Tires or Tubes

Coverage for tires and tubes only apply if a source of loss that is insured against under the personal article form also damages a covered bicycle.

Example: Jeri’s vintage, velocipede (type of high-wheeled bicycle) is covered by a personal article form when it suffers the following:

Scenario 1: The bike’s front wheel explodes while she is riding it in a town parade – tire ineligible for coverage.

Scenario 2: The tires, along with the rest of the bike, are damaged in a garage fire – tires are eligible for coverage.

11. Fine Arts

No coverage is available to any item of fine art that is in the possession of venues such as public museums, galleries, art dealers and auctioneers. However, the exclusion applies only when such places also insure the property.

Example: Hannera turns in a claim involving the theft loss of an acrylic painting. It was done by a turn of the century French artist and it was listed with a value of $3,200 on her policy. The claim is denied when her insurer discovered that it was stolen while at exhibit at her local branch library and the library system had its own insurance policy that provided coverage.

Neither is there coverage under the personal article form for property owned by local, state or national governments, nor for property being displayed at fairgrounds or large [national or international] exhibitions. An exhibition situation may be covered IF that location is listed in the policy.

COVERAGE EXTENSIONS

The personal article form provides additional coverage for certain types of property that are acquired during the policy period, but only when a limit for that type of property coverage is on the policy declarations.

1. Newly Acquired Fine Arts

Coverage is provided for newly acquired fine arts that is lost or damaged due to a covered source of loss. The extension of coverage lasts for a maximum of 90 days from the date of acquisition, but it is subject to the policy’s expiration date or the date the property is reported or to the insurer; either instance ends the extension. At the time the property is reported, the insured is obligated to pay an additional premium that is computed according to the date of acquisition (rather than the reporting date).

Further, a limit applies to such property. The maximum amount of coverage available to newly acquired fine arts is 25% of the total limit that appears for fine arts. This is a sublimit, not additional coverage.

2. Newly Acquired Cameras, Instruments, Jewelry and Furs

Coverage is provided for newly acquired cameras, musical instruments, jewelry or furs that are lost or damaged due to a covered source of loss. The extension of coverage lasts for a maximum of 30 days from the date of acquisition, but it is subject to the policy’s expiration date or the date the property is reported or to the insurer; either instance ends the extension. At the time the property is reported, the insured is obligated to pay an additional premium that is computed according to the date of acquisition (rather than the reporting date).

Further, a limit applies to such property. The maximum amount of coverage available to newly acquired cameras, musical instruments, jewelry or furs is 25% of the total limit that appears for the applicable, (scheduled) class of property or $10, 000, whichever amount is less. This is a sublimit, not additional coverage.

Example: The Carsdaylisons have a large amount of valuable property insured under a new personal articles form that took effect on January 10th. The following are some policy and acquired property details.
Property	Policy’s Property Limit	Insured’s Newly Acquired, Unreported Property
Fine Arts	$22,000	$9,000
Jewelry	$46,000	$15,000
Musical Instruments	$5,000	$1,200
The Carsdaylisons acquired new items of fine arts on February 22^nd, new items of jewelry on March 14^th and new instruments on May 8^th. On June 2^nd, burglars ransack their home and steal most of their valuables. The family reports the following loss.
Property	Amount Stolen		Amount of Claim Payment
Fine Arts	$30,000 (including $5,000 in new acquisitions)		$22,000
Jewelry	$48,000 (including $15,000 in new acquisitions)		$33,000
Instruments	$3,000 (including $1,000 in new acquisitions)		$3,000
Total	$81,000		$58,000
The difference between the loss amount and the amount recovered is due to several factors. The fine arts recovery is restricted by the policy limit, so the newly acquired limit is inapplicable. No coverage applies to the newly acquired jewelry because the theft occurred after the 30-day coverage period. The newly acquired instruments are covered because their inclusion falls within the grace period for new property and is within the available policy limit. Note: Had the items been reported as acquired, the limits could have been upwardly adjusted and total coverage provided. Late reporting can have serious consequences.

OPTIONAL COVERAGES AND PREMIUM CREDITS

The Personal Articles Form includes the following features that apply IF the items are shown in the form’s declarations page:

1. Safe/Vault Credit

This credit applies to insured coin and stamp collections. The credit’s implementation requires at least 75% of a collection be stored in a safe or a vault. The safe or vault has to be locked and must be fireproof. Further, the safe or vault must be located either at the insured’s residence or at a bank or safe deposit company. In addition, when a bank or safe deposit company’s facilities are used, their location (address) must be documented on the policy.

Example: The Dawndersons were recently notified by the insurer that the vault credit that previously applied to their property schedule was removed and they will be charged additional premium. The insurance company found out that the property was kept in a vault located at a friend's pawn shop.

2. Vault Restriction and Credit

This provision applies to insured jewelry. The credit is allowed when the insured schedules and stores jewelry at a bank or a security institution’s premises. The policy must include the address of the applicable facility that is storing the valuables.

Note: Coverage is voided if the insured removes the stored jewelry without giving advance notice to the insurer about the period of time that the jewelry is out of storage and if the insured does not pay any required, additional premium.

Related Court Case: Jewelers Block Recovery Reduced in Accordance with Safe Warranty – this is a commercial insurance situation, but it helps illustrate the issue.

3. Named Peril Coverage Limitation (Musical Instruments)

This provision restricts the protection available to musical instruments. When it is selected, this class of property is only eligible for coverage when loss is caused by the half dozen, listed hazards (collision/overturn, fire, flood, lightning, theft or windstorm).

4. Breakage Coverage (Fine Arts)

This policy feature, when applicable, affects the coverage for fine arts. That particular class of property qualifies for protection against loss involving breakage to art glass (including windows), statuary, items made of porcelain, or marble and similar, artistic property. However, the coverage only applies when an entry on the declaration states this coverage applies. Then an entry must be made by each scheduled item as to whether or not the coverage applies to it and an entry must be made as to whether it applies to unscheduled items of fine art.

5. Additional Person Insured for Ring

When this option is selected, a third party who is a recipient of a jewelry ring from an insured may be listed in the policy in order to recognize that person’s insurable interest in that property. Under this option, the insured must also stipulate that the insured status applies ONLY to the ring and not to any other covered property.

Example: Johnny has dated Merrilee since they were both freshmen at Big College University. At a homecoming football game, he proposes and gives her a 1 carat engagement ring. As Merrilee is showing the ring to a friend, she is jostled and drops it. A person picks it up and runs off with it.

Scenario 1: Merrilee only has contents coverage and the loss of the ring is not covered.

Scenario 2: Johnny added Merrilee as an additional insured under a PAF policy – the loss is covered.

PERILS COVERED

The personal articles form obligates an insurer to pay for any tangible cause of loss to any covered property EXCEPT for any source that is specifically listed as being ineligible.

PERILS EXCLUDED

1. The personal articles form does not respond to losses that involve a variety of sources. The policy wording attempts to make it clear that any instance of loss or destruction where an excluded cause of loss exists renders that situation ineligible for coverage. Where the excluded event occurs within a series of events and whether the excluded item occurs over a large area (is catastrophic) has no effect; the exclusion still applies. The sources of loss that are ineligible for coverage include the following:

a. Civil Authority

If civil authorities confiscate, destroy, quarantine or seize property that is covered under the personal articles form, there is no coverage. However, if the civil authority destroys property as a way to create a fire stop, the loss is covered, provided the fire would have been covered by the policy.

Example: Tasha’s rural home is among many in the path of a fire blazing along nearby grasslands. The Parchland County Fire Chief orders her home’s demolition and $10,000 in musical instruments scheduled on a personal articles form are also destroyed. Since Tasha’s home was lost in order to stop the progress of a fire that would have attacked her property, the loss of the instruments, as an exception, qualifies for coverage.

b. Intentional Acts

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

Note: Not only must the act be deliberate, but also the intent must be to cause a loss. Further, when one insured intentionally damages property that is owned or co-owned by another insured, all insureds are barred from collecting payment of that loss. Under this exclusion, even innocent insureds lose their protection.

c. Nuclear Hazard

If nuclear reaction, radiation or radioactive contamination causes a loss, such loss is not covered. It makes no difference how the nuclear reaction, radiation or radioactive contamination is caused and whether it occurs under controlled or uncontrolled circumstances.

Any loss that is a consequence of the above is also not covered. Fire, explosion and smoke often are part of a nuclear incident, but even if these perils are covered under the policy, when they occur as part of a nuclear reaction, radiation or radioactive contamination loss, they are not covered.

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

d. War and Military Action

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

2. There is not coverage when loss or damage is caused by the following. These exclusions are not subject to the anti-concurrent cause wording that appears in exclusion 1.

a. Wear and Tear

There is no coverage for loss caused, essentially, by the passage of time and handling/use of covered property, including wear and tear, deterioration (form refers to gradual deterioration, so a loss involving rapid deterioration may be excepted), inherent vice, or other property deficiencies.

Example: Laura’s statuary collection is insured under a personal articles form. One day she notices that an antique ceramic statue, insured for more than $5,000, has broken in two. Investigation of the loss reveals that, when the statue was made, an air pocket existed near the center of the object and, eventually, it could not support the weight of its top half. This loss would not be covered because it was due to an inherent vice (flaw).

b. Neglect

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

c. Birds, Vermin, Rodents, Insects or Animals

Loss and destruction created by, well, critters and bugs are ineligible for coverage. Damage by animals that are owned or in the custody of an insured is also not covered.

Example: Barry’s extensive stamp collection suffers severe damage due to the escape of white mice that he was caring for while a friend was on vacation. The digested stamps are not covered.

3. Bicycles

Bikes are not an excluded source of loss. Rather, when bikes are involved in a loss, there is no coverage for loss that can be attributed to mechanical breakdown or to handling, maintaining and/or repairing this class of property. The exclusion makes an exception, still providing for damage due to either fire or explosions that are directly related to working on or handling a bike.

Example: Kelli is doing some needed maintenance on her vintage racing bike that is scheduled on her personal article form. The bike is mounted on top of a table in a special workroom in her home.

Scenario 1: While testing to see if the rear tire is balanced, the wheel flies off the frame and crashes into the wall, ruining it. The damage to the tire is not covered under the personal article form.

Scenario 2: While soaking the vintage bike’s chain and brakes in solvent, fumes build up and explode, destroying the bike. The bike damage is covered since the damage, though connected to bike maintenance, was caused by an explosion.

4. Coin or Stamp Collections

Since coins and stamps are particularly fragile classes of property, there are a number of exposures to loss that are ineligible for coverage:

Temperature extremes, including humidity
Property that fades, dents, suffers scratches, creases, folds and similar wear/tear

Example: Paul and part of his stamp collection have widely different experiences in the sun. Paul’s enjoyment from his ten-day, tropical vacation is tempered upon his return. He’s horrified to discover that he left a stamp album open on a desk near his bedroom window. The time in the sunshine severely faded two sheets of stamps. The loss in value to the stamps is not covered.

Color transference, property flaws (defects) or any loss of value (depreciation)
Disappearance or individual items, unless that item is specifically described and assigned its own policy limit or if an individual item’s disappearance is accompanied by the disappearance of the page of a volume in which it was mounted.
Working on or handling such property

5. Fine Arts

The personal article form applies several exclusions to losses affecting fine arts, disqualifying damage or loss caused by:

Breakage of art glass windows, statues, glassware, marble, porcelains and similarly fragile items except when breakage is due to fire, lightning, windstorm, flood, earthquake, explosion, aircraft, transport vehicle collision/overturn, vandalism, or theft (including attempted theft).

Note: This coverage is provided if Breakage coverage is selected on the declarations but only for the items for which the coverage is selected.

Retouching, restoring or repairing – such handling exposures are under an insured’s control, so are not deemed as accidental exposures.

Example: Patricia was attempting to clean some ornate, antique wood frames from paintings she inherited from her grandmother. Fumes build-up and explode, destroying all of the frames. Her PAF policy will not respond to this loss.

6. Musical Instruments

The personal article form applies several exclusions to losses affecting musical instruments, disqualifying damage or loss due to either mechanical or electrical breakdown (including failure). However, an exception exists for each, permitting coverage when damage is caused by either fire or explosion that is related to property breakdown or failure.

Example: Nancy’s kitchen was demolished during a grease fire. While no other part of her home was damaged, she did experience a problem with her saxophone. The temperature in her bedroom rose enough during the fire that all the pads on her Saxophone keys were dried out and cracked. Her insurer approves a claim after a music shop confirms that excessive heat did cause the damage.

Further, no coverage is extended for loss or damage because of property being repaired, adjusted or serviced. Again, there is an exception for such instances when fire and/or explosion occur.

WHAT MUST BE DONE IN CASE OF LOSS

1. Notice

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

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

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

IF the act that causes the loss is a crime, the insured must promptly notify the police
The notification must describe the property affected by the given loss

The above actions serve important functions. First, they permit the company to begin the loss investigation process, including any action to protect its rights. Second, quick notification to the police may increase the chance for property recovery and third, the reporting duty also minimizes fraud on the part of an insured.

2. You Must Protect Property

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

3. Proof of Loss

If the insurance company requests it, the named insured is required to provide the insurer with a signed, sworn proof of loss. The proof of loss must be submitted within 90 days from the date of the insurer’s request and it must show the following information:

The time, place, and the details of the loss
The (insurable) interest of the named insured and the (insurable) interest of all others, such as mortgagees and lien holders, in the property. If a party cannot demonstrate an insurable interest in the damaged property, the insurer is not obligated to make payment to an insured.
Other policies that may cover the loss, since other policies may have to also provide coverage for an eligible loss
Changes in title
Detailed repair estimates and an inventory of lost items (other, similar information may also be requested by the insurer)

4. Examination Under Oath

All insureds must agree to be questioned by the insurer with regards to a claim and the questioning can include answering questions under oath. This duty helps to protect a company against attempts to file false claims. On the positive side, it may also assist in getting the most details concerning a valid loss.

Example: A coin collection goes missing during a party held for a high school’s drama club after a musical is finished. The insurer asks the parents who hosted the party to convince their teen daughter to provide more information about the party and its guests. The daughter refuses to help and the insurer, convinced that the daughter holds critical information, advises that it will stop investigating the claim.

5. Records

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

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

Example: A policyholder sent a letter to her insurance company. She shared that she would NOT be sending a fourth set of documents that contained the provenance of her stolen art collection. She also threatened to sue her insurer since it was the fourth time it requested this information (and she complied with the previous three requests) and the loss was nearly two years earlier.

6. Damaged Property

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

7. Volunteer Payments

A named insured must not make payments, pay or offer rewards, or assume obligations or other costs, except at the named insured's own cost. This stipulation does not apply to costs that are allowed by this policy.

The policy allows an insured some leeway to make payments in order to respond to emergencies or to help mitigate problems.

8. Abandonment

Property can not be abandoned to the insurer without the insurer’s permission. Of course, if the insurer agrees to accept the damaged property, the act is NOT abandonment.

Note: Agreeing to accept property relinquished by an insured must be in writing.

9. Cooperation

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

VALUATION

1. Scheduled Fine Arts

Any item of fine art that is specifically described in the policy and that is accompanied by an assigned limit of insurance has that coverage amount applying as an agreed value.

2. Actual Cash Value

a. Scheduled Personal Articles – scheduled (specifically described) personal articles have losses adjusted on an actual cash value basis. That means that a current value determination includes consideration of depreciation, reducing any loss payment.

b. Unscheduled Personal Articles - unscheduled personal articles are also covered on an actual cash value basis. At the time of loss, the insurer will make a comparison between the limit that appears for the insured property class and its total, actual cash value. If the ACV is greater than the applicable limit, any loss will be paid on a proportional basis. The applicable portion that is paid is determined by dividing the applicable limit by the applicable acv.

Example: Bennee loses his entire stamp collection in a fire. The personal article limit on his policy was $7,500. After investigating the loss, the insurer determines that a comparable collection would have an actual cash value of $9,200. The insurer pays Bennee $6,075 ($7,500 multiplied by .81, reflecting the adjustment for the amount of coverage he should have carried).

3. Agreed Value

If, per the information on the policy, an agreed value settlement applies to scheduled property and that property is damaged, that agreed value is paid. If the insurer requests, the property must be surrendered to the insurer after the loss has been settled.

4. Loss to a Pair, Set, or Part

a. When Actual Cash Value Applies – under this provision, any personal article that is part of a pair or set that is lost or damaged is settled by either replacing the item or repairing the item. The insurer also has the option to pay an amount equal to the value of the given damaged part or to pay an amount that reflects the difference between the pair or set’s pre-loss and post-loss value.

Note: This settlement provision could result in a contract dispute as there is no wording that gives the insurer the right to settle according to the least expensive option, just that several options are available for its use. One might make an argument that this should include a reference to the personal article’s “Loss Settlement Terms” condition.

When a loss affects jewelry that is a component, or that belongs to a set or pair, the insurer is obligated to pay the item’s full value if the property is scheduled and has its own insurance limit. However, after payment is made, the insured is obligated to surrender the surviving property to the insurance company.

b. When Agreed Value Applies – under this provision, when a loss affects covered property that is a component, or that belongs to a set or pair, the insurer is obligated to pay the item’s full value if the property is scheduled and has its own insurance limit. However, after payment is made, the named insured is obligated to surrender the surviving property to the insurance company.

HOW MUCH WE PAY

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

1. Insurable Interest

The insurance company’s obligation to pay for an eligible loss is constrained by the total insurable interest held by the named insured, regardless what may appear as limits or the property’s applicable value.

Example: Leonard lost his complete collection of superhero statues when a windstorm destroyed half his home. The collection was insured for $5,200. It’s determined that the collection was worth $7,000. After the insurance company discovers that the collection was owned equally by him and his twin sister (who lives in her own, separate home), he is paid $3,500.

Example: Jefferson reports a claim under his personal articles form. A scheduled, antique chess set was stolen from his home and the set had a separate $8,400 limit. However, when investigating the loss, the insurer finds out that the chess set is a family heirloom and Jefferson shares equal ownership of the set with his three siblings. The insurer pays Jefferson $2,100, his insurable interest.

2. Deductible

This provision informs the named insured that any loss is net of any deductible selected and appearing for any given class of property that is protected by the personal article form.

Example: Dina has a PAF covering her fine arts, musical instruments, coin collection and cameras. She selected a $500 deductible. When her home is totaled in a fire, she’s happy to hear that all of her lost valuables will be covered. She’s not quite as happy when she learns that she has to bear $2,000 of the loss due to her deductibles.

3 Loss Settlement Terms

This provision explains that the applicable insurance company has the option to pay according to the property’s valuation (determined at the time of loss), what it takes to repair an item, what is needed to replace the property (substituting property that is comparable in value and quality), the policy’s applicable insurance limit or according to the cost to replace the property with the best substitute practically available. Further, the insurer has the right to use whichever option is the cheapest, though this term is subject to the policy’s other “How Much We Pay” provisions.

4. Insurance Under More Than One Coverage

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

5. Insurance Under More Than One Policy

Depending upon the source of coverage that is available (in addition to this policy), the policy may respond to the loss on an excess basis. When there is other insurance that applies to the loss, the insurance company providing coverage under this form is only obligated to pay its share of the loss which exceeds what is provided by any other coverage source. This is true even if such other sources of loss are not collectible. Further, any shared/excess payment is still subject to any applicable limit applying to such damaged or lost property.

6. Coverage Under a Service Plan

The policy’s available coverage is directly affected when a service plan or similar agreement (such as warranty plans and product protection plans) applies to an occurrence. In such instances, the policy responds on an excess basis and is subject to any applicable insurance limit.

Example: Dina’s insurer discovers that several of her cameras were covered by a special replacement coverage agreement (they found the information in the proof of loss documents supplied by Dina). The insurer tells Dina that it is withholding any payment on the applicable cameras and that she must, first, seek recovery under the plan.

LOSS PAYMENT

1. Loss Payment Options

This section may cause insureds confusion since it could be interpreted as treading the same ground as the earlier, “How Much We Pay” section’s “Loss Settlement Terms” provision.

a. Our Options – when a loss occurs, this provision states than an insurer may choose the most cost effective of the following:

· Pay the lost, damaged property’s immediate, pre-loss value

· Pay to repair the damaged property to its immediate pre-loss condition

· Pay the cost to replace the lose/damaged property with substitutes that are comparable in quality and nature

· Pay based on any value previously establish via agreement or appraisal (whether the situation involves partial or total loss).

b. Notice of Our Intent to Repair or Replace – when an insurer decides to either repair or replace covered property, it must let the insured know of its intent. The notification has to take place within 30 days after the insurer receives a valid proof of loss.

2. Adjustment and Payment of Loss

This provision addresses settlement according to the ownership of the lost/damaged property:

a. Your Property – If no other insurable interest (including a loss payee) exists and if no third party exists that is also responsible for payment, then any payment will be settled between the insurance company and the insured.

b. Property of Others – When the policy pays for damage to or loss of property that belongs to a third party, the insurer has the option of making payment either to the named insured (who is then responsible to getting payment to the applicable party) or directly to the property owner. This provision also states that such payments will not be duplicated. Only one party will be paid for a given, eligible loss. Finally, the provision states that the insurance company has the option to handle the expense of defending an insured against lawsuits that a third-party property owner might file.

3. Conditions for Payment of Loss

Here the form states that an insured is due payment for a loss no later than 60 days after the amount of a given loss is determined. The determination may result from a written agreement between the insurance company and the insured, the final filing (entry) of a judicial award or after an appraisal award has been filed with the insurer.

Example: Linzie’s antique, Bechstein Grand Piano was severely damaged by smoke when a fire broke out in her home on November 4^th. The piano was scheduled on her personal article form for $20,000, yet her insurer offered $7,600 to repair the instrument. Linzie complained that the antique could not be properly restored. She felt that the full, scheduled amount should be paid and requested that the dispute be settled under the policy’s appraisal provision. On January 8^th, the appraisers agreed upon and formally notified the insurer of an award of $18,750. A vindicated Linzie wrote her insurer that she will sue if that check isn’t in her hands by March 9^th.

CONDITIONS

In this portion of the policy, the policy’s general provisions are described.

1. Appraisal

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

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

Notes:

· An appraisal is about the amount of an eligible loss, not whether or not coverage applies.

· This provision does not include specific wording that the appraisal result is binding.

2. Assignment

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

3. Benefit to Others

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

4. Change, Modification, or Waiver of Policy Terms

Only the insurance company has the option of waiving or changing this policy’s terms and such waiver or change must be in writing. If the insurer initiates either an appraisal or any examination under oath, the requests do not affect any other policy terms, so an insured may not consider other policy provisions to be waived or rendered moot.

5. Conformity with Statute

Terms in conflict with the laws of the state in which the premises shown on the declarations is located, are changed to conform to such laws. This provision is rarely relied upon since amendments or endorsements are added to policies to match the state where the policy is used. However, there are instances where the condition is relied upon.

6. Death

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

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

7. Inspections

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

What purpose does this serve? This is a warning and a notice to an insured that a company inspection cannot be used as evidence of the worthiness of the property. A company has its own underwriting rules and philosophy for providing coverage and will not permit its actions to be used to the benefit of other parties. This also prevents the company from being held liable to other areas of authority concerning the property.

8. Liberalization

Sometimes a program undergoes revisions that affect coverage for all policies, yet there may not be any additional premiums involved. If such a change occurs during a policy period or if it occurs no later than 60 days of the current term’s effective date, the applicable policy automatically changes to reflect those revisions.

Note: No changes take effect when overall program changes are implemented via a program edition change or via a separate endorsement.

9. Loss Payable Clause

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

10. Misrepresentation, Concealment, or Fraud

Any intentional concealment or misrepresentation on the part of any insured can void the policy for ALL insureds. If an insured lies or hides a material fact or any circumstance that relates to the insurance that is granted by this policy, that act or omission may eliminate the insurer’s obligation to provide coverage for any insured. This may occur either before or after any loss (depending when an act or concealment is discovered).

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

Related Court Case: Insured Misrepresents (Classic)

11. Policy Period

The policy period sets the time frame in which a loss must occur in order for it to be covered under the policy. In other words, a loss must take place within a stated policy period in order to qualify for coverage during that given period.

12. Recoveries

There are instances when the insurer pays for a loss and then, later, the property is recovered. Similarly, after the insurer’s payment, damage payments are received from those responsible for the loss. When this happens, the named insured and the insurer are obligated to inform each other. The costs of the recovery efforts are paid first.

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

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

13. Restoration of Limits

This provision states that partial losses have no affect on the total insurance limit available for subsequent, eligible losses. Therefore, policy limits are restored to their full amount after such losses. However, if a scheduled (separately described) item is lost or destroyed, no limit applies since future coverage for that item is unnecessary. In such cases, the insurer will refund any premium that has not been earned.

14. Subrogation

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

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

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

15. Suits against Us

While, during a serious dispute, an insured has a right to sue the insurer to resolve the situation, that right may only be sought AFTER complying with the personal article form’s terms. Also, any lawsuit has to be filed within two years of the date the insured first becomes aware of the applicable loss.

Note: The policy provision makes an important exception. It permits an insured to file a lawsuit according to the time period allowed by applicable state law.

16. Territorial Limits

Covered property may qualify for protection regardless where that property is located when a loss occurs. In other words, coverage exists on a global basis.

Example: The Rompersons are vacationing in S. Korea. They come back to their hotel room and find that some expensive formalwear and an antique painting they recently purchased were stolen. The clothing and painting are eligible for coverage.