FP 00 12–FARM PROPERTY–FARM DWELLINGS, APPURTENANT STRUCTURES AND HOUSEHOLD PERSONAL PROPERTY COVERAGE FORM ANALYSIS

(April 2020)

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This analysis is based on the 04 16 edition of these coverage forms. Changes from the 09 03 edition are in bold print.

INTRODUCTION

The entire form must be reviewed in order to understand how coverage applies. The terms you and yours in the form mean the named insured. If the named insured is married and the couple lives together in a common household, the term you also includes the spouse. Us, we and ours refer to the insurance company. The other definitions that apply to this coverage form can be found in FP 00 90–Farm Property–Other Farm Provisions Form–Additional Coverage, Conditions and Definitions.

SECTION I COVERAGE

Coverage A–Dwellings

A. COVERAGE

The insurance company pays for direct damage to covered property at an insured location that is described on the declarations if the damage is due to a covered Cause of Loss. The coverage form also provides for some limited off premises coverage but only when expressly described below.

1. Covered Property

The dwelling must be owned by the named insured and may be on the insured premises or location or elsewhere. However, it is covered only if shown on the declarations. Attached structures are covered but only when actually attached and not just connected by a fence or utility line. Coverage A protects the material and supplies that are on the premises for the purpose of altering, building, or repairing the dwelling or a properly attached structure. Equipment used to service the insured dwelling and grounds is also treated as covered property if it is not covered elsewhere. This equipment is covered even if off premises but only if it is only off premises temporarily.

2. Property Not Covered

Coverage does not apply to land, including land on which the dwelling is situated, or to water. Trees, shrubs, plants, and lawns are also not covered except as covered by an Extension of Coverage.

3. This item—Special Limit of Insurance Under Coverage A has been eliminated. (04 16 change)

Note: The $1,000 special limit that applied to outdoor radio and TV antennas and satellite dishes attached to the dwelling was eliminated in the 04 16 edition. This means that these items are covered but are no longer subject to a separate limitation.

B. COVERAGE A–CONDITIONS

The conditions listed in Form FP 00 90–Farm Property–Other Farm Provisions Form–Additional Coverages, Conditions and Definitions and in Form IL 00 17, Common Policy Conditions, also apply to Coverage A. In addition to those, the following Loss Conditions apply:

Common Policy Conditions Analysis

FP 00 90–Farm Property–Other Farm Provisions Form–Additional Coverage, Conditions, Definitions Analysis

Loss Conditions–Valuation

1. Property (04 16 change)

The policy pays on a replacement cost basis if the insurance limit equals at least 80% of the replacement value of the property at the time of loss. Replacement cost does not include the value of the excavation, basements, foundations and underground structures. The 80% requirement can be changed by endorsement or valuation and specific dwellings can be limited to Actual Cash Value.

When replacement cost valuation applies, the insurance company pays the amount to replace any damaged or lost property with property of similar kind and quality, the cost to repair the structure, or the limit of insurance coverage applicable to the damaged property, whichever is the least expensive option. Two important provisions apply. One is that the structure can be rebuilt at another location. However, under this option, the insurance company only pays the amount that would have been required to rebuild on the original location. Two is that the insurance company does not pay for construction upgrades or improvements required by any laws or ordinances. FP 04 04–Ordinance or Law is available to cover increased costs required by-laws or ordinances.

Example: Jim purchased a farm policy when he bought his farm 25 years ago. For years he kept the same coverage limits. Jim's son-in-law, an insurance agent, encouraged him to review and increase his limits. Jim agreed to the reevaluation of his farm property values. Jim was shocked when he saw the limits needed, but he increased his coverage as suggested. Less than a month later, a tornado touched down and severely damaged the dwelling on his farm. Because Jim's limits were current, the loss adjustment and settlement went through with no problems, and the dwelling was replaced. Jim’s only out-of-pocket expense was the policy deductible.

When a policy’s limit does not represent (is less than) 80% of replacement cost, payments are made either on an actual cash value basis or as a proportion that the actual limit bears to 80% replacement cost, whichever is larger.

Example: Let’s revisit the previous situation. In this case, Jim carried a dwelling limit of $50,000. The dwelling’s actual cash value was determined to be $45,000, while the dwelling’s replacement cost was found to be $125,000.

The ratio applicable to the loss would be 50% [$50,000/$125,000 X.80]. This means that for any loss, either the Actual Cash Value or 50% of the replacement cost ($62,500) would be paid, whichever was the higher amount, subject to the limit of insurance. Because the dwelling was a total loss, Jim would have recovered the full $50,000 limit on it, but that would have left him with a substantial out-of-pocket expense to replace his farm home.

In any replacement cost situation (except for the exception referenced below), the insurance company does not pay until the repairs are actually completed. It pays the Actual Cash Value until the repairs are completed and then provides final payment to cover the difference. Within 180 days after the date of loss, the insured must tell the company if they want to rebuild or if they wish to take an Actual Cash Value settlement. However, if the loss is less than $5,000, or 5% of the coverage limit, the loss is settled on a replacement cost basis even before repairs are made in order to simplify the handling of the claim.

2. Glass Replacement

When glass is replaced, the cost of safety glazing material is included, but only when required by law.

Coverage B–Other Private Structures Appurtenant To Dwelling

A. COVERAGE

The insurance company pays for direct damage to covered property that is at an insured location and described on the declarations. The direct damage is covered only when the damage is due to a covered Cause of Loss. Limited coverage is provided off the insured location but only as described elsewhere in the property coverage form.

1. Covered Property

All private structures owned by the named insured that are appurtenant (related) to the insured dwelling are covered. They must be separated from the covered dwelling by clear space or be attached to the main dwelling by only fences or utility lines.

2. Property Not Covered

· Land and water

· *Structures that are rented to persons who do not live in the named insured’s dwelling

· *Structures that are used by the named insured for farming operations

· Any structure specifically listed on the declarations as not covered

*If these structures are private garages, they are covered even if rented out or used for farming.

3. Limits of Insurance Under Coverage B (04 16 change)

The Coverage B limit is 10% of the Coverage A limit. The limit for Coverage B is an additional amount of coverage. Any payment under Coverage B does not reduce the Coverage A limit. However, the payment is per occurrence NOT per building.

Example: Paul has a private garage and a tool shed on the insured location. They were both destroyed in the tornado. The Coverage A limit on the policy was $100,000. The cost to replace the garage is $8,000 and to replace the tool shed is $5,000. Paul will receive not more than $10,000 to pay for the entire claim, not $13,000 as he had hoped.

Note: The $1,000 special limit that applied to outdoor radio and TV antennas and satellite dishes was eliminated in the 04 16 edition. This means that these items are covered but are no longer subject to a separate limitation.

The 04 16 edition also eliminated the option to increase Coverage B limits on the Declarations. The Coverage B limit can only be increased in this coverage form by increasing Coverage A. However, if additional limits are needed for a specific appurtenant structure, FP 05 25–Increased Limits for Structures Appurtenant to Dwellings can be attached and the structure listed with its additional limit of insurance.

B. COVERAGE B. CONDITIONS

The conditions listed in FP 00 90–Farm Property–Other Farm Provisions Form–Additional Coverages, Conditions and Definitions and in Form IL 00 17– Common Policy Conditions, also apply to Coverage B. In addition, Coverage B is subject to the same valuation clause as under Coverage A, Conditions.

IL 00 17–Common Policy Conditions Analysis

FP 00 90–Farm Property–Other Farm Provisions Form–Additional Coverage, Conditions, Definitions Analysis

Coverage C–Household Personal Property

A. COVERAGE

The insurance company pays for direct damage to Household Personal Property at an insured location, but only if the damage is due to a covered Cause of Loss. Limited coverage is provided at other locations but only as described elsewhere in the property coverage form.

1. Covered Property

The Household Personal Property must be owned or used by the named insured or a family member living in the household. In addition, Household Personal Property owned by others can be included and covered after a loss occurs if the named insured requests it. Such guest property must be located either in the named insured’s dwelling or on the grounds on which that dwelling rests.

2. Property Not Covered (04 16 additions)

The following items are not covered under Coverage C:

· Items insured in another policy or specifically covered in another part of this policy.

· Aircraft or aircraft parts, unless the aircraft is for hobby use only and cannot carry passengers or cargo. An aircraft policy provides this coverage if needed.

· Trees, shrubs, plants, and lawns owned by a tenant named insured, except as covered by an Extension of Coverage.

· Fish, birds, or animals.

Note: FP 00 40–Livestock Coverage is available to cover certain animals.

· Business property, except as provided in item 3. Special Limits Of Insurance Under Coverage C

· Electronic data processing media and software but only those amounts that exceed the greater of such property’s prepackaged software or blank discs’ value.

· Personal property used for the farming operation except for office fixtures and equipment. This property can be covered under Coverage G in FP 00 13–Farm Property–Farm Personal Property Coverage Form.

· Motor vehicles and conveyances along with their equipment and parts unless those parts and equipment are scheduled on the declarations. There are two exceptions:

o Portable electronic equipment when such property is powered by a source other than the motorized property’s electrical system. This applies only to electronic equipment that can reproduce, receive, or transmit data, audio or visual signals.

Note: In prior editions, permanent electronic equipment used to reproduce, receive, or transmit data, audio and visual signals were specifically listed as not covered. They continue not to be covered through the wording of this motor vehicle equipment not covered. The wording is different, but the result should be the same.

o Motor vehicles or conveyances used only for servicing an insured’s dwelling and grounds or for providing mobility to the handicapped. The vehicle/conveyance cannot be licensed for road use.

Note: A commercial or personal auto policy covers normal motor vehicles. Golf carts may be covered using FP 05 27–Golf Carts.

· Credit, debit, and other similar cards that permit withdrawals or transfer of funds. This exclusion does not apply to the coverage granted under this form as an Additional Coverage.

· Any property involved with illegal transportation, trade, or related activities is not covered because insurance coverage is not intended to facilitate illegal activities.

· Agritainment property is not covered. Agritainment property is defined in FP 00 90–Farm Property – Other Farm Provisions Form – Additional Coverages, Conditions, Definitions in order to determine exactly what property is not covered.

3. Special Limits of Insurance–Coverage C (04 16 changes)

The following classes of property are subject to sub-limits. These limits are not in addition to any limit in the policy. Instead, they act to restrict recovery to no more than the very modest sub-limit indicated. If higher limits are needed, the coverage must be purchased separately. The following sub-limit amounts apply to all property included in the category on a per occurrence basis:

· $200 for gold, platinum or silver, other than goldware, platinum ware, or silverware, and also on money

· $1,500 for manuscripts, passports, letters of credit and securities. The costs of research, replacement and restoration are part of this limit.

· $2,500 for any watercraft, including all equipment, furnishings, outboard motors, and trailers

· $1,500 for trailers and semitrailers that are not used with watercraft activities or farming operations

· $2,500 for property that is at the insured location but that is used in business

· $1,500 on property of an insured that is located at other premises and used for business purposes. This limitation does not apply to antennas and media used with electronic devices that can reproduce, receive, or transmit audio, visual or data signals that are used in any land conveyance.

The following types of property are also limited, but only for theft losses:

· Furs, jewelry, precious stones, semi-precious stones, and watches are limited to $2500 per occurrence

· Dinnerware and trays, trophies and other items containing silver, gold, platinum, or pewter are limited to $2,500 per occurrence. Goldware, goldplated ware, silverware, silverplated ware, platinum ware, platinum plated ware and pewterware are examples of this type of property.

· Firearms and related equipment are limited to $3,000 per occurrence

The following limitations apply to electronic devices that can reproduce, receive or transmit audio, visual or data signals:

· $1,500 applies to such items that are portable and designed to utilize a variety of power sources including that of a motorized conveyance while in or on the motorized conveyance.

· $1,500 applies to such items that are portable, used only in farm operations, designed to utilize a variety of power sources including that of a motorized conveyance, but at the time of loss off the insured location are not in or on a motorized conveyance. The limit applies to any antenna and media that is to be used with such electronic equipment.

· $250 applies to antennas and media used with electronic devices that can reproduce, receive or transmit audio, visual or data signals that are used in any land conveyance.

Note: This was previously part of the $1,500 limit in the first paragraph but now is a separate item. This could be a positive or a negative for the customer.

Note: These limits, along with those that apply to business property, may be increased or changed to coverage extensions by endorsing the policy.

B. COVERAGE C–CONDITIONS

IL 00 17–Common Policy Conditions Analysis

FP 00 90–Farm Property–Other Farm Provisions Form–Additional Coverage, Conditions, Definitions Analysis

Loss Condition – Valuation is added that states that Household Personal Property is valued at actual cash value but not for more than the amount needed to repair or replace it.

FP 04 36–Replacement Cost–Household Personal Property, can be used to amend and improve how such losses are settled.

Coverage D –Loss of Use

A. COVERAGE

The following are covered but only up to the Loss of Use limit of insurance on the declarations. The loss of use limit is the maximum for the sum of the loss from the three coverages listed below. The time period for loss is not limited to loss incurred within the policy period. The loss must begin in the policy period but can continue into the next period as long as limits remain available.

1. Your Additional Living Expense
Additional living expense applies if a covered cause of loss damages the primary family living quarters (owned or rented) to the extent that it is uninhabitable. This coverage pays for any necessary increase in living expenses incurred so that the occupants can maintain their normal standard of living. Coverage applies for either the time it takes to repair the existing building or the time it takes to relocate to permanent new quarters.

2. Fair Rental Value
The fair rental value of a tenant-occupied dwelling is paid if a covered cause of loss damages an insured dwelling or a covered appurtenant structure to the extent that it cannot be rented such that and rental income is lost. Payment is based on the fair rental value of the structure minus any non-continuing expenses. The payment period is restricted to the shortest time period required to rebuild or repair.

3. Loss and Expense Due To Emergency Prohibition Against Occupancy
There are cases where a dwelling is not damaged, but it still cannot be occupied because of damage to surrounding areas. If the damage in the surrounding areas is from a covered cause of loss, and local authorities deny access to the insured dwelling, coverage applies under this section for any additional living expense or fair rental value for a period of up to two weeks, excluding any loss due to the cancellation of a lease.

Examples:

Scenario 1: A severe storm hit the area near Mary’s farm. Although Mary’s farm was not damaged, the sheriff decided no one could travel to her part of the county because of downed power lines and fears of looting. The sheriff’s action meant that Mary would not be able to return home for at least one week. Her additional living expenses for this period were covered.

Scenario 2: A political cult has declared war with the local government over zoning laws. Mary’s farm is close to the land and buildings owned by the cult. Though her property has not been damaged, the sheriff decided it was dangerous to travel to her part of the county because of marauding, firearm-bearing cult members. The sheriff’s action meant that Mary would not be able to return home until the volatile situation is resolved. It turns out that she is denied access to her home and land for a week. Her additional living expenses for this period were not covered as the cause of the loss is ineligible for coverage.

B. COVERAGE D CONDITIONS

The conditions listed in FP 00 90–Farm Property–Other Farm Provisions Form–Additional Coverages, Conditions and Definitions and in IL 00 17–Common Policy Conditions apply to this Coverage. There are no additions.

IL 00 17–Common Policy Conditions Analysis

FP 00 90–Farm Property–Other Farm Provisions Form–Additional Coverage, Conditions, Definitions Analysis

SECTION II–COVERAGE EXTENSIONS

A. TREES, SHRUBS, PLANTS, AND LAWNS (04 16 change)

Coverage applies for all trees, shrubs, plants and lawns located within 250 feet of the dwelling. Coverage is limited to theft, fire, lightning, explosion, riot, civil commotion, aircraft, non-owned vehicles (not operated by a resident) and vandalism.

This extension does not include coverage for any items that are considered either contraband or part of any illegal transportation or trade.

Note: The state-by-state legalization of marijuana may be one reason for this change because, while marijuana may be considered legal in a particular state, it continues to be considered contraband and part of illegal trade within federal guidelines.

The limit is 5% of the policy Dwelling. However, if the named insured does not own the dwelling coverage it is 10% of the Household Personal Property Limit. Coverage is subject to a limit of $500 for any one tree, shrub, plant, or lawn.

No coverage applies to any trees, shrubs, plants, or lawns grown for business or farming purposes. Trees, shrubs, plants, or lawns used for agritainment purposes are also not covered.

This extension applies as additional insurance.

Example: Herman lives near a town with some residents who are having fun with a new “game” of driving cars through fields and lawns. One night, some local kids decided to play on Herman’s farm. They ran through some low shrubbery, then onto the lawn and finally pulverized a prized 3-year-old dogwood, valued at $485. Since the damage was within 250 feet of the house, there is coverage for up to 5% of the dwelling limit ($100,000 X .05 = $5,000 in this case). The deductible amount would have to be met but the remaining loss would be paid up to the extension limit.

B. HOUSEHOLD PERSONAL PROPERTY OF THE INSURED AWAY FROM THE INSURED LOCATION

Coverage for Household Personal Property applies anywhere in the world. However, when such property is located at another location owned by a person who qualifies as an insured, coverage is limited to 10% of the limit of insurance shown on the declarations or $1,000, whichever is greater. The covered property must be owned by the named insured or someone in the named insured’s family who lives in the household. The limit may be increased and the increased limit shown on the declarations.

Example: Derek moved to college and took along his Smart TV, laptop computer, Bluetooth speakers, guitar, refrigerator, microwave, books, and clothes. When the house he lived in burned down, he was amazed to find out how valuable his possessions were. The total value came to $7,000. Because his parents had not scheduled his location as an insured location on their policy, the only coverage available was the off-premises property limit. The household personal property was insured for $50,000, so the most he could recover was $5,000.

Certain Household Personal Property is covered off-premises and is not subject to the percentage limitation. One situation is when property is moved from the insured location because the dwelling is not fit for occupancy. Another is when the family moves from one principal residence to another. In this second situation, there is pro rata coverage between the two locations for up to 30 days.

C. REFRIGERATED PRODUCTS–NOT FARM PERSONAL PROPERTY (04 16 change)

Coverage extends to cover up to $1,000 for loss or damage to contents of a freezer or refrigerated unit on the insured premises. The loss must be caused by a change in temperature due to an interruption of electrical service to refrigeration equipment caused by either damage to generating or transmission equipment or by a mechanical or electrical breakdown of a refrigeration system. This is not an additional amount of insurance, but there is no deductible. Property must be owned by the insured and cannot be farm personal property.

Example: The Farner family took a much-needed vacation. A neighbor watched over the livestock and pets while they were away. When they returned, they noticed an odor from the garage. Somehow the fuse that controlled the power to the garage had blown while they were away but no one had noticed. All of the food in the freezer/refrigerator had thawed and spoiled. This extension of coverage paid up to $1,000 for the Farners’ spoiled food.

D. BUILDING ADDITIONS AND ALTERATIONS

This extension is available only when the named insured is a tenant.

1. Coverage

Any additions, alterations, fixtures, improvements or installations made to the part of the residence occupied by the named insured and made or acquired at the named insured’s s expense are covered under this coverage extension. The limit of insurance is 10% of the Household Personal Property limit, unless a higher limit is specified on the declarations. This extension is an additional amount of insurance.

2. Loss Settlement

If the named insured pays for any repairs, this extension covers the loss on an actual cash value basis. If any damage is not repaired within 12 months after the date of loss, a settlement based on a proportion of the actual cost of the repairs based on the time remaining on the lease. The lease can be either written or oral. If any other party pays for the repair or replacement, this extension pays nothing.

Example: Kevin lived and worked on his uncle’s farm so purchased his own farm policy. Because he planned to continue living there for a long time, he added a room to the back of the house. He used the space as a music studio. One day a fire started that severely damaged his studio. Fortunately, Kevin’s insurance agent had convinced him to increase the limit on his policy beyond the 10% automatic coverage when the addition was built. The separate limit allowed him to make the needed repairs and to continue to enjoy the house.

SECTION III–ADDITIONAL COVERAGES

A. REMOVAL OF FALLEN TREES (04 16 change)

1. If a tree near to the covered dwelling falls and damages covered property, coverage applies for the removal of that tree but there are stipulations and requirements:

· If the tree is more than 250 feet from the dwelling and the fall is due to a covered cause of loss, removal of the tree is covered.

· If the tree is less than 250 feet from the dwelling and the fall is due to a covered cause of loss other than fire, lightning, explosion, riot, civil commotion, aircraft, non-owned/operated vehicles, vandalism or theft, coverage to remove the tree applies.

Note: This carving out of coverage prevents duplication with the Tree Shrubs, Plants, and Lawns Coverage Extension. It might have been better to say that the removal of a tree that falls down due to a covered cause of loss is covered provided it is not covered elsewhere on the policy.

2. If a covered cause of loss causes a tree to fall as described above, but the tree does not damage covered property and instead merely restricts access to the covered dwelling, coverage is available. However, this applies only if the access is blocked due to the tree falling either:

· On a driveway such that a registered motor vehicle cannot enter or exit the grounds next to the covered dwelling

· In such a way that block a fixture or ramp meant to help a handicapped person enter the covered dwelling.

3. A limit of $1,000 is available for any one loss, but it is further limited to $500 for any one tree. This is additional insurance.

This additional coverage does not apply to any coverage provided under the Trees, Shrubs, Plants, and Lawn Coverage Extension.

Note: Wording had changed from applying to only named insured’s principal residence to applying to any covered dwelling which broadens coverage to other owned dwellings on the property that are not occupied by the named insured.

B. CREDIT CARDS AND ELECTRONIC FUND TRANSFER CARDS OR OTHER ACCESS DEVICES; FORGERY; COUNTERFEIT CURRENCY (04 16 change)

1. The four elements included in this coverage all relate to monetary transactions. This coverage is an additional $500 of insurance, unless a higher limit is shown on the declarations. This coverage specifically pays for:

· Any credit card obligations due to either theft or unauthorized use of the card. However, the insured must have complied with all credit card obligations.

· Any loss due to theft or unauthorized use of an electronic fund transfer or debit card provided the insured has complied with all the card obligations and requirements.

· Any loss due to forgery or alteration of a negotiable document.

· Any loss involving counterfeit U.S. or Canadian currency when accepted in good faith.

If a person commits or is implicated in a series of acts described above, the combination of all of those acts is considered a single loss.

2. Three types of losses are not covered:

· Credit or debit card loss that is caused by a resident of the household or by a person entrusted with a card using it.

· Any loss arising from a business operation

· Any loss caused by a dishonest insured

3. There is no deductible.

4. The insurance company can make investigations and provide defense to the insured for losses under this Additional Coverage. The defense ends after payment of a loss exhausts the limit of insurance. The legal representative selected by the insurance company defends any suit brought because of credit or debit cards. The company also retains the option to defend any insured for losses involving forgery.

5. This is not a sublimit. It is additional insurance.

C. WATER DAMAGE

In the event of a water damage claim, this coverage pays to tear out and replace the parts of the building or structure that block access to the pipe or other equipment causing the water damage. This coverage does not apply to the actual repair of the faulty part or equipment. This coverage does not increase the limit of insurance. Sumps, sump pumps and other similar types of equipment are not part of this additional coverage.

Example: Fred could hear rushing water. Then he saw wet spots on the first floor ceiling of his home. When water began to drip through the ceiling, he took action. He shut off the water main and called a plumber. The plumber inspected the ceiling and then opened up the area where he was sure he would find the problem. He then replaced the ruptured pipes. The loss involved the following:
Damaged Item/Expense	Amount
Drywall Removal	$65
Replastering	$75
Drywall/Plaster Labor	$115
New Pipes	$275
Pipe Replacement Labor	$200
Total	$730
Total Paid	$255
The insurance company paid $255 for the water damage and for repairing the area that was torn out. However, $475 of the plumber's bill was not paid since pipe replacement is not covered under the policy.

D. GRAVE MARKERS

The insurance company pays up to $5,000 for damage to grave markers and mausoleums whether they are on or off premises. Regardless of the applicable cause of loss on the declarations, the only Covered Causes of Loss are those provided under either BASIC or BROAD. Payment is on an actual cash basis. This is not an additional amount of insurance. In other words, payment made under this provision reduces the policy’s applicable limit.

E. OTHER ADDITIONAL COVERAGES

This policy includes a statement to refer to the FP 00 90–Farm Property–Other Farm Provisions Form for more coverages, defined terms and provisions that also apply.

SECTION IV–OTHER PROVISIONS

A. COVERED CAUSES OF LOSS, EXCLUSIONS AND LIMITATIONS

A policy requires a Covered Cause of Loss section to be complete. These provisions are discussed in FP 10 60–Causes of Loss Form–Farm Property.

B. LIMITS OF INSURANCE

This is discussed in FP 00 90–Farm Property–Other Farm Provision Form–Additional Coverages, Condition and Definitions.

C. DEDUCTIBLE

This is discussed in FP 00 90–Farm Property–Other Farm Provision Form–Additional Coverages, Condition and Definitions.