Question: I have a VA policyholder. I don't have the exact policy form yet but it is an HO 03 policy with Travelers.

A hail storm damaged the risk in June 2016. The policyholders subsequently sold the house in July 2016. After the new owners closed and moved into the property, they were advised of hail damage to the cedar shake roof by a contractor.

The new owners contacted the policyholders through their realtor and the policyholders — who now no longer owned the house — agreed to file a claim for the damage.

Travelers extended coverage for the loss.

Then, the contractor disputed the claim amount. Travelers subsequently sent a letter to the policyholders stating they would not extend any more coverage because the policyholders lost the insurable interest in the property when they sold the house. They would not even release depreciation on what they already covered.

The policyholders then agreed to hire me as a public adjuster at the request of the new owners and signed an assignment of benefits to the new homeowners. The insurer is refusing to change their stance.

My thinking is:

1. 1. 1. The insurer was the insurer on record when the loss occurred and therefore owes for the loss.
    2. The policyholders have the right to use the funds at a different location.
    3. The insurer already extended coverage so they waived their rights to deny payment on the claim.
    4. Benefits were assigned to the new owner so there is still an insurable interest in the house. (That was done after the sale, however.)

Do the policyholders have a case to pursue the claim or have they lost that ability?

— Ohio Subscriber

Answer: I'm looking at the HO 00 03 05 11; the Travelers policy may be different. The ISO form provides coverage for losses that occur during the policy period. The insured's owned the property when the damage occurred, so they had insurable interest at the time, and they gave prompt notice as is required by the policy.

The ISO from requires the assignment to be approved in writing by the carrier. Did Travelers approve the assignment? If the assignment was accepted, then you have a claim being made beyond the policy by people who didn't own the property at the time; that could a problem, however the policy at issue was in effect at the time of loss, so it should still apply.

Who received the original payment, the original insured's or the buyers? Travelers paid part of the loss and is now claiming that the original insured's have no further claim, even though they paid part of the loss. But if the assignment was accepted, then the payment should have been made to the buyers, and the rest of the claim should be paid. Travelers accepted the loss and made payment, the rest of the claim should be paid.

You have an issue of fact as to who received the original payment and when the assignment took place. I think that's a large part of the issue. If the assignment wasn't accepted, then the original insured's are making a claim for property they no longer own.

Question: Our policyholder sold his vehicle to a private owner and never notified the insurer so the vehicle could be removed from the policy. A short time thereafter, the vehicle was involved in an auto accident. It turns out the private owner did not transfer the title into his name, nor does he carry an active policy of insurance for the vehicle purchased from our policyholder. Is there liability or collision coverage for this loss under our insured's personal auto policy?

— Connecticut Subscriber

Answer: Presuming the vehicle was still listed on the policy as a covered auto and shown in the declarations, and since the named insured is an insured for the use of any auto, if your insured is found liable, the PAP will apply. There is no applicable exclusion based on the information you have provided. As for collision coverage, as long as the car is a covered auto by definition and the PAP has collision coverage and there is no applicable exclusion based on the facts of the accident, the PAP will apply to a collision claim.

Continue on…

Analysis brought to you by the experts at FC&S Online, the unquestioned authority on insurance coverage interpretation and analysis for the P&C industry. To find out more — or to have YOUR coverage question answered — visit www.nationalunderwriter.com/FCS.

After a private owner sells their vehicle, it's always a good idea to follow up on the coverage transfer to the new owner. (Photo: iStock)

Question: Farm Bureau Mutual Insurance Company's Policy States, “Change/Assignment of Interest… No change of interest in this policy is effective unless we consent in writing. However, if a 'named insured' dies, we will protect the legal representative as 'named insured.'”

The insured signs an assignment with a windshield repair shop for the payment of the windshield repair to be paid to the windshield repair shop directly. There is a second assignment from the windshield repair shop to NEON LLP for Neon to collect the windshield repair shop's outstanding repair statements from the insurer.

Does the policy provision stated above preclude either the NEON or the repair shop to stand in the shoes of the insured? Does the policy provision preclude assignments as they pertain to recovery of the insured's proceeds due under the policy? Only the insured can receive monies due under the policy?

— Pennsylvania Subscriber

Answer: In the situation you present, depending on how the assignment is worded, the insured has not transferred the policy rights to the repair shop; he has simply transferred one particular claim payment to the provider of the service. Unless the assignment states that all policy benefits for the remaining term of the policy are assigned to the shop, the insured is still the insured on the policy, will presumably continue to pay the premiums and there has been no change in the nature of the risk. An assignment of benefits is not an assignment of interest in a policy.

Question: In the BAP, CA 00 01, under the Transfer of Rights of Recovery Against Others to Us clause, who is the “person or organization” referring to? Is it the named insured? Is it others? If so, who would that be?

I always took the wording to mean that the named insured's rights of subrogation are transferred to the insurance company. But others in the office thought the “person or organization” referred to others such as an additional insured.

What is your opinion?

— Pennsylvania Subscriber

Answer: The key word in the transfer of rights of recovery clause is the word “any.” This means that any person or organization — that is, the named insured, other insureds, claimants — any person or organization to whom or for whom the insurer makes a payment. If that person or organization has rights of recovery against another entity, the insurer then has those rights transferred to it.

More insights from FC&S:

How well do you know condo insurance exclusions?

When is humidity or mold damage excluded?

Special Reports /

How to handle property sale, transfer claim disputes

Related Stories

Recommended For You