Chapter 13: Multirisk Management Contracts: Homeowners

Section I- Coverages

*Coverage A - Dwelling* -dwelling on the *residence premises* (the home being used) plus structures attached to the dwelling, such as an attached garage, are insured -Also are materials and supplies on or adjacent to the residence premises for use and the construction, ulceration, or repair of the dwelling or other structures. Land not included

earthquake endorsement

*Covers damage caused by Earth movement, including earthquakes, landslides and volcanic eruptions* - low reimbursement rate is due to several factors, including the failure of the majority of homeowners to purchase the endorsement and the effect of a deductible of 2% (in some states 10%) of the insurance applicable separately to dwellings and other structures - a minimum deductible of $250 applies to any one loss

federal disaster assistance

*Federal disaster funds are given to victims of floods for assistance in rebuilding their lives* - the federal disaster fund is using activated when an area is the clear a disaster by the president - the funds are provided to the victims at a low interest rate

endorsments

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Essential policy terms

- bodily injury - business - insured -insured location - occurrence - property damage - residence employee - residence premises

Coverage B- Other Structures

- exposures that are separated from the dwelling, such as a detached garage - does not apply to any structure used for business purposes or rented to any person not a tenant of the dwelling, unless used solely as a private garage - the location of this exclusion and the way it is stated illustrate two important points 1) exclusions are not always called exclusions, they may appear following "we do not cover" or "except" 2) they may appear in the policy, not just under the heading "exclusions"

Declaration and what follows..

Following the declaration page, the balance of each form is divided into two sections *Section I:* Pertains to direct and indirect property losses related to dwelling, other structures, personal property, and loss of use *Section II:* includes personal liability coverage for you and medical payments to others -each section lists the coverages provided, the perils insured against, and the exclusions and conditions applicable to that section -finally, conditions applicable to both sections are listed - When you decide the amount of insurance to have on your house, you have automatically selected the amount for other coverages. if additional amounts are needed, they are available with payments of additional premium - the basic for Section II (coverages E&F) is the same for all forms, but can be increased with payment of additional premium - the insuring agreements, exclusions, and conditions for Section II are the same for all forms *the basic differences among the forms are in the property coverages provided in Section I*: -Form 4 & 6 do not include insurance on the dwelling and other structures b/c 4 is for tenants and 6 is for condos - the latter have an interest on behalf of the building in which they live as well as related structures, but property is insured on behalf of the owner and all occupants in a common separate policy *The perils covered represent another basic difference among the forms* -some are named perils while others are open perils -form 8 has a much shorter list of covered perils than others do

Links Between Holistic Risk Pieces

Liability Risk Weather Catastrophe Risk Fire Risk Terrorism Risk

Coverage C- Personal Property

This part of the policy says, *"we cover personal property owned or used by the insured while it is anywhere in the world"* - includes property you own as well as that belonging to others while you are using it. If you borrow your neighbor's lawn mower, it is protected by your insurance as if it were yours (EX: *if you still at the property of a friend at your residence pirmasis, you can cover the property under the policy, even if you are not using the friends property*) - property usually situated at an insureds residence other than the resident premises is subject to a limit of 10% of coverage C or $1,000, whichever is greater -Coverage C is 50% of Coverage A. So if Coverage A is $100,000 then Coverage C has a limit of $50,000 -10% coverage will be $5,000, which is limit on personal property kept at a residence other then the residence premises Two provisions and coverage C Merit careful attention: 1) *Special limit of liability* Dollar limits are placed on some property for loss caused by any Peril and on other property for lost caused by theft 2) *the other property not covered* - related to contact of a business and therefore is not suited for homeowners coverage - a business-related policy or endorsement should be used to cover those items -these special limit should call your attention to any Gap and coverage if you have the kind of property listed - for some items, you can be reimbursed up to $2,500, while for others, such as money in any form, the limit is $200 -may want to cover the gaps with a scheduled personal property endorsement added to the policy

Umbrella policy: minimum underlying coverage

Buyers of umbrella coverage are required to have specified minimum amounts of underline coverage - if you buy a personal umbrella policy, for example, you may be required to have at least $100,000 / $300,000 / $50,000 (or single limit of $300,000) Auto liability coverage and a $300,000 personal liability coverage - if you have other specified exposures, such as aircraft or both excluded by your homeowner's policy, the insurer will require underline coverage of specified minimum limits *umbrella policy is not a substitute for adequate basic coverage with reasonable limits*

scheduled personal property endorsement

Personal liability coverage and medical payments to others coverage does not apply to bodily injury or property damage arising out of business Pursuits of any insured or out of rendering or failing to render Professional Services -business Pursuits exclusion does not apply, however, to activities that are ordinarily incident to nonbusiness Pursuits (Ex: your liability exposure in connection with an occasional garage sale will be covered. If you conduct garage sales regularly, however, such activity is a business Pursuit and liability coverage does not apply)

Personal umbrella liability policies

Protect against catastrophic losses by providing High Limits over-under line coverage - there is no standard Under the Umbrella policies as they are in auto and home insurance All however have the following characteristics in common: *they are access over a basic coverage* *they are broader than most liability policies* *they require specified amount and kinds of underlying* *they have exclusions*

Umbrella policy: excess and broad

Unlike other liability policies, umbrella policies do not provide first dollar coverage - *they pay only after the limits of underline coverage, such as your auto or homeowners policy, has been exhausted* - they cover some exposure is not covered by underline - a typical umbrella policy covers personal injury liability, for example where Auto and homeowners policies do not - when there is no underlying covers for a covered exposure, a deductible is applied - some umbrella liability policies have deductibles also called retained limit as small as $250 but deductibles of $5000 or $10,000 are not uncommon

Umbrella policy: exclusions

*Exclude the following:* - obligations under workers compensation, unemployment compensation, disability believes or similar laws - owned or rented aircraft, Warcraft excluded by the homeowners policy, the business Pursuits, and Professional Services, unless they are underlying coverage - property damage to any property in the care, custody, or control of the insured, or owned by the insured - any act committed by or at the direction of the insured with the intent to cause personal injury or property damage - personal injury or property damage for which the insurance covered under a nuclear energy liability policy

personal property replacement cost endorsement

*In the event of a loss, it will pay you the lowest of the following:* - the full cost of replacement (if replacement cost exceeds $500, actual placement must occur) - the cost incurred to repair or restore the item - the limit of coverage C - any special limit stipulated in the policy - any limit separately added by endorsement - *pays for lost on an actual cash value basis, which means replacement cost minus depreciation* - except for something you bought very recently, you are under shirt from the replacement cost point of view (EX: your four-year-old large-screen television might cost $700 to replace today, if it has depreciated 10% per year, then sure will pay you $420 in the event it is stolen or destroyed)

Packaging Coverage

*Packing policies:* Another name for homeowners policies, so called because they combine different types of coverage that were previously provided by several policies and a number of endorsements -packaging reduces cost and premiums by reducing administrative and marketing costs -provides broader protection and eliminates many gaps in coverage

other risks

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Homeowners Policy Forms

Each policy contains three parts 1) *declaration page*: Identifies the specifics that are unique to the insured, such as the covered location,and also list policy limits, period of coverage, the name of insurer, and similar info 2) *homeowners policy jacket* Includes general, universal provisions, such as title of the coverage , and acts to bind together the remaining policy parts 3) *a policy form attached to the jacket* the substance of the contract, spelling out the specific coverage provisions

inflation guard endorsement

if the house values in your area are increasing, you should (1) consider adding *inflation guard endorsement* to your policy, which increase insurance automatically every year or (2) increase the amount of insurance between 90 and 100 % of replacement value and keep the amount up to date every time you pay the premium -this will ensure being paid in full for partial losses and provide more complete protection against a total loss -some insurers also offer a replacement cost guarantee endorsement whereby replacement cost is covered, even it exceeds the limit if liability

Coverage F- Medical Payments

medical expenses will be paid if incurred within 3 years of an accident and arising out of five possible situations -differs from that found in your auto policy -medical expense coverage is for you and your passengers -The coverage is for losses incurred by others *The covered situations are as follows:* -That a person on the insured location with the permission of an insured -That a person off the insured location if the bodily injury arises out of a condition on the insured location -one caused by a residence employee in the course of the employment by the insured -one caused by the activities of an insured -one caused by an animal owned by or in the care of an insured -expenses incurred by regular residents of the residence premises, except for residence employees, are not covered -the insured, spouse, and children living at the residence, and others living there are excluded so that the policy does not become a first party health insurance policy for them

Coverage E- Personal Liability

the insuring agreement for coverage E includes two promises by the insurer: -*to pay damages for which the insured is legally liable* and -to *"provide a defense at our expense by counsel bu our choice, even if the suit is groundless, false or fraudulent"* -both promises are of significant value, given the frequency of lawsuits, the size of awards and the cost of defense -the coverage is on an open perils basis; all events not excluded from coverage are included -One limitation is that damages must be either bodily injury or property damage, nonphysical personal injury such as libel Note the exact wording of the policy: Coverage E- Personal Liability *if a claim is made or suit is brought against an "insured" for damages because of "bodily injury" or property damage" cause by an "occurrence" to which this coverage applies..."* -defense is provided only until the amount paid by the insurer for damages (court judgments or negotiated settlements) equals the limit of liability -insured is responsible for defense -deciding on sufficient amount for coverage E is best done by considering both the exposure to liability and to extended litigation

Section I and II conditions: surbogation

* the insured is required to transfer to the insurer any rights to recovery available from a third party* - the transfer is made only to the extent of payment made by the insurer (EX: if an airplane detaches and falls on your house, the resulting damage is covered within the limits of your policy because it is a "falling object") - payment is limited by the loss settlement clause and deductible - if you do not have insurance, you likely would attempt to collect from the airline - the insurer, upon payment of your loss, has your right to sue the airline - generally, the insured will be reimbursed for any out-of-pocket expenses not covered by Insurance (such as deductibles and coinsurance) from any amount the insurer collects from the third party - if such collection exceeds the amount paid by the insurance to the insured, then that too, is the property of the insured *the insured is precluded from interfering with the insurance subrogation rights by, for example, settling with the negligent party without the insurance consent*

title risk

*A claim against property that has not been satisfied* (example, a spouse whose signature does not appear on the deed signed by the other spouse when the property was sold. The claim is based on the spouses community property and just in the couples real property, regardless of who originally paid for it) - if there is a defect in the title to your property, an informed buyer will insust that it be removed (cleared) before the title is accepted, even though it may have originated many years ago - the clearing process can be time-consuming and expensive - a title insurance policy protects the homebuyer against loss caused by a defect in the title that existed at the time the policy was issued - it does not cover defects that coming to existence after the policy is issued The insurance says, *If anything was wrong with the title to the property at a time this policy was issued, we will defend you and pay for the Lost calls when it is discovered, within policy limits* - before making this promise, then share attempt to determine if defects exist - if any are found, they are describing the policy and excluded from coverage, or policy is not issued until they have been removed -when Title to the property transfer, the purchaser must buy his or her own title insurance policy if protection is desired

Section I- Perils Insured Against

*Coverages A & B- Dwellings and other Structures* Under this heading, the policy says, *"we insure against risk of direct loss to property described in Coverages A and B"* - the most important aspect of the agreement is that coverage is for open perils sometimes, referred to as for "all risk" -a close second is the limiting phrase *"we do not insure, however, for loss..."* Three exceptions to coverage follow this phrase - coverage, while it is for open perils, do not protect for all losses under all circumstances *Exceptions* 1) is for collapse other than as provided in additional coverage is noted above 2) list six circumstances in which protection is not affordable under the policy - the circumstances relate to especially hazardous situations or non fortuitous events, such as theft and a dwelling under construction or lost due to wear and tear - one of these circumstances deals with losses arising from mold, fungus, and wet rot, which are covered only if Henry with them walls or ceilings and caused from accidental discharge of water or stains - this coverage is available only for those states that do not adopt the iso endorsement adding mode as a new exclusion

mold endorsement

*Endorsement adopted by many states to load the cost of homeowners insurance, particularly mold claims* - type ISO "Limited Fungi, Wet or Dry Rot, or Bacteria Coverage" adds exclusion to the HO-3 policy The endorsement specifies the following definitions: *Section I- Perils Insured Against* in form *HO 00 03:* *A. Coverage A-Dwellings and Coverage B- Others Structure* Paragraph* 2.c(5)* is deleted and replaced by the following: *(5)* Caused by constant or repeated seepage or leakage of water or the presence or condensation of humidity, moisture or vapor, over a period of weeks, months, or years unless such seepage or leakage of water or the presence or condensation of humidity, moisture or vapor and the resulting damage is unknown to all insured and is hidden within the walls or ceilings or beneath floors or above the ceilings of a structure Paragraph* 2.c(6)(c)* is deleted and replaced by the following: *(c)* Smog, rust or other corrosion ; *B. Coverage C-Personal Property* *12. Accidental Discharge or Overflow of Water or Stream* Paragraph *b.(4)* is deleted and replaced by the following: *(4) Caused by constant or repeated seepage or leakage of water or the presence or condensation of humidity, moisture or vapor, over a period of weeks, months, or years unless such seepage or leakage of water or the presence or condensation of humidity, moisture or vapor and the resulting damage is unknown to all insured and is hidden within the walls or ceilings or beneath floors or above the ceilings of a structure *Section I-Exclusions* Exclusion* A.10* is added *10. Fungi, Wet or Dry Rot, or Bacteria* Fungi, Wet or Dry Rot, or Bacteria meaning the presence, growth,proliferation, spread or any activity of fungi, wet or dry rot, or bacteria This exclusion does not apply: A. *When fungi, wet or dry rock, or bacterial results for fire or lightning* or B. *To the extent coverage is provided for in the fungi, wet or dry rot, or bacteria additional coverage under Section *I*- property coverages with respect to Lowe's caused by a Peril insured against other than fire or lightning* Direct loss by a Peril Insured Against resulting from fungi, wet or dry rot or bacteria is covered *the only other coverages what is provided under additional coverage as brought by the insured and specified in the following table* These limits of liability applies to the total of all loss or costs payable under this endorsement, regardless of the number of "occurrences", the number of claims made or the number of locations insured under this endorsement and listed in the schedule *1* Section I-Property Coverage Limit of Liability for Additional Coverage "Fungi," Wet or Dry Rot or Bacteria *2* Section *II* Coverage *E* Agreagate Sublimit of Liability for "Fungi" Wet or dry rot, or Bacteria

Section I- Perils Insured Against: Coverage C-Personal Property

*Personal property is covered against direct laws on a named perils basis including the following:* fire or lightning *WindStorm or hail* - is hail broke a window and damaged property inside, the loss will be covered - if the window was left open, damage to property would not be covered - Furnishings, equipment, and other personal property are covered only if such property is inside a fully enclosed building Riot or civil commotion Aircraft Vehicles Smoke Vandalism or malicious mischief *Theft* - includes damages caused by attempted theft as well as loss of property from a known location when it is likely that the property has been stolen - if someone damages your bike and in an attempt to steal it, such damage is covered - the second part of def definition is sometimes referred to as mysterious disappearance (* requires that there be loss of property from a non place in such a fashion that theft is likely to cause*) *Several exceptions to the theft coverage are enumerated in the policy* -HO-3 does not include loss caused by theft committed by any insured ( includes any Resident relative and anyone under age 21 in the care of one of these resident relations) - theft in or from a dwelling under construction or of materials and supplies for use in the construction is excluded because the risk is too great - one particularly important to typical College age students, unless an insured is residing there, theft from a residence owned by, rented by, rented two, or occupied by an insured, other than the residence premises, is excepted Property of students kept at school is covered as long as a student has been there within 45 days *Falling objects* - if a tree falls on your canoe, the damage is covered because the tree is a falling object - this prayer does not include Lost Property contained in the building, however unless the roof or an interior part of the building is first damaged by Falling object Weight of ice, snow, or sleet *Accidental discharge or overflow of water or steam* - water collect from washing machine and cause damage to a painting hung on the wall of a room below Sudden and accidental tearing apart, cracking, burning, or bulging of a water heating or transporting Appliance *Freezing* -not include lost on the residence premises while the dwelling is unoccupied, unless you arrange to maintain heat in the building or shut off the water supply and drain the system Sudden and accidental damage from artificially generated electrical current Volcanic eruption

shopping for homeowners insurance

*There are three steps to shopping for homeowners coverage:* - figure out what you have - figure out what you want - collect your closing information about insurance before making your final decision Next you need to decide what insurance you want and the amount of coverage for example -Coverage A (dwelling) $100,000 -Coverage E (liability) $25,000 -Coverage F (medical payments) $500 per person You also need to choose your deductibles, such as $100, $250, and $500, and limits on coverages E, such as $100,000 or $300,000 in coverage E Family, collect quotes from potential insurers

flood risk

*homeowners policy exclude loss by flood for two reasons:* - it is considered catastrophe - and it is due to the problem of adverse selection because only those living in flood-prone areas would buy the coverage - this major gap in coverage can be filled by purchasing a flood insurance policy available through the national flood insurance program (NIP), a federal program that provides flood insurance to flood-prone communities - flood insurance is required by law in order to get secured finances to buy, bill, or improve structures interior areas that are designated special flood Hazard areas (SFHAs) The policy covers losses that resulted directly from River and steam and Coastal and Lake Shore flooding - structures that are covered by flood shows include most types of world and roofed buildings that are principally above ground and affixed to a permanent site - the contents of a fully enclosed building are also eligible for coverage, however flood insurance policies do not automatically provide this coverage - it must be specifically requested - commercial structures, multiple family dwellings, and single-family residences are also eligible for coverage *Two layers of coverage are available:* The first is emergency coverage, available to residents of flood-prone communities as soon as the community enters the program - the race are partially subsidized by the federal government Once a flood rate map is completed, a second, or regular layer of coverage is available at actual rather than subsidized rates - Insurance under the *regular* program is available only to community that communities that have passed required ordinances and have undergone Studies by the Army Corp of Engineers

personal injury endorsement

- the liability coverage of your homeowners policy provides protection against losses caused by bodily injury or property damage for which you may be responsible - bodily injury is defined as bodily harm, sickness, or disease *it does not include the following, which I consider to be personal injury and are added by personal injury endorsement*: - false arrest, detention, or imprisonment, or malicious prosecution - libel, slander, defamation of character, or violation of right of privacy - invasion of the right of private occupation, wrongful conviction, or wrongful entry *(Ex: suppose you write a letter to the editor of the local paper in which you make a defamatory statement about a person. You can be sued for libel)*

Section II- Conditions

-Limit of liability -severability of insurance -duties after "occurence" -duties of an injured person-coverage F- medical payments to others -payment of claim-coverage F-medical payments to others -suit against us -bankruptcy of an "insured" -other insurance -policy period -concealment or fraud *Limit of liability* clarifies that the max coverage available is the amount shown in the declarations *severability of insurance* provides coverage separately to each insured, although the total available for any one occurrence is the limit shown in the declaration *duties after loss* and *duties of an injured person* are similar to the duties stipulated in the Section I conditions, as is *suit against us* conditon *payment of claim* in regard to coverage F, merely emphasizes that payment is made without regard to fault *bankruptcy of an insured* requires that the insurer be responsible for payment even if the insured has been relived of his/her obligation due to bankruptcy *other insurance clause* makes coverage E "excess", meaning the policy pays only after another coverage is exhausted -if the other coverage has a similar provision, then the allocation is determined (EX: if both policies provide the same level of coverage, each carrier will pay half of the loss)

business pursuits endorsement

-Personal liability coverage and medical payments to others coverage does not apply to bodily injury or property damage arising out of business Pursuits of any insured or out of rendering or failing to render Professional Services -business Pursuits exclusion does not apply, however, to activities that are ordinarily incident to nonbusiness Pursuits (Ex: your liability exposure in connection with an occasional garage sale will be covered. If you conduct garage sales regularly, however, such activity is a business Pursuit and liability coverage does not apply)

Section I and II conditions : cancelation

-either the inusred or the insurer may want to terminate th epolicy prior to the end of the policy period -you may cancel at any time giving the insurer wrtten notice -insurance regulations, have increasingly limited the cancellation privileges of insurers *Four situations exist under which the insurer may cancel the policy* -nonpayment of premium -a new policy in effect less than 60 days may be cancelled for any reason with 30 days written notice -in Section C, a material misrepresentation or -substantial charge (increase) in risk will permit cancellation with a 30 day written notice (ex: an insured who began to store large amounts of in flammables on the premises after purchasing the policy may cause the insurer to cancel the coverage when such use becomes known to the insurer) -

Section I and II conditions: nonrenewal

-in Section D, the insurer promises the follwoing: "We will not fail to renew this policy except for one of the reasons referred to in C Cancellation above. We may refuse to renew for one of the listed reasons by mailing the (insured) named in the Declarations at the mailing address shown in the policy or at a forwarding address, written notice at least 30 days prior to the expiration date of this policy"

Section I and II conditions: assignment

-policy rights of ownership are not transferable (assignable) without written permission of the insurer- -As a result, when you sell your house, you cannot automatically transfer the insurance on it to the new owner

Addional coverages

12 additional items of coverage are provided under the additional coverage is section of the policy *Debris removal* Provides payment for the cost of removing Ash, dust, or particles from a volcanic eruption that has caused direct property lost -Part B under (I) is for fallen trees, which will pay up to $1,000 for the removal from Resident premises of trees that fall due to the weight of ice, snow, and sleet - this additional protection is needed because of the coverage is provided only for the cost of repair or replacement of damaged property, not for the cause of hauling away the debris that blocks a driveway in the Residence premises or ramp for handicapped person -several provisions in the additional coverage is section of the policy are intended to encourage the insured to take steps that reduce the size of a lost after it has occurred *one is a reasonable pair*, which provides payment for repairs made solely to protect property from further damage *(Ex: a temporary patch in the roof, following a covered loss, will be paid to prevent more extensive damages inside while a wedding permanent repairs)* - the conditions section further stipulates that if the insured fails to protect property in this way, some further damage might not be covered - property removed from premises endangered by covered perils covered while removed "against loss from any cause" for no more than 30 days *the insurer also promises to pay fire department service charges incurred to save or protect cover property from a ccovered peril* -Up to $500 per lost, without application of a deductible is available * trees, shrubs, and other plants are also address and additional coverages* - lost to these items on the residence pirmasis is covered if caused by one of the several named pearls - wind storm, ice, insects, and disease are not among the covered perils - no more than $500 per tree, shrub or plants is available, with the total length of 5% of coverage A *The homeowners policy will pay up to $500 for such laws under the credit card, fund transfer call, forgery, and counterfeit money coverage* - the $500 limit is for the Lost Cause by any single person, regardless of the number of cars or other instruments involved * the loss assessment provision in the additional coverages is section of the homeowner policy provides up to $1,000 to cover such charges* - many of us may belong to an association of property owners (e.g. condominium projects) - provision has its greatest applicability in the condominium unit owners form (HO- 6), but it is included in all of the homeowners forms *provides for direct physical loss to cover property due to two situations previously considered as perils, collapse of a building and lowest cost to or buy glass or safety glazing material* *10th additional coverage found in the HO - 3 is for landlords furnishings* - up to $2,500 coverage is available to cover landlords appliances and other property located in an apartment on the residence premises that is usually available for rental - the same perils that are available for covered C applies to just protection, except for theft is excluded -

Loss of Use

Coverage protect you from losses sustained if the premises cannot be live in as a result of a direct loss to either the premises or neighboring premises *Additional living expenses*: coverage provided if a loss covered under Section 1 of the homeowners policy renders the residence uninhabitable - if a civil Authority prohibits you from using the premises as a result of direct damage to neighbouring premises by a Peril insured against in this policy, both additional living expense and fair rental value lost when we pay for a period Not exceeding two weeks *important characteristic of coverage D is that it covers only additional expenses* - a Family Forced out of its home for a week due to fire damage will not receive payment for all expenses incurred in during that week (EX: if a family normally spends $250 a week on groceries, but had to pay $400 while away, only the difference plus other expenses will be paid)

Section I- Exclusions

First exclusion (*ordinance or law*): -*"we will pay for the Lost Cause directly by an insured Peril, by but not one caused by an ordinance"* EX: if your garage does not meet building code requirements and it's damaged by fire to such an extent that it must be razed, the insurer will pay only for the first damage (the fire). You will bear the rest of the lost (the demolition) *Earth movement* - if the damage is not total, and fire, explosion or breakage of glass follows the Earth movement, the additional laws caused by those perils is covered - homeowners who won earthquake protection can purchase and endorsement for an additional premium *Water Damage* - excludes loss caused by specified water damage and then says, *"direct loss by fire Comer explosion or theft resulting from water damage is covered"* - specify exclusions are for flood, backup of sewers or drains, water seepage below the ground, and overflow of a sump *Power Failure* - if the power fairy results in the occurrence of a covered peril, Loss caused by the covered peril is covered EX: if lightning strikes a power station, cutting off electricity that he should Greenhouse, lowest caused by Frost to your plants is not covered. On the other hand, the freezing and bursting of your pipes, as a covered Peril, is covered *neglect* - the exclusion has the purpose of encouraging insureds to act at the time flows to minimize severity. - you are not expected to run into a burning house building to recover property, however *you are expected to make temporary repairs two holes in the roof caused by wind damage in order to prevent further damage by rain before permanent repairs can be made* *War and nuclear* - the purpose and the homeowners policy is to avoid catastrophe *intentional loss* - directed towards Court decisions that permitted Insurance not guilty of any misrepresentation or concealment to collect for arson damage caused by another insured - purpose is to discourage arson or at least to avoid paying for it -*under A & B* *concurrent causation* Dotrune that states when a loss is called simultaneously (concurrently) by two or more perils, and at least one is not excluded, the loss is covered - Fishers are responding to the concurrent causation Doctrine by excluding *weather conditions*, *acts or decisions of governmental bodies*, and *faulty, inadequate, or defective planning*, zoning, development, surveying, design specifications, workmanship, repair, construction, renovation, remodeling, grading, & compaction

The Special Form (HO-3): Insuring agreements and definitions

Insuring agreements and definitions follows the declaration page -same in all homeowners forms & says *We will provide the insurance described in this policy in return for the premium and compliance with all provisions of this policy* *Two aspects to note:* 1) the portion following the words "in return for" is consideration that is vital to the contract -unless you comply with the provisions of the policy, the consideration is incomplete - the insurer is saying, " if you comply with the provisions, we will provide the insurance describe and the policy" 2) you must look further and the policy to find out what insurance is described - before you can determine this you must know the meaning of the terms used in the policy - words or phrases printed and bold letters are defined in detail under the headings "definitions" Parts of Section I: *Coverages* *Perils insured against* *Exclusions* *Conditions*

Section II -Liability Coverages

Liability that are standard to homeowners are covered in the homeowners policy -the coverage includes defense costs, this liability protection is found in coverage E -Medical expenses incurred by others in circumstances that might result in litigation may-or may not- be provided in coverage F

Section I - Conditions

Outlines your duties, the company's duties and options, what happens in the event of a dispute between you and the company about the amount of the lowest and the position of mortgagee's and Bailees Several ways to place bounds around coversges provided by the policy: -*Specially limits of liability, as in coverage C* -*Listing property not covered, as in coverage C* -*Listing losses not covered, as in additional coversges and perils insured against* *Conditions* A) insurable interest and limit liability B) duties after loss C) loss settlement D) loss prior or set E) appraisal F) other insurance or service agreement G) suit against us H) our option I) loss payment J) abandonment of property K) mortgage clause L) no benefit to Bailee M) nuclear Hazard clause N) recover property O) volcanic eruption period P) policy period Q) concealment of fraud R) loss payable clause Because the concert is conditional, meaning that your rights depending on the Fulfillment of certain duties, you must be familiar with the conditions - your failure to fulfill a Duty may result in a loss not being paid - this point is emphasized by *condition G, which provides that you cannot bring legal action against the insurer unless you have complied with the policy provisions and the action is started within one year after the occurrence causing loss or damage* other duties warrant further discussion: *duties after loss* *Loss settlement*

Section II- Exclusions

The exclusion sto Section II coverage in the homeowners policy are found in the following separate subsections: -Motor vehicle liability -watercraft liability -aircraft liability -hovercraft liability -further exclusions to both coverage E and F -Exclusions to coverage E only -Exclusions to coverage F only Among the group of exclusions shared by coverages E and F for instance, is the exclusion for acts that were not accidental -Also, war, as catastrophic exposure is excluded, as are communicable disease, sexual molestation, corporal punishment and metal abuse -premises that are owned by, rented to, or rented by an insured , but are not insured locations are also excluded *There are 6 more exclusions to coverage E* -first exclusion of liability of losses charged against the insured as a member of an association or corporation -this is to omit coverage of most contractually assumed liabilities, which are fortuitous risks -duplicate coverage is avoided in the fourth exclusion, where payments for bodily injury are available from various work related laws -the last two exclude coverage for catastrophic nuclear exposure and coverage for bodily injury to the named insured *Four exclusions apply to coverage F* -1st: medical payments to resident employees while away from the residence premises and arising out to events not related to employment duties -2nd: where other available compensation exists -3rd: nuclear exclusion -4th: clarifies the intention of omitting protection for the name insured and resident relatives, all of whom are assumed to be covered by health insurance

duties after loss

When a loss occurs, you must to the following: 1) *give immediate notice to the company or its agent* 2) *notify the police in case of theft* 3) *notify the credit card companies, if applicable* 4) *Protect the property from further damage, make reasonable and necessary repairs to protect it and keep an accurate record of repair expenditures* 5) *Cooperate with the insurers investigation of the claim* 6) *Prepare an inventory of damaged personal property showing the quantity, description, actual cash value, and amount of loss* 7) *Exhibit the damaged property as often as required and submit to examination under oath* 8) *Submit to the company, within sixty days of its request, a signed, sworn statement of loss that shows the time and cause of loss, your interest and that of others in the property, all encumbrances on the property, other insurance that may cover the loss and various other info spelled out in the policy* - preparing inventory (#6) after loss is a very difficult task. generally the loss adjuster for the insurance company will help you, but that does not ensure a complete inventory - the only way to deal with this problem is before a loss - you should have an inventory not only before those but at the time you buy insurance so that you will know how much Insurance you need - will you photographs or video tapes of their homes and belongings to supplement and inventory *An up-to-date inventory of your household furnishings and personal belongings can help you do the following:* - determine the value of your belongings and your personal insurance needs -establish the purchase date and cost of your major items in case of loss - identify exactly what was lost - settle your Insurance claim quickly and efficiently - verify uninsured losses for income tax deductions

Provisions for setting losses to buildings, are as follows

if the total amount of coverage equals at least 80 percent of current replacement cost of your home (e.g. at least $80,000 on a $100,000 structure), you are paid the full cost of replacing or repairing the damage up to the policy limits. No deduction for depreciation On the other hand, if the amount of coverage is less than 80% of the replacement cost, the insurer will pay the larger of (1) *actual cash value, which is replacement minus depreciation* or (2) *that proportion of the cost to repair or replace, w/o deduction for depreciation*,which is the total amount of insurance on the building bears the 80% of its replacement cost EX: at the time of a $20,000 loss, your home has a replacement value of oi$100,000. Suppose you have $70,000 worth of insurance on it. The loss could be settled as: *(amount of Insurance carried/80% of replacement cost) x loss = payment* -($70,000/$100,000) x $20,000 = $17,500 -if the actual cash value of the loss-replacement cost minus depreciation- was greater than $17,500, you would be paid the larger amount

Loss settlement

personal property losses are paid on the basis of actual cash value at the time of loss, not exceeding the cost to repair or replace the property (carpeting, domestic appliances, awnings, outdoor antennas, and outdoor equipment, whether or not attached to buildings, are paid on the same basis) -Typically, anything permanently attached to the a building is considered to be part the building -Phrase *"whether or not attached to the buildings"* makes them coverage C (personal property) losses rather than coverage A (real property)

Section II- Additional Coverages

this section provides 4 additional coverage: -claim expenses -first aid expenses -damage to property of others -loss assessment -claim and first aid expenses coverages stipulates what the insurer will pay *claim expenses* refer generally to costs associated with litigation, such as premiums on bonds and prejudgment interest assessed against the insured, other than the actual cost of defense *First aid expenses* are those associated with bodily injury liability as covered under the policy and therefore are not limited to the conditions required for medical payments to apply, but they do require the possibility of an insureds liability *Damage to property of others* is an added (small) benefit to cover other property's losses when you are not liable -at times may feel a moral obligation to pay for someones property damage, even though you are not legally liable *coverage that provides up to $500 for losses to property belonging to someone other that the insured on the insureds premises, but for which the insured is not liable* -applies even when loss is caused intentionally by an insured who is under the age of 13, such when a child throws a rock through a window -these types of intentional activities may be excluded under the liability coverage if the courts consider the child able to "intend" hard- *loss assessment* provides the same as that found in Section I, except that is covers liability assessments instead of property assessments

Determining coverages

to determine coverage once loss has occurred, ask yourself what type of property (real or personal) is involved in the loss. If both, consider each type separately *if real property is involved, be certain it is covered by the policy by consulting the declarations page to see if a premium was paid for coverage A* -Next, check the exclusions listed under Section I-Perils Insured Against for coverages A and B, as well as those listed under Section I- Exclusions -If no exclusions applies, refer to the provisions of the loss settlement clause to determine how much of the loss will be compensated *If it involves personal property, the process is slightly more complicated* -First, make certain that is property is covered by referring to the special limits of liability and property not covered provisions of coverage C under Section I-Property Coverages. You hope the property is not -Next, look at Section I-Perils Insured Against for coverage C for a listing of covered loss causing events -if the loss was caused by a peril that is not listed, no coverage exists -if loss was caused by a covered peril, refer to Section I- Exclusions for limitations on protection -Last, apply the provisions of the loss settlement clasue to determine how much you will be paid for the loss