Filed Under:Claims, Education & Training

Know Your CE: Homeowners 3--Special Form

Each issue, Claims CE provides several continuing education-based questions designed to test claim professionals on their knowledge of a particular topic. This is in an effort to help educate and inform adjusters and supervisors on appropriate claim-handling techniques. For this edition, we take a look at the Homeowners 3--Special Form (HO 00 03 10 00).

The question-and-answer format is meant to be general in nature and does not necessarily account for the differences in law and practice in different venues. The authors of this question-answer column are not attorneys; content should not be construed as legal advice for the unique circumstances of any particular claim.

Question #1: The Decomposing Body

The named insured, an elderly gentleman, died of natural causes while sleeping at his home. His body was not discovered until one week postmortem, when a neighbor came to check on him. Because the neighbor did not have a key and was concerned about the insured's safety, he broke a window in the front door in order to gain entrance. In addition to this pane in the door, damage was sustained to both contents and personal property as a result of the body's decomposition. Is the restoration and/or replacement of dwelling and personal property covered under the Homeowners 3--Special Form (HO 00 03 10 00)?

a. Coverage is available for all claimed damage to both the dwelling and personal property.

b. Coverage is available for damage to the dwelling as a result of both the neighbor's actions and the decomposition of human remains. However, there is no coverage for damage to the personal property.

c. Coverage is available for the dwelling for damages resulting from the neighbor's actions only.

d. No coverage is available for this loss.

Click to the next page for the answer and explanation!

Answer and explanation

The best answer is "b," coverage is available for damage to the dwelling as a result of both the neighbor's actions and the decomposition of human remains. However, there is no coverage for damage to the personal property.

The HO 00 03 10 00 policy provides coverage on an open-perils basis for Coverage A - Dwelling. With no exclusion applicable, the damage done by the neighbor is covered under the policy. Although the policy excludes "discharge, dispersion, seepage, migration, release, or escape of pollutants unless caused by a peril insured against named under Coverage C," policy verbiage appears to refer specifically to man-made pollutants or contaminants.

The definition of pollutants is specified in the form as follows: "Pollutants means any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste includes materials to be recycled, reconditioned, or reclaimed." Especially because courts tend to interpret exclusionary language very narrowly, it is likely that the damage to the dwelling resulting from the decomposition of the human remains would be covered.

Unlike Coverage A, Coverage C - Personal Property is provided on a named-peril basis. Coverage C has no specific language providing coverage for this type of loss; therefore, the claim for damage to personal property resulting from the body's decomposition would likely not be covered.

Click the next page for Question 2!

Question #2: The Stolen Boat

The insured owns a 12-foot fishing boat that is powered by an electric motor attached to its transom. After hearing from a friend that the fish are biting at a local lake, she hooks up her trailer and heads for the nearest boat ramp. After launching the boat and carefully tying it to the dock, the insured takes her fishing poles and tackle box from her truck and places them in the boat along with a set of oars and the battery that she uses to power the motor. She then leaves the parking lot briefly to pick up some extra supplies for her day out on the water.

When she returns to the boat, the insured finds that her fishing poles, tackle box, electric motor, battery, and oars have all been stolen. Is the insured's loss covered under the Homeowners 3--Special Form (HO 03 10 00)?

a. Coverage is available for all stolen items under Coverage C, but is limited to $1,500.

b. Coverage is available for the fishing poles and tackle box only, subject to a sublimit of $1,500.

c. Coverage is available for the fishing poles and tackle box with no applicable sublimit.

d. No coverage is available for any of the stolen items because the theft occurred away from the residence premises.

Click to the next page for the answer and explanation!

The best answer is "c," coverage is available for the fishing poles and tackle box with no applicable sublimit.

While the HO 00 03 10 00 policy form does not provide coverage for theft away from the residence premises for "watercraft of all types, and their furnishings, equipment, and outboard engines or motors," the use of the word "their" in the policy language specifically connects the furnishings, equipment, and outboard engines or motors to the watercraft that is the subject of the exclusion. Since the fishing poles and tackle box have no fixed connection to the boat and could easily be used elsewhere (on another boat, from the shore, on a dock, etc.), the watercraft theft exclusion probably should not be applied to these items.

However, the exclusion would appropriately apply to the oars that fit this specific boat, the battery that powers the motor, and the boat's motor itself. Because HO 00 03 10 00's verbiage that limits watercraft coverage to $1,500 is identical to the exclusionary language for off-premises theft, the $1,500 sublimit would likely not apply to the fishing pole and tackle box.

Click the next page for Question 3!

Question #3: The Underground Rusted Pipe

The insured has a water supply line that travels underground from the meter box at the street, through the concrete block foundation of the insured's dwelling, and into the interior of the home. The insured has noticed that an area of earth beside the driveway remains saturated with water for several days. A plumber comes out to excavate a section of the driveway and finds a leak in the supply line where rust had deteriorated the pipe resulting in a perforation. There is no damage to the dwelling itself.

The insured presents a claim for the excavation work, the replacement of soil/fill under the driveway, the plumber's work for fixing the pipe, the bill for repaving the damaged section of the driveway, and the cost of the metered water lost as a result of the leak. Is there coverage under the Homeowners 3--Special Form (HO 00 03 10 00) for the insured's claim?

a. There is no coverage for the loss.

b. There is coverage only for the cost to repair the damage to the driveway.

c. There is coverage for the insured's entire claim except for the plumbing work on the pipe itself.

d. There is coverage for the insured's entire loss as claimed.

Click to the next page for the answer and explanation!

The best answer is "a," there is no coverage for the loss.

Earlier editions of the HO 00 03 policy did not mention "water" as property not covered. Under those earlier policies, it is possible that the entire claim would be covered with the exception of the cost to repair the leaking pipe itself. Coverage applied because there was covered property (i.e., the water itself) that was lost or damaged from the peril of accidental discharge.

Under the 10 00 edition, however, the HO 00 03 now lists "water or steam" as property not covered. Furthermore, in this case there is no covered peril for damage to the pipe. Although the policy does provide coverage for the peril of accidental discharge of water (including the cost to tear out and replace any part of a building, or other structure, on the "residence premises" when necessary to repair the system), it goes on to state that "such tear out and replacement coverage only applies to other structures if the water or steam causes actual damage to a building on the 'residence premises.'" Since in this claim, damage was limited to the driveway, no coverage exists.

Click the next page for Question 4!

Question #4: The Frozen Pipe

The insured owns a vacation home insured under a Homeowners 3--Special Form (HO 00 03 10 00). While the insured is away, a strong winter storm moves through the area, causing temperatures to fall below freezing for several days. As a result of the unusually cold temperatures, water in the copper supply lines in the basement ceiling freezes and causes the pipes to split. When the temperatures begin to rise again, the ice melts and water leaks from the damaged pipes into the interior of the home, causing damage to both the dwelling and to personal property.

In order to determine coverage for the loss to the dwelling and personal property, what important questions must be adequately answered?

a. Did the policyholder ensure that heat was maintained in the building?

b. Was the water supply to the home turned off and drained?

c. Was there a power outage that occurred during the storm?

d. All of the above.

Click to the next page for the answer and explanation!

The best answer is "d," all of the above.

The HO 00 03 10 00 policy requires that an insured uses reasonable care to: "(a) Maintain heat in the building; or (b) Shut off the water supply and drain all systems and appliances of water."

With claims resulting from damage to frozen pipes, it is important to complete a thorough investigation and coverage analysis prior to exercising an exclusion based upon the failure to use the reasonable care stipulated under the terms of the policy. If the insured maintained heat but a power outage caused the heat to fail, coverage for resultant freeze damage would still exist. If the insured had instructed a caretaker or a property manager to maintain heat in the dwelling and had a reasonable belief that those instructions would be carried out, there would likely be coverage -- as well as some subrogation potential. Likewise, if the insured did not maintain heat but drained all of the systems (being unaware that a "flat run" of pipes still held enough water to freeze and cause damage), the duty of reasonable care would likely still have been met.

mbrown@tmmayfield.com, www.linkedin.com/in/mrbrownnc.

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