Turkeys aren't the only things that can't fly. Once they areshoved out of ISO's headquarters into the real world, someinsurance turkeys don't fly, either.

One in particular resonates. Here is the pertinent form languagefrom ISO HO 00 03 15 11:

SECTION I – PROPERTYCOVERAGES A. Coverage A – Dwelling

1. Wecover:

a. The dwelling on the“residence premises” shown in the Declarations, includingstructures attached to the dwelling;

Now consider the following claim, summarized from the facts of amultitude of actual cases:

Mom and Dad own a home. They haveput down a substantial payment to procure space in a highlysought-after retirement community with a fixed“move-in” date. With optimistic dreams of recoveringthat payment via the sale proceeds of their current home, theycontract with a Realtor. Unfortunately, the real estate market intheir area slumps. Move-in time at the retirement communityarrives, and still no sale. Adult daughter tells parents to head onto retirement village; she'll move into the house to keepit maintained and occupied until their realtor finds abuyer.

A major fire severely damages thehome. Adequate homeowner insurance in the name of Mom and Dad is infull force, automatically renewed annually via directbill/escrow.

The carrier denies theclaim.

Their insurance agent assures thedaughter and parents there must be some mistake; a simplemisunderstanding over vacancy and unoccupancy. Sure, Mom and Dadhave moved out, but the daughter has moved in. And furthermore, asa resident relative, the daughter is even an insured under thepolicy!

Unfortunately, the actual form language sides with the carrier.While the agent is absolutely correct in his vacancy/unoccupancyargument, even if he'd been wrong, neither of those would haveaffected a fire claim under a residential policy. No, the carrieris denying the claim under an entirely different provision of thepolicy. And even though that provision is crystal clear, it isseldom given more than a moment's thought once an agent leaveslicensing school.

A crystal-clear basis for claim denial commonly overlooked byagents? Yep, I'd say that qualifies as a coverage turkey!

Where lurks this “gobbler” provision from the HO forms? Lookback at the previous policy provision quoted above, and note thekey requirement for determining if a particular dwelling fallsunder coverage A: it must be located on the “residence premises.”Here is the pertinent wording from the ISO HO definition:

“Residence premises” means: a. Theone-family dwelling whereyou reside; (emphasis mine)

Now do you see the carrier's reasoning? Note those three keywords: ”where you reside.” If English teachers everywhere willforgive me, the only key question to complete our journey is “Who'syou?” Ah, grasshopper, that one is easy. In the HO definitionssection you will find the standard ISO wording:

In this policy,'you' and 'your' refer to the'named insured' shown in the Declarations and thespouse if a resident of the same household.

Let's take a closer look.

1. To be covered, dwelling must be located on “residencepremises.”
2. “Residence premises” is where “You” reside.
3. “You” is specially defined to include Named Insured andresident spouse only.
4. Named Insured on applicable HO policy is Mom and Dad; does notinclude unnamed daughter.
5. Mom and Dad reside at the retirement community, not in thedamaged dwelling.
6. Since no “You” resides at this specific dwelling, it is not a“residence premises” and does not fall under Coverage A.
7. Therefore, any claim for property damage to this dwelling isvalidly denied under this policy, regardless of peril, premiumpayment or well-intended actions of daughter.

What's really insidious about this is how many agents, even whenmade aware, adamantly refuse to accept the clear policy language.“That's not the intent!”, they cry. Or “No court would ever enforcethat against an innocent insured!”, often paired with a commoncodicil, “No court in OUR state would ever enforce…”

Ah, but they have, they do and they will. My good friend BillWilson, head guru of the IIABA Virtual University, has documentednumerous court cases that have come down squarely on the carrierside in similar cases. As we've discussed in previous articles,even if courts don't favor certain policy provisions, they arereluctant to overturn clear wording. There have indeed been courtswho found differently, leaning on an “innocent insured” rationale.But if it were that clear that one set of courts is wrong while theothers are right, I doubt Bill would have named this specific issueto be one of the top priority ISO forms changes needed.

One hopes ISO will see clear to throw out this particularlanguage, or at least clarify the issue. If the intent is to forcea change to a DP form once the Named Insureds move out, make thatrule. If the intent is to force the addition of an endorsement withextra premium to reflect the perceived change in exposure, createthat endorsement and premium. Unpredictable real estate markets,retirement community availability and expense, job scarcity andnumerous other scenarios where named insureds need to move on whileretaining coverage of a former-but-still-owned home makes this apotential turkey with widening potential for negative impact.

Bottom line: Do you really want to sell insurance — or assureinsureds after a claim — that something is definitely true wheneven the courts are flying off in unpredictable directions? This isone turkey that needs to be stuffed.