Acid Rain Damage as ComprehensiveLoss?

Q: We recently submitted a comprehensivecoverage claim under the personal auto policy (PAP) to one of ourinsurance carriers. The insured had sustained damage to the glass,paint, and chrome of his car. The car was bought new in 1989, andit appeared that some form of chemical had accidentally beenspilled or sprayed on the vehicle. At the company's request, theinsured took the vehicle to an automotive glass shop, thedealership where he had bought the car, and an automotive detailingshop. All three of these businesses provided him with a statementthat it was their opinion that the vehicle had been exposed to acidrain. Copies of these statements were submitted to the insurancecarrier.

After much procrastination and deliberation, the claims adjusterwrote: “We must respectfully deny your claim which has beenconfirmed to be a result of acid rain based on that fact that wecover losses that are direct and accidental. Acid rain damage isnot covered under the personal auto policy.”

We totally disagree with this decision and have expressed ouropinion to the adjuster, his supervisor, and the claims manager. Wehave also discussed the situation with the various other carrierswithin our agency and all have confirmed that the personal autopolicy's comprehensive coverage covers acid rain losses.

North CarolinaSubscriber

A: The coverage denial you describe does notstand up to scrutiny. It is our impression that insurers routinelypay for damage caused by tree sap when the insured has purchasedcomprehensive coverage under the personal auto policy. If damage bytree sap is “direct and accidental,” then how can it be argued thatacid rain is any less so?

Unless it can be said that the insured deliberately sought outthe exposure to acid rain, the loss is unquestionably “accidental.”As to whether the loss is “direct,” there is no question that theloss is direct as to place (the exterior of the covered auto).Further, on the assumption that each drop of acid rain causes itsshare of damage, each occurrence is also “direct” as to time.Simply, a lot of little losses occur before they becomemeasurable.

Business Use of a Personal Auto

Q: We have an insured who was using the autolisted on the policy to deliver newspapers. The insured auto struckanother vehicle. Insured was negligent for the loss.

Does the insured auto in this incident not fulfill thedefinition of a covered auto due to the fact that they weredelivering newspapers? Does the PP 00 01 06 94 definition of acovered auto under J.2.a. and b.2 exclude both liability coverageand physical damage coverage when an auto is being used to delivernewspapers, pizza, etc.?

OhioSubscriber

A: Presuming this vehicle is not a newlyacquired vehicle, as long as the auto is a covered auto asscheduled in the declarations, there is no exclusion to preventliability coverage or physical damage coverage. The liabilitysection of the policy does have an exclusion for using a vehicle ina business but that does not apply to the use of a privatepassenger auto or a van or pickup owned by the named insured. Thesame is true in the physical damage section. Now, the insurer maywant to revise the premium based on the use of the vehicle but thepolicy itself does not exclude coverage in your situation.

Asbestos Damage to Swimming Pool

Q: We have an insured with an HO-0003(04/91) homeowner's policy.

A neighboring property was having a roof replaced and during thecontractor's removal of the shingles the asbestos from theshingles/roof system somehow migrated into the insured's in-groundswimming pool causing damage.

The question is:

Is there coverage for this type of loss under the HO-0003(04/91) policy?

MassachusettsSubscriber

A: The in-ground pool is an otherstructure, coverage B. As such, coverage is on an open perilsbasis. There is an exclusion for faulty workmanship, repair,construction of part or all of any property on or off the residencepremises; it doesn't have to be the insured's property that therepair is to, the policy just says any property on or off premises.While there is an ensuing loss provision that could providecoverage, asbestos is a pollutant and is not covered unless causedby a coverage C named peril. Therefore, coverage for the asbestosin the pool would be excluded. However, the contractor should beresponsible for the claim since his actions caused the loss.

Asbestos Floor Tiles Removal

Q: Under our Mortgage Service ResidentialPolicy (MSP-RES), the dwelling sustained an on-premises coveredwater loss that resulted in damaged flooring. It turned out thefloor tiles were of older manufacture and contained asbestos. Whilethere is no disagreement the water damages are covered, does thepolicy owe for the extra costs of asbestos special handling anddisposal?

The policy is an open peril dwelling form with no coverage C. Itinsures against direct loss to covered property but excludes losscaused by: [(5) release, discharge, or dispersal of contaminants orpollutants.]

One view is that the cause of loss in this claim is waterdamage, not pollutants. The asbestos pollutant itself is not acause of loss to the flooring. Rather, it threatens hazard uponremoval of the floor tiles, when the asbestos becomes airborne.Thus, since the loss was not caused by release of pollutants, theexclusion for loss caused by release of pollutants would not beapplicable. The asbestos clean up would be an incidentalnecessitated by reasonable water damage repairs and covered.

Another view is that the water damage is the loss cause and theremoval of the asbestos tile creates an ensuing loss, be it anactual ensuing loss or a threatened ensuing loss. The policy statesthat any ensuing loss not excluded or excepted is covered. As thepollution dispersal is indeed excluded in the policy, the costs ofasbestos handling and disposal would not be covered.

Others think that the removal of asbestos tiles do notconstitute an ensuing loss. Mold, by contrast, is actually causedby water interacting with a particular material. Mold is thus saidto be an ensuing loss. Asbestos, however, was not created by thewater loss and thus is not an ensuing loss. The asbestos isconsidered a latent vice or defect. And while the policy alsoexcludes latent vice and defect, the cause of loss was waterdamage, not asbestos. Because the latent vice of asbestos did notcause the floor damage, the exclusion for loss caused by latentvice would not be applicable. Which interpretation is correct?

MissouriSubscriber

A: The asbestos is not an ensuing loss nordoes the pollution exclusion apply; you have a water loss, and theremoval of material containing asbestos is part of debris removalwhich is covered. The asbestos isn't really an inherent vice sincewhen it was put in it was acceptable construction – it wasn't untillater that we learned of its dangerous side effects. The loss, andthe removal of the asbestos containing material, is covered.

Comprehensive or Collision Loss under PAP

Q: Our policyholder drove through some wet painton the road, which caused damage to his vehicle. Our question iswhether this is a comp or a collision claim or if this would becovered at all?

IowaSubscriber

A: Interestingly, this question came up ata recent claims association meeting attended by the FC&Seditors. The consensus of the claims adjusters there was that thistype of loss can be considered as covered under either scenario.The damage was caused by an impact with another object, that is,paint as an object impacting with the auto. Or, this could be acomprehensive loss with paint falling across the auto. The answershould be one that is in the best interests of the insured; inother words, if the insured has a lower deductible with a collisionclaim, then this would be considered a collision loss; if theinsured has a lower deductible with a comprehensive claim, thenthis would be considered a comprehensive loss. The insured shouldget the benefit of the doubt here since both a collision loss and acomprehensive loss are understandable and reasonable explanationsfor the claim.

Collision Coverage Under a Personal AutoPolicy

Q: Our insured was driving his car downthe highway when a tire on the car shredded. Parts of the tirebroke the muffler system and dented the wheel well. The insurerwants to cover the damage under the collision coverage, but we feelthat other than collision coverage is more proper. Your thoughts onthis claim will be appreciated.

PennsylvaniaSubscriber

A: The definition of “collision” that ison the auto policy is important in this instance. Assuming that thedefinition is “impact with another vehicle or object,” we believethat if the tire tread had completely separated from the rest ofthe tire and the wheel at the time it struck the muffler, collisionis the proper coverage; that is, if the tire tread pieces hadseparated from the tire and wheel, then they were “another object”that collided with the insured's auto. If the pieces were stillsomehow connected to the auto at the time of the damage, then thepieces cannot be considered “another object” separate from theinsured's auto. In such an instance, coverage would be under theother than collision part of the policy.