dwelling policy chapter (property)

COVERAGE A - DWELLING

Coverage a - dwelling covers structures used for dwelling purposes, including all attached structures and outdoor personal property or equipment used to maintain or service the premises (if not covered elsewhere). any materials or supplies at the described location used for the construction, alteration, or repair of the swelling are also covered. however, the land on which the dwelling is located is not covered. (the logic of this provision is the swelling insured often is rented to others and insured without content coverage. if the landlord furnishes lawnmowers or other equipment to service the premises, there is no need to schedule a small amount of content coverage.)

BROAD

Losses to the dwelling are covered on a replacement cost basis as long as the insured maintains a minimum amount of coverage equal to 80% of the dwelling replacement cost. the broad form coverage expands the causes of loss insured under the basic form. there are 7 additional perils insured in the broad form, beside the basic form perils, the extended coverage perils, and vandalism and malicious mischief 1. burglary damage - this peril expands the coverage included for vandalism and malicious mischief. coverage is provided for damage to any covered property (not just the building) if caused by burglary. there is no coverage for property taken by burglars or if the dwelling has been vacant for 60 or more days with a dwelling policy before the loss. 2. falling objects - loss or damage resulting from falling objects is covered, except damage to awnings, fences, outdoor equipment, outdoor radio and television antennas or aerials, masts, or towers. damage to the interior of a building is covered only if the exterior was damaged first. 3. weight of ice, snow or sleet - loss or damage to the building or contents caused by the weight of snow, ice, or sleet is covered. there is no coverage for damage to piers, wharves, docks, awnings, fences, swimming pools, foundations, retaining walls, pavement, or patios. 4. tearing apart, cracking, or burning or bulging - the sudden and accidental tearing apart, cracking, burning, or bulging of appliances from heating water, an air-conditioning system, or from an automatic fire protection sprinkler system is covered. Loss caused by freezing is not covered. 5. accidental discharge or overflow of water or stream - damage caused by the accidental discharge or leakage of water or steam from a plumbing, heating, air conditioning, or automatic sprinkler system is covered. however, the policy will not pay for loss or damage caused by continuous or repeated seepage, or for losses caused by freezing, unless the insured does his best to maintain heat in the building or drains the equipment and shuts off the water supply. damage caused by discharge from an off-premises storm drain, steam, or sewer pipe is not covered. 6. freezing of plumbing - the freezing of plumbing, heating, air conditioning, or automatic sprinkler systems is covered only if the insured has taken reasonable steps to maintain heat in the building or has shut off the water and drained the pipes and appliances. 7. electrical (artificially generated) - sudden and accidental damage resulting from artificially generated electrical current is covered. there is no coverage for damage to tubes, transistors, or electronic components or circuitry that are part of appliances, fixtures, computers, and home entertainment units. in addition, the broad form policy expands coverage for explosion, vehicles, and vandalism and malicious mischief. the broad form does not exclude explosion of steam boilers or steam pipes as the basic form does. for vehicles, the broad form only excludes damage to fences, driveways, or walkways if caused by an insured, but does not exclude damage to other property caused by an insured. in other words, if damage to fences, driveways, or walkways is caused by someone other than the insured or a resident of the insured's household, there would be coverage for the resulting damage. finally, unlike the basic form that excludes loss to building glass under the vandalism and malicious mischief perils, there is no such exclusion in the broad form. in addition, the broad form also includes the following other coverages: lawns, trees, shrubs, and plants - loss or damage to lawns, trees, shrubs, and plants is covered if caused by fire, lightning, explosion, riot or civil commotion, aircraft, nonowned or operated vehicles, or vandalism and malicious mischief. this is an additional amount of insurance and is limited to a maximum of $500 per tree, shrub, or plant, and a maximum per loss of 5% of the amount of coverage on the dwelling. breakage of glass - glass or safety glazing material that is a part of the covered building, including storm doors and storm windows, is covered. also covered is loss or damage to other covered property caused by the breakage of glass. there is no coverage for glass breakage if the building or structure has been vacant for a certain number of days (60 or more) collapse - the broad and special form cover collapse of a building or a part of a building if the loss is the result of hidden decay, insect, or vermin, weight of personal property or rain that collects on the roof, the use of defective materials or methods in construction, or one of the broad form perils. collapse does not include settling, cracking, shrinkage, bulging, or expansion. this is not considered an additional amount of insurance.

AUTOMATIC INCREASE IN INSURANCE

automatic increase in insurance is an endorsement that may be added to a dwelling policy to increase the amount of insurance by an annual percentage to offset the effects of inflation. this endorsement requires additional premium

OTHER COVERAGES

all 3 coverage forms also include other coverages that are extensions of the major coverages. all coverage forms include the following 8 other coverages: 1. removal - the policy will pay for loss or damage to property removed from the insured premises when threatened by a peril insured against. perils insured against are converted to open peril coverage during the process of removal. the basic form policy provides coverage for 5 days, while the broad and special forms provide 30 days of coverage 2. other structures - the insured may elect to apply up to 10% of the dwelling insurance amount to cover other structures on the insured premises. in the basic form, this is not an additional amount of insurance and will reduce the amount available under coverage a in case of a concurrent loss. in the broad and special forms, coverage is provided automatically and considered an additional amount of insurance. 3. debris removal expense provides coverage for reasonable costs to remove debris after a covered loss. this includes the expense to remove of ash or dust caused by volcanic eruption. coverage is not considered an additional amount of insurance. 4. reasonable cost for repairs - reasonable costs incurred by the insured for repairs necessary to protect property from further damage at the time of a covered loss also is covered. this is not an additional amount of insurance. 5. tenants' improvements, alterations, and additions - if the insured is a tenant, up to 10% of the personal property limit may be applied to loss or damage to improvements, alterations, or additions acquired by the insured tenant. in the dp-1, this is not considered an additional amount of insurance and will not increase the total amount of insurance payable in case of a loss. in the dp-2 and dp-3, this is an additional amount of insurance and will not reduce the coverage c limit for the same loss. 6. worldwide personal property coverage - the insured may elect to apply up to 10% of the personal property limit to pay for losses to personal property away from the premises. there is no coverage for rowboats or canoes. property of guests and servants are not covered away from the insured premises. this is not considered an additional amount of insurance. 7. rental value and additional living expense - up to 20% of the coverage a limit of liability may be used for loss of both fair rental value and additional living expense. 8. fire department service charge - up to $500 will be paid for costs incurred by the insured because of an agreement to pay the fire department if they respond to a fire at the described premises. this coverage is considered an additional amount of insurance, and no deductible applies to this coverage.

COVERAGE B - OTHER STRUCTURES

coverage b - other structures covers other separate structures at the same location. formerly called appurtenant structures, this coverage would apple to detached garages and other outbuildings on the described location that are separated from the dwelling by a clear space, or connected only by a fence, utility line, or similar connection. structures may be used to store commercial farming or manufacturing equipment owned solely by the insured as long as the only gaseous liquid fuel in storage is contained in a permanently installed fuel tank on a vehicle or craft stored or parked in the structure. other structures may not be rented to anyone except a tenant of the main dwelling. a garage that is used for a private garage does not come under this exclusion of rented property and is covered even if it is rented to someone other than the occupant of the dwelling. other rented buildings may be specifically scheduled for coverage under coverage b.

DWELLING UNDER CONSTRUCTION

dwellings under construction are eligible for coverage. however, due to the unique nature of these risks, an endorsement is required to modify some of the policy provisions. the limit of liability for a dwelling under construction is provisional, and is based on the completed value of the structure. at the time for loss, the applicable limit is a percentage of the provisional limit, based on the proportion of actual cash value of the property at the time of loss. premium is based on an average amount of insurance during construction.

BASIC

dwelling form DP 00 01 is a named peril coverage form and provides the most limited coverage of the three forms. losses under the basic form will be paid on an actual cash value basis. unlike the broad and special forms, there is no minimum amount of insurance required for the basic form. the basic form insures against the following perils or causes of loss: 1. fire - to be covered, the loss must be the result of a hostile fire. a friendly fire is one that is intentional and is contained within its intended boundaries (such as a fireplace). if the friendly fire escapes these boundaries and causes damage to other property, the fire would then be considered a hostile fire and covered by the insurance. however, a fire does not have to originate from a friendly fire to be considered a hostile fire. 2. lightning - if lightning causes damage to the insured premises or causes a fire, the resulting damage will be covered. 3. internal explosion - internal explosion encompasses just about any explosion that takes place in an insured structure or in a structure containing covered personal property. coverage does not include loss of damage resulting from electric arcing, breakage of water pipes, breakage or operation of pressure relief devices, or explosion of steam boilers or steam pipes owned, leased or operated by the insured. an example of a covered loss is explosion of a gas stove. in addition to these causes of loss, the insured can add the extended coverage perils to the basic policy for an additional premium. this coverage is printed in the basic form. however, coverage does not apply unless a premium is shown on the declarations for this coverage. the perils included in the extended coverages are the following: 4. windstorm or hail - damage to the insured property from windstorm or hail is covered. awnings, signs, and antennas outside the dwelling are not covered. damage to the interior of a building will be covered only if the exterior of the building is first damaged by the windstorm or hair. for example, if interior damage results from wind or hail entering through an open window, there would be no coverage. 5. explosion - the peril of internal explosion is expanded in the extended coverage endorsement. the explosion does not have to occur inside the dwelling. the explosion of steam boilers and steam pipes is not covered. 6. smoke - loss or damage caused by smoke is covered. coverage does not include smoke from agricultural smudging, industrial operations, or from a fireplace (friendly fires). smoke resulting from a hostile fire is covered under the peril of fire. 7. aircraft and vehicles - loss or damage that results from direct physical contact with aircraft (including self-propelled missiles and spacecraft) or vehicles is covered. there is no coverage for loss or damage to fences, driveways, or walks caused by aircraft or vehicles, or for any other property damaged by vehicles. 8. riot or civil commotion - although riots and related terms are not defined in the policy, included within this cause of loss are acts of striking employees, or any assembly of individuals who commit a lawful or unlawful act in a violent or tumultuous manner, to the terror or disturbance of others while occupying the covered premises, and any looting that occurs during a riot or civil commotion, if it occurs during and at the place of the riot or civil commotion. 9. volcanic eruption - this peril was added to the extended coverage provisions of the dwelling forms in the 1989 revision. although some coverage would be provided under the explosion peril in the absence of this addition, the volcanic eruption peril also covers loss resulting from ash or debris of a volcanic action. there is no coverage for loss caused by earthquake, land shock waves, or tremors. if the extended coverage perils are insured on the policy, the insured also may add coverage for vandalism and malicious mischief. 10. vandalism and malicious mischief - VMM covers loss or damage to property from willful and malicious destruction of the insured property, Glass breakage and damage resulting from theft is not covered. glass and theft must be covered separately. there is no coverage if, preceding the loss, the insured's premises have been vacant for 60 consecutive days under the dwelling policy.

GENERAL EXCLUSIONS

dwelling policy forms contain several general exclusions that define the actual extent of coverage provided. the exclusions found in all 3 dwelling forms are listed below. ordinance or law - coverage does not apply to expenses incurred as the result of any ordinance or law that regulates the construction, use, or repair of any property, or that requires the tearing down of any property. however, there is coverage for replacement of broken glass with safety glazing material if required by ordinance or law. earth movement - earthquakes and land shock waves associated with volcanic action are not covered. landslides, mudslides, and sinkholes (caused by or resulting from human or animal forces or any act of nature) also are not covered. however, any damages caused by ensuing fire and explosion are covered water damage - damage caused by flood, below-surface water, and water or waterborne material (such as sewage) that backs up from a sewer or drain is not covered power failure - if there is loss or damage due to a power failure away from the insured premises, such as the spoilage of refrigerated food from a power outage, there is no coverage neglect - if at the time of loss, further damage results because the insured neglected to try to save or preserve the property, there is no coverage for the additional loss or damage war - damage caused by war, insurrection, rebellion, or revolution is not covered nuclear hazard - nuclear reaction or radiation, or radioactive contamination is not covered. intentional loss - it is contrary to public policy to insure loss or damage that is intentional, whether committed or conspired by all insured or an individual insured governmental action - this refers to the destruction, confiscation, or seizure of property by order of governmental authority. this exclusion does not apply to action taken at the time of a fire to prevent its spread if fire losses are covered by the policy. in addition, the following specific types of property are NOT covered in any of the dp forms: *land *structures used for commercial, manufacturing or farming *structures rented to others who are not a tenant of the dwelling *loss resulting from the cancellation of lease (applicable only for fair rental value and additional living expense coverage) *animals, birds, or fish *aircraft *boats (except rowboats and canoes) *motor vehicles, including equipment and accessories (except motorized vehicles used solely to service the premises that are not subject to vehicle registration) *vehicle sound recording, receiving or transmitting devices (including tapes or other media used with the equipment while in the vehicle) *outdoor lawns, plants, shrubs, or trees (this is only excluded in the basic form) *hovercrafts and parts *devices used solely for deposit, withdrawal, or transfer of funds *credit cards and fund transfer cards *accounts, bank notes, deeds, bills, coins, currency, platinum, script, smart cards, etc. *paper records and electronic date (coverage is provided for the cost of blank recording media or prerecorded computer programs) *water and/or stream *grave markers (coverage may be added by endorsement) special form (DP 00 03) exclusions - besides the general exclusions found in all dwelling forms, the special form contains the following additional exclusions. there is no coverage for loss or damage that results from: *insects, birds, vermin and domestic animals. *gradual and expected losses (such as wear and tear, deterioration, latent defect, inherent vice, mechanical breakdown) *theft of property not a part of the building, or theft in or to a dwelling under construction *pollutants *weather conditions to the extent they contribute to an excluded cause of loss (applies only to coverage A and B) *acts, decisions, or the failure to act (applies only to coverage A and B) *faulty planning, design or materials (applies only to coverage A and B)

SLECTED ENDORSEMENTS

several optional endorsements are available to the insured to further expand the coverage provided. listed below are the most common optional endorsements used with the dwelling policy

PROPERTY COVERAGES

the dwelling policy has five coverages for the insured to select from to cover the dwelling: 1. coverage a - dwelling 2. coverage b - other structures 3. coverage c - personal property 4. coverage d - fair rental value 5. coverage e - additional living expenses each of these 5 coverages is included in the 3 policy forms (basic, broad, special), except additional living expenses (coverage e), which is not included in the basic form but may be attached by endorsement. in addition, fair rental value (coverage d) and additional living expense coverage may only be added if one of the other property coverage is written. coverage is indicated by showing a limit of liability and premium on the declarations page. a standard deductible of $250 applies to all property coverage except fair rental value, additional living expense, and the fire department service charge. the deductible applies only to an occurrence basis, regardless of how many types of property are involved in the loss. however, if there is more than one dwelling insured under a single policy, the deductible applies separately to each dwelling and its contents that may be damaged by a single occurrence.

COVERAGE FORMS - PERILS INSURED AGAINST

the three coverage forms applicable to the dwelling policy define the perils or causes of loss insured against. these forms include: 1. DP 00 01 - Basic 2. DP 00 02 - Broad 3. DP 00 03 - special

SPECIAL

unlike the basic and broad forms, which are named peril forms, the special form is an open peril form. in other words, all perils are insured against except those specifically excluded. the special form only covers the dwelling and other structures on an open peril basis. the insured's personal property is covered for the broad named perils found in the dp 00 02, with a few exceptions that will be discussed. the special form covers losses to the building on a replacement cost basis, the same as in the broad form. the primary differences between the broad form and special form coverages include the following: *theft of property that is a part of the dwelling or other structure is covered in the special form *the coverage for accidental discharge or overflow of water and steam is expanded to cover the loss as the result of accidental discharge or overflow of water or steam that occurs off the insured premises. for example, if the overflow of a neighbor's plumbing system causes damage to the insured's premises, there would be coverage. *there are no exclusions for antennas, outdoor equipment, fences, or awnings from the peril of falling objects in the special form.

BROAD THEFT COVERAGE

the only theft coverage provided in any dwelling policy forms is theft of property that is a part of the building under the special form there are no policy forms that cover theft of personal property. however, broad theft coverage can be added by endorsement if the insured is the owner-occupant of the dwelling. the endorsement will cover personal property owned by the insured or a resident of the insured's household caused by theft or attempted theft, or for vandalism or malicious mischief that results from theft or attempted theft. there is no coverage if the premises have been vacant for 60 or more consecutive days the broad theft endorsement provides both on-premises and off-premises coverage. off-premises coverage can be insured only if on-premises coverage is written. a separate limit of liability will be shown on the declarations page for both coverages on-premises coverage insures loss of property that is owned or used by the insured or a resident employee at the premises described in the policy. it also extends to property placed for safekeeping in a bank, trust, or safe-deposit company, a public warehouse, or a dwelling not owned, occupied, or rented by the insured off-premises coverage provides protection for property that is either owned or used by the insured, or owned by a resident-employee, when it is away from the described premises there is no off-premises coverage for property at a newly acquired principal residence. however, then on-premises limit will apply automatically for 30 days, including while the property is in transit to the new location certain types of property are covered only for specific amounts. if the insured requires higher limits for these items, additional coverage may be purchased. the categories of property with these special sub-limits are as follows: for dwelling dp (02) policy: *$200 for money, bank notes, bullion, gold, silver, platinum, coins, and other metals. *$1500 for securities, accounts, deeds, evidence of debt, letters of credit, notes other than bank notes, manuscripts, passports, tickets, stamps *$1500 for watercraft and their trailers, furnishings, equipment, and outboard motors *$1500 for other trailers *$1500 for jewelry, watches, furs, and precious and semiprecious stones *$2500 for firearms and related equipment *$2500 for silver and silver-plated ware, gold and gold-plated ware, and pewter ware, including flatware, hollowware, tea sets, trays, and trophies in addition to the special limits, certain types of property are specifically excluded from coverage. the types of property not covered by the broad theft endorsement are *animals, birds, or fish *credit cards and fund transfer cards *aircraft and parts (except model or hobby aircraft) *property while in transit *property held as a sample or for sale *property specifically described and insured by any other insurance *property of tenants, roomers, and boarders (other than relatives) *business property of the insured or resident employee *property in the custody of a laundry, cleaner, tailor, presser, or dryer, except loss by burglary or robbery *property at any other location owned, rented, or occupied by the insured, except if the insured is temporarily residing there *motor vehicles (other than motorized vehicles used to service the premises that are not subject to motor vehicle registration) *motor vehicle equipment and accessories, including sound receiving, transmitting or recording devices, while in the vehicle

CONDITIONS

All dwelling policy forms include the following conditions: *policy period *insurable interest and limit of insurance *concealment or fraud *duties after a loss *loss settlement *pair or sets *appraisal *other insurance *subrogation *suit against the insurer *insurer's option to repair or replace *loss payment *abandonment *mortgage holders *no benefit to the bailee *cancellation and nonrenewal *liberalization *assignment *death *nuclear hazard *recovered property *volcanic eruption because most of these conditions are described elsewhere in the coursework, the following only details parts of any condition specific to the dwelling property forms. insurable interest and limit of insurance - if more than one person has an insurable interest in the property, the insurer will not by liable for more than the insured's interest in the loss or damaged property loss settlement - losses will be valued as the least of the following *the ACV of the property at time of loss *the policy limit *the amount necessary to repair or replace the property *the amount reflecting the insured's interest in the property at the time of loss pair or set - a clause in many property and inland marine policies that provides that the insurer is not obligated to pay for the total value of a set of insured items if only one item has been lost, damaged, or destroyed. the loss settlement would be based on the reasonable and fair proportion that the loss or damaged part bears to the total value of the set suit against the insurer - no suit may be brought against the insurer unless the insured has fully complied with all policy conditions and the actions is started within 2 years (24 months) of the date of the loss. insurer's option to repair or replace - the insurer has the option to repair or replace any part of damaged property with like property by providing written notice of the insured within 30 days from receiving signed proof of loss. death - in the event of an insured's death, the legal representatives of the deceased insured will be considered an insured as respects to covered property nuclear hazard - losses caused by nuclear hazard will not be considered caused by fire, explosion, or smoke recovered property - if any property is recovered in which there has already been a loss payment made, the insured has the option of taking the property and returning the amount paid, or giving the property to the insurance company. volcanic eruption - all volcanic eruptions occurring within 72 hours of the initial eruption will be considered one occurrence. this means there will only be one deductible.

CHARACTERISTICS AND PURPOSE

There are 3 separate coverage forms available under the dwelling program that provide basic, broad, or special form coverage. the dwelling policy is used to insure 1 to 4 unit residential dwellings that are not eligible for coverage under the regular homeowners program because of age, location, value, or other factors. the dwelling can be completed or in the course of construction and can be either owner of tenant occupied. the insured dwelling cannot have more than 5 roomers or boarders. mobile homes may be insured under the dwelling program, but only for basic coverage. mobile homes to be insured must be permanently located on a private lot and a certificate of "mobile home tie-downs' must be submitted with the application. the dwelling program, however, is not designed to insure farm property. certain incidental business occupancies may be covered by endorsement if they are conducted by the insured on the dwelling premises, and there are no more than 2 persons working at any time. permissible incidental occupancies include small service operations, telephone answering services, offices, music or photographic studios and private schools.

COVERAGE C - PERSONAL PROPERTY

coverage c - personal property includes personal property commonly found in homes owned by the insured or other family members. personal property belonging to guests or servants of the insured may also be covered. unlike the homeowners forms, in which coverage on property of guests applies at any residence occupied by the insured, coverage on property owned by a guest or servant under the dwelling form applies only while such property is at the described location. with regards to personal property of an insured, 10% of the coverage c limit may apple against losses by covered perils to personal property (other than rowboats and canoes) while it is anywhere in the world. this restriction of coverage does not apply if the personal property is moved to a newly acquired principal residence. in such case, the personal property is covered for 30 days or the expiration of the policy, whichever is shorter. this coverage is never automatically provided in any of the DP policies, and a limit must be shown on the declarations page with premium charged.

COVERAGE D - FAIR RENTAL VALUE

coverage d - fair rental value applies is property under coverage a, b, or c becomes damaged or destroyed and unfit for normal use due to damage or destruction. the policy will pay the fair rental value of the described premises. fair rental value does not include expenses that would not continue while the premises are unfit for use (such as heat and electricity). coverage continues until repairs are completed and will not stop if the policy expires first. if a civil authority prohibits use of the insured property because a peril insured against has damaged a neighboring location, payments are limited to a maximum of 2 weeks.

COVERAGE E - ADDITIONAL LIVING EXPENSE

coverage e - additional living expenses only is available if broad or special form dwelling coverage is written. it pays for additional living expenses the insured incurs while the described premises are unfit for use or being repaired. these additional expenses include things such as rent for alternative housing. the intent is to allow the family to maintain their normal standard of living. coverage will continue until repairs are competed (even if the policy expires). as with coverage d, if a civil authority prohibits use of the insured property payments may be limited to a maximum period of 2 weeks.