Exam 3

Referencing the same case study we've been discussing, and remembering the loss and coverage amounts below, how much would you pay for the dwelling? **The RCV of the garage was determined to be $26,650.00. Damage to the home was estimated at $15,755.00 and Mary had an estimate from a tree service to remove her trees for $1,425.00 ($1,000.00 for the larger tree lying on the house and $425.00 for the tree lying across the garage slab). Mary told the adjuster that she had paid the teenager across the street $75.00 to cut the limb off the roof and nail a plastic tarp across the hole. The home was valued at $300,000. Mary had an HO-3 policy with $275,000 in Coverage A limits. She had Coverage B: Additional Structures coverage of $27,500, and $137,500 in Coverage C (Personal Property/Contents) limits.

$17,255.00

Mean Joe Green's house caught fire. Repair costs to the house, appliances, and fixtures totaled $52,500. His Coverage A limits were $150,000. At the time of the fire, the replacement cost value of his home was $210,000, and he had an 80% coinsurance requirement. If Joe's policy had a $1,000 deductible, what would the policy pay?

$45,989.50

Chung Gee's Oriental Restaurant does a thriving business for lunch and has an average dinner crowd. It has a commercial property insurance policy. One day an elderly motorist accidentally runs through the plate glass window and into the store. The damage is extensive and the business must close for a month while repairs are completed. Mr. Gee asks you if the policy covers the revenue he lost while his business is closed. For what kind of coverage would you look to go about reimbursing him for the business's lost income?

Business Income coverage

Mary's grandmother lives with her. A thief breaks into Mary's house while they are both out and steals her grandmother's television set and jewelry. Mary's standard HO-3 policy will:

Cover the loss under the Contents coverage of her HO-3 policy, subject to the policy limits, the $1,500 sub-limit on jewelry and applicable deductible.

Homeowner's policies usually insure property for which of the following:

Fire, lightning, windstorm, and explosion

Refer to the case study in question #20. Immediately upon receipt of the claim you called Mary. After securing a brief explanation surrounding the loss, you told her that you would have a field adjuster come by to inspect the damage within 48 hours. Mary asked you if it would be all right if someone were to remove the tree limb that's piercing the roof so she can cover the hole. How would you respond?

Her policy will cover any reasonable expense she incurs to protect further damage to her property, and that she will be fully reimbursed as part of the appraisal.

A ship loaded with lumber encountered "the perfect storm". Some of the lumber was thrown overboard to save the ship. This action is called:

Jettison

Replacement Cost Value means:

The cost to replace a damaged or destroyed item of property (with one of like kind and quality at today's prices).

Florida's Valued Policy Law applies to:

Total loss of any building, structure, mobile or manufactured home resulting from any covered peril

Referencing the previous question, one month after the fire you receive a bill from the fire department for $450.00 for responding to the fire. Would this be paid under your homeowner's policy?

Yes. It is called Fire Department Service Charge and is an Additional Coverage provided under the policy, limited to $500.

Which of the following is excluded under a Personal Articles Floater with "all risk" coverage? 1) A valuable mink coat worth $5,000 is virtually destroyed by moths. 2)A valuable gun collection is stolen from the Insured's home. 3)A sophisticated telescope, designed to track asteroids, is damaged by fire.

#1 only

Which of the following would NOT be covered under a standard homeowner's policy?

During a storm a transformer two miles from the Insured's residence explodes, causing widespread power loss. The insured suffers no damage but loses $275 worth of food in their refrigerator due to the loss of power.

Your business owns a five year old copy machine that breaks down. It's worked so well over the years, and new machines are so expense, that you decide to have it repaired. A local vendor takes the machine to their shop. A severe thunderstorm spawns a tornado that severely damages the vendor's shop, and your copy machine is destroyed. A new machine of its type would cost you $15,500 and your old machine was valued at $6,500. You file a claim under your commercial property policy where your deductible is $500. What can you expect?

In the absence of an RCV endorsement, you would receive $6,000 (the ACV of your machine less the $500 deductible) under Property Off-Premises coverage

Stan runs a local corner grocery that also sells gasoline. One day a customer pulls away from the pump while the gas is still pumping, breaks the pump line and causes gasoline to escape all over the parking lot and into the storm drain. Stan files a claim under his commercial property policy. Damage to repair the pump totals $545.00 and $157.00 worth of gasoline was pumped out before anyone noticed the accident and was able to stop the pump. The local HazMat team was called out by the authorities to clean up the parking lot and the storm drain. Stan received a bill from the County for $8,850.00 for the clean up. He sends the bill to you to pay. What kind of coverage under Stan's policy would pay this loss?

Pollution Clean Up and Removal

Actual Cash Value means:

Replacement cost less depreciation.

A homeowner had his house insured for $240,000. It was totally destroyed by a hurricane. His insurance company paid him the full $240,000, even though the replacement cost of the house was only $195,000. The reason for this decision was based on:

The Valued Policy Law

Which of the following would NOT be covered under Coverage C, Personal Property?

The dead fish when the insured accidentally overturns his tropical fish tank and all the fish die from lack of oxygen.

Jane and her husband return home after a weekend trip to find their house was broken into. Their large screen television, computer equipment, some jewelry, a valuable gun collection and some fishing equipment were stolen. How would their HO-3 policy respond to this loss?

The theft loss would be covered within the Coverage C limits of the HO-3.

Joe has a Dwelling "DP-3" policy covering one of his rental properties, with Coverage A limits of $75,000 and a deductible of $500. A tornado severely damages the house and it takes 3 months for repairs, during which time Joe loses his tenant and monthly rental income of $750.00. How much, if any, will Joe's policy pay for the lost rents under Fair Rental Value coverage?

$ 2,250

A homeowner has an HO-3 policy with $120,000 of Coverage A, $12,000 of Coverage B, $60,000 of Coverage C, and a $500 deductible. If a tree falls on the homeowner's detached work shed and the cost to repair the work shed is $14,330. How much would you pay the homeowner under his HO-3 policy?

$12,000

Again, refer to the case study presented in question 20. The property field adjuster inspected the damage to Mary's home and garage. He also checked with the local weather service. He confirmed that cyclonic activity was documented on Doppler radar in the general vicinity of Mary's home and a tornado sighting was also reported in the area. He determined that a tornado had touched down, carried the garage away, and felled Mary's trees. The RCV of the garage was determined to be $26,650.00. Damage to the home was estimated at $15,755.00 and Mary had an estimate from a tree service to remove both of her trees for $1,425.00 ($1,000.00 for the larger tree lying on the house and $425.00 for the tree lying across the garage slab). Mary told the adjuster that she paid the teenager across the street $75.00 to cut the limb off the roof and nail a plastic tarp across the hole. Remember that the home was valued at $300,000. Mary had an HO-3 policy with $275,000 in Coverage A limits. She had Additional Structures coverage of $27,500, $137,500 in Coverage C (Personal Property/Contents), and a $1,000 deductible. How much would you pay for the garage alone?

$27,500.00

Assume that a homeowner has an HO-3 policy with $120,000 of Coverage A, $12,000 of Coverage B, $60,000 of Coverage C, a $500 deductible, and Replacement Cost coverage. If a tree that falls on the homeowner's detached work shed destroys the homeowner's personal property within the shed to the tune of $6,435.00 in damages, how much would you pay the homeowner under his HO-3 policy?

$6,435

Referring to the facts stated in the last scenario, The fire loss results in a repair appraisal of $180,450 on a building that has a replacement cost value of $250,000. The building has been condemned by the County and must be totally demolished. Clean up and removal of existing fire debris will cost $17,500. How much will the Masterminds policy pay?

Since the location is condemned, the building is a total loss, and the valued policy law will require payment of $250,000 for the dwelling. An additional $10,000 is also available for debris removal.

*Note: This scenario will also be referenced for question #25 John Davis is the CEO of Masterminds Inc. He operates four separate restaurants, each with its own style and menu (i.e. American, Oriental, Mexican and Caribbean) and name. John decides to add a new restaurant that serves a menu from Eastern India and purchases the perfect building. Two weeks later, and before he has an opportunity to contact his insurance agent, a fire breaks out next door and spreads to his building. Before the fire is extinguished more than half of it is destroyed. John reports the claim and it is assigned to you. You make contact with John, at which time he asks if the new location will be covered under the Masterminds policy. The initial step in your investigation is to review the Masterminds policy. It is a Commercial Property policy with $300,000 in dwelling coverage on each of its four locations, a special "All Risks" coverage form and a $1,000 deductible. How would you respond to John?

The commercial Building and Personal Property form provides coverage for newly acquired locations for 30 days for up to $250,000 on the dwelling and $100,000 on the business personal property. Thus, the new location is covered.

The owners of the Sea-Side Inn decide to take a summer vacation so they board up their motel in May and leave for Italy. They return in late August to find that someone had broken into their motel, stolen their computer system, video security system and the televisions in each room. Total damages are $8,500 in property damage to the buildings and $22,450 in theft. The Inn has a commercial Building and Personal Property coverage form with a $500 deductible and a Replacement Cost Endorsement for all coverages. Is the loss covered and what would you pay?

The loss is not covered. If the property is vacant for more than 60 consecutive days, theft and vandalism coverage is suspended.

A fire starts in your home. Fortunately, the fire department quickly arrives and puts out the fire. Unfortunately, the water from their hoses damaged the wood floors, walls and furniture. This water damage would be covered because:

There was an unbroken connection between the fire and damage caused by the water, therefore fire is the "proximate cause" and resulting damage is covered.

The ABC Laundry Service has a commercial property policy with your company. An employee dropped a cigarette into a waste basket without putting it completely out and a fire destroyed half the store before it was extinguished. The local fire department sends the laundry a bill for $626.00 for their response to put out the fire. Will the policy cover this expense and how much?

Yes. Fire Department Service Charge is included up to $1,000, thus covering the entire bill.

Mean Joe Green was heating grease to fry some fish when the doorbell rang. He left the grease heating on the stove and went to the door, where he found that his neighbor couldn't start her car. Forgetting about the grease, he walked next door with her and proceeded to check out the engine. After about 20 minutes he got her car started. He ran back to the house where he found smoke pouring out the front door and the kitchen ablaze in fire. He quickly slipped into the spare room, grabbed his insurance policy from the file cabinet, and called the fire department from the front yard. Total damage to the kitchen and dining room, including smoke damage to the entire house, appliances and fixtures, was $52,500. The replacement cost value of personal property lost in the fire was $35,500, and the ACV is $27,250. Joe had an HO-3 policy with $150,000 Coverage A (Dwelling) limits and $75,000 of Coverage C (Personal Property/Contents). Joe had also purchased Replacement Cost coverage. His deductible was $1,000.00. How much should the adjuster have paid Joe under all of his available coverages?

$ 87,000.00

An insured has an HO-3 homeowner's policy with $125,000 in personal property (contents) coverage and a $500 deductible. While on a trip to Denver for a family reunion a thief steals her wedding ring and pearl necklace from her hotel room. The total value of this jewelry is $12,500. How much will her homeowner's policy pay?

$1,500 which is the limit available for jewelry

Adjustments under commercial property coverages are initially valued how?

Actual Cash Value

A shipper wants to obtain insurance coverage on both outgoing and incoming shipments while in transit. This type of coverage is called:

Cargo coverage

A detached 10' x 20' work shed, within which a homeowner stores his tools, his lawnmower, his wood-working equipment and fishing rods, is damaged by fire after a gas can explodes. Under what part of his homeowner's HO-3 policy is this damage covered?

Coverage B - Other Structures

If a lender has an insurable interest in a home, where would its interests be protected?

Mortgage or Mortgagee clause

*Questions 20-23 will reference this scenario. Mary Alice has a home valued at $300,000 and an HO-3 policy with $275,000 in Coverage A limits and a $1,000 deductible. She has Additional Structures coverage of $27,500 and $137,500 in Contents coverage with a $500 deductible on Contents. One summer day a severe thunder and lightning storm rolled in with lots of high winds. Mary unplugged all of her major electrical devices and rode out the storm in her living room. When it was over she went outside to inspect her property, only to find her detached 2-car garage in back yard was gone and only the slab remained. One of her larger pine trees, about 20" in diameter, was twisted and bent like a pretzel, and was lying across the rear roof of her house with a limb sticking through the roof into the attic. Mary immediately called her carrier to report the loss. Your office gets an urgent call from Mary at 2:00 p.m. The loss is assigned to you at 3:15 p.m. For which perils does Mary's HO-3 coverage form provide protection?

The HO-3 policy provides "All Risk" coverage for Coverages A and B, which includes all perils, including windstorm, unless excluded.