FC&S Mailbag: Ask the Experts

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Additional or Replacement Auto

Q: Our insured has a personal auto policy with three vehicles listed. On Nov. 6, 2013 she purchased a 2005 Pontiac which was meant to replace listed vehicle number one on her policy, a 1997 Monte Carlo. The agent contends the insured had a buyer lined up for her Chevrolet Monte Carlo and had every intention of selling that vehicle. The registration plate was transferred from the Monte Carlo to the 2005 Pontiac. The insured did not sell the Monte Carlo that was on her policy as the sale fell through. 

We consider the 2005 Pontiac a newly acquired auto as it did not replace a vehicle on the policy since the insured still had possession of the 1997 Monte Carlo. The vehicle was not reported to us within 14 days per the policy requirements.  

The insured's agent considers this a replacement vehicle because it was intended to replace the 1997 Monte Carlo. He further contends, because of this change of registration, the insured was not legally able to drive the Chevrolet and as such the 2005 Pontiac should be considered a replacement auto.  

Can you offer an opinion on whether you feel this is an additional or replacement auto based on the facts above?

Pennsylvania Subscriber

A: It is our interpretation that this is an additional auto, but it could depend on insured's jurisdiction, as there is a split in authority on this issue. So, we took both approaches in coming to our interpretation, as explained below.

Courts generally hold that a vehicle is a replacement if it's procured after issuance of the policy and the described vehicle is disposed of by the policyholder or is otherwise inoperable at the time of replacement. The insured acquired the Pontiac (second auto) after issuance of the policy and before the expiration of the policy; however, insured did not dispose of the Monte Carlo on the policy because insured maintained possession of the vehicle (no disposition) and it was not inoperable at the time of the replacement. Jurisdictions adopting this approach include North Carolina and Illinois, for example.

On the other hand, some courts rely on a less-stringent analysis which centers on the insured's intent and conduct under the totality of the circumstances. That camp considers whether the insured intended the second vehicle to act as a replacement and acted in accordance with that stated intent. Those courts have refused to find that a vehicle can't replace another vehicle based on the fact that insured kept the covered vehicle after buying the second and the covered auto was not inoperable. Kansas, Alabama, and Washington are such jurisdictions. Under this approach, the benefit of the doubt would possibly go to the insured.  

Balancing both approaches, we believe that this is an additional auto. For us, the tipping point is that the insured did not report the Pontiac within 14 days, per policy terms. Moreover, the Monte Carlo was not disposed of, so the insured could have continued to use it even if it would have been illegal under state law. For these reasons, if the Monte Carlo was still on the policy, the Pontiac should be considered an additional auto since it has been added to the coverage.

Weight of Snow Damages Pool Liner

Q: Weight of heavy snow caused an in-ground pool cover to pull from its anchors and fall into the pool, causing damage to the liner and loss of water within. The full extent of damage and repair is not known until weather permits an in-depth inspection.

The insurer denied coverage under the HO3 form, Section 1, Perils Insured Against – Coverage B–Other Structures, 2. Caused by: b. freezing, thawing, pressure or weight of water or ice to a 1) fence, pavement, patio or swimming pool.

The insurer further cites Section 1, Exclusion 1: “We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. 3. Water below the surface of the ground including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure.”

Our contention is that the weight of snow—not water or ice—caused the cover to fall into the pool and damage the liner. The damage to the liner from this weight of snow caused water to leak out of the pool, requiring liner and water replacement. Potential additional damage may result from lack of weight of the water on the pool walls to offset hydrostatic pressure from ground water.

Is the insurer correct in denying this claim?

Ohio Subscriber

A: While ice is by definition frozen water, the fact that the policy lists them separately as excluded items indicates that each state of water must be considered individually. Snow by definition is soft, white pieces of frozen water that fall to the ground from the sky in cold weather; precipitation in the form of small white ice crystals formed directly from the water vapor of the air at a temperature of less than 32°F (0°C). This is different from both water and ice. As such, the exclusion speaks specifically to ice and water, so only those are excluded, and not the weight of the snow.

As far as the carrier's use of the exclusion for water below the surface of the ground, the snow was not water nor was it below the surface of the ground; that exclusion does not apply. The loss should be covered.

Pollution Exclusion Applicability

Q: My insured has a CG 00 01 12 01 policy. The insured was hired to install new circuits for a customer. An employee was pulling cable and accidentally set off the fire suppression system in the customer's office. As a result, ansul was released from the suppression system. The damage includes the cost to refill the suppression system (with ansul) and cost to clean-up ansul. Does the pollution exclusion in the CGL form apply?

Pennsylvania Subscriber

A: The pollution exclusion is not applicable in this instance. The premises is not one owned or occupied by the insured and the insured did not bring the fire suppressant on to the premises for its work. As for the cleanup costs, the pollution exclusion states that the exclusion does not apply to liability for damages because of property damage that the insured would have in the absence of any request or order to clean up. In other words, if the insured has coverage for the property damage it caused, the cleanup part of the pollution exclusion is not applicable.