Property Coverages—AAIS Homeowners
Principal Property Coverages
Summary: The American Association of Insurance Services (AAIS) property coverages as found in the current homeowners forms are discussed in the following pages. The AAIS forms have been revised in 2007, and have been given a new numbering system. The prior forms were, for example, form 3, edition 2.0. But now, the forms are HO 0001 01 06, HO 0002 01 06, HO 0003 01 06, HO 0004 01 06, HO 0005 01 06, HO 0006 01 06, and HO 0008 01 06.
The form analyzed below is form HO 0003 01 06, the special form; significant differences from the other forms, such as HO 0008 and HO 0005, are noted, as well as the changes from the earlier form 3.
For simplicity’s sake we will simply refer to HO 0003. Please note that the forms, as of this writing, have not been approved in all jurisdictions, so check with your insurers to see if the forms are in use.
Topics covered:
Perils insured against—coverages A and B
As discussed in another article AAIS Homeowners Program, there are seven coverage forms in the homeowners program. Forms HO 0001 and HO 0008 are limited as to coverage, and are used for the insured who either does not wish, or is not eligible for, the broader coverage provided by the other forms. Form HO 0004 may be used for the tenant homeowner, or for the co-owner of a two- to four-family dwelling. Form HO 0006 is used for a co-operative apartment or for a condominium insured. Form HO 0005 provides “open perils” building and contents coverage.
In this article, we discuss the HO 0003, noting in particular the changes from the earlier form. We shall also indicate the differences from the other forms; notably the HO 0008 and HO 0005.
The following definitions pertain primarily to the property coverages, although some, like “business,” appear in both the property and liability sections. (Those used only in the liability coverage section are discussed elsewhere; see Liability Coverages—AAIS Homeowners.
1. The words “you” and “your” mean the person or persons named as the insured on the “declarations”. This includes “your” spouse if a resident of “your” household.
2. The words “we”, “us”, and “our” mean the company providing this insurance.
3. ”Actual cash value” means the cost to repair or replace property using materials of like kind and quality, to the extent practical, less a deduction for depreciation, however caused.
6. ”Business” means:
a. a trade, a profession, or an occupation, including farming, all whether full time, part time, or occasional. This includes the rental of property to others, but does not include:
1) the occasional rental for residential purposes of that part of the “described location” normally occupied solely by “your” household; or
2) the rental or holding for rental of a portion of that part of the “described location” normally occupied by “your” household to no more than two roomers or boarders for use as a residence; or
b. any other activity undertaken for money or other compensation, but this does not include:
1) providing care services to a relative of an “insured”;
2) providing services for the care of persons who are not relatives of an “insured” and for which the only compensation is the mutual exchange of like services;
3) a volunteer activity for which:
a) an “insured” receives no compensation; or
b) an “insured’s” only compensation is the reimbursement of expenses incurred to carry out the activity; or
4) an activity not described in 1) through 3) above for which no “insured’s” total compensation for the 12 month period just before the first day of this policy period was more than $2,500.
Analysis
A significant departure in this form is the addition of a definition of “actual cash value.” When no definition is given in a policy, courts have often taken positions that might be thought contrary to the policy drafters’ intentions. For more information on actual cash value, see Actual Cash Value.
A profit motive is normally the hallmark of a business. Although it has been argued that a part-time business falls outside the “trade, profession, or occupation” characterization (see, for example, North Carolina Farm Bureau Mutual Ins. Co. v. Briley, 491 S.E.2d 656 [N. C. App. 1997], where the court said “business” should refer only to a principal occupation), the AAIS language makes it clear that part-time or occasional activities, including rental of property to others, does, indeed, constitute a business. (Occasional rental, for residential purposes, of the part of the insured premises normally occupied by the named insured’s household is not considered a “business.” Also, see Liability Coverages—AAIS Homeowners. Providing foster or day care services are among the services regularly provided to others that constitute a business. However, if the services are performed for a relative, or performed for a nonrelative and exchanged for like services and no money changes hands, then these activities are not to be considered a “business.” In the previous forms, seasonal or part-time activities engaged in by minors were listed in the definition as not considered a “business.” Such activities could include working as a life guard, mowing grass, or baby-sitting. In the current form, this provision has been moved to the incidental liability coverage section. (The equivalent ISO HO 00 03, in the liability section, states that the business exclusion does not apply to an insured under age 21 involved in a part-time, occasional, self-employed business with no employees.) The previous form contained an exception from the definition: “activities that are related to ‘business’, but are usually not viewed as ‘business’ in mature.” This exception has been removed from this edition. It is to be hoped that this will not lead to a more stringent interpretation of the exclusion than is intended. For example, an insured might attend a business expo out of town, and go to dinner with some other attendees. If he or she negligently injures another diner in the restaurant, would the argument be that, had it not been for the business, the other diner would not have been injured?
7. ”Declarations” means all pages labeled declarations, supplemental declarations, or schedules that pertain to this policy.
8. ”Described location” means the one- to four-family house, the townhouse, or the row house where “you” reside and which is shown on the “declarations” as the “described location”. It includes related private structures and grounds at that location.
However, if the “described location” is a townhouse or a row house, it includes only related private structures and grounds at that location that are used or occupied solely by “your” household for residential purposes.
9. ”Domestic employee” means a person employed by an “insured”, or a person leased to an “insured” under a contract or an agreement with a labor leasing firm, to perform duties that relate to the use or care of the “described location”. This includes a person who performs duties of a similar nature elsewhere for an “insured”, provided such duties are not in connection with an “insured’s” “business”.
However, “domestic employee” does not include a person who is furnished to an “insured”:
a. as a temporary substitute for a permanent “domestic employee” who is on leave; or
b. to meet seasonal or short-term workloads.
Analysis
The new AAIS forms have added “described location” as a defined term, thus eliminating the definition under “insured premises” (see later in this article). The homeowners forms, as will be seen, now use “described location” when referring to the section I property coverages, and “insured premises” when referring to section II liability coverages. The definition makes it clear that if the insured’s “described location” is a townhouse or row house, then the related private structures and grounds at that location include only those used or occupied solely by the named insured’s household for residential purposes.
The forms also expand the definition of a domestic employee to include a leased employee, but only one performing duties relating to the care or use of the described location. Temporary substitutes or short-term or seasonal employees are not considered “domestic employees.” For example, a staff hired to cater a reception in the insured’s home would not have “domestic employee” status, even though they are performing duties relating to the use of the “described location.”
11. ”Fungi” means any kind or form of fungus, including but not limited to mildew and mold, and any chemical, matter, or compound produced or released by a fungus, including but not limited to toxins, spores, fragments, and metabolites such as microbial volatile organic compounds.
13. ”Insured: means:
a. ”you”;
b. ”your” relatives if residents of “your” household;
c. ”your” relatives under the age of 25 years who:
1) are financially dependent upon “you”;
2) are students enrolled in school full time, as defined by the school; and
3) were residents of “your” household just before moving out to attend school;
d. persons, other than “your” relatives, under the age of 21 years who:
1) reside in “your” household; and
2) are in “your” care or in the care of “your” resident relatives;
e. persons, other than “your” relatives, under the age of 21 years who:
1) are in “your” care or in the care of “your” resident relatives;
2) are students enrolled in school full time, as defined by the school; and
3) were residents of “your” household just before moving out to attend school;
The phrase an “insured”, wherever it appears in this policy, means one or more “insureds”.
Analysis
New in the HO 0003 is the definition of “fungi.” With the surge in claims for mold damage, particularly in the homeowners field, policy drafters have been compelled to add a definition so that insureds cannot argue over any coverage that might be provided.
The form addresses the question as to whether students away at school are considered “insureds.” However, the definition makes clear that the insured student away at school must be under age 25 (which would allow for graduate work), a full-time student, financially dependent upon the insured (“financial dependence” need not mean that the student’s entire finances come from the insured, just that without the insured’s support the student could not attend school), and have been a resident of the insured’s household just prior to leaving to attend school. A nonrelative, such as a foster child or ward of the state, can qualify as a student away at school, but only up to age 21 years. Note, however, that there is no requirement that the nonrelative be financially dependent upon the insured. Nonrelated persons can also qualify as insureds if they are in the care of the insured or a resident relative, and reside in the insured’s household.
New in this form is the statement that “an insured,” wherever used in the form, means one or more insureds. Some courts have found that under some circumstances the use of “insured” in the singular meant only one particular insured, which led to unintended coverage.
14. ”Insured premises” means:
a. the “described location”;
15. ”Limit” means amount of insurance.
16. ”Motorized vehicle” means:
a. a self-propelled land or amphibious vehicle, regardless of method of surface contact, but this does not include a:
1) ”hovercraft”
2) model hovercraft that is not designed or used to carry people or cargo;
3) ”watercraft”; or
4) model watercraft that is not designed or used to carry people or cargo; or
b. a trailer or semitrailer that:
1) is attached to or being carried on or towed by; or
2) becomes detached while being carried on or towed by:
a vehicle described in a. above.
Analysis
In the earlier form, “described location” was a term loosely defined under the definition for “insured premises.” But now, as pointed out earlier, it is a defined term that is used in the property section. In form HO 0006, “described location” is defined as “the unit in which ‘you’ reside and which is shown on the ‘declarations’ as the ‘described location’.” The remainder of the “insured premises” meaning is used only in the liability section, and will be discussed in the article dealing with AAIS liability coverages. See Liability Coverages—AAIS Homeowners. The earlier form defined “limit” as “the amount of coverage that applies,” thus leading to some confusion. Was the amount of coverage that shown in the declarations? Or, was it the amount of the covered loss? Now, it is simply the “amount of insurance.”
Although the current form defines “motorized vehicle,” the definition of “motor vehicle” no longer appears, which eliminates the need to determine whether a vehicle was a “motorized” or a “motor” vehicle or some strange combination of both. A “motorized vehicle” can include a battery-powered vehicle, since the only qualification is that the vehicle be self-propelled. Thus, a bicycle is not a “motorized” vehicle; a battery-powered razor scooter is.
A trailer or semitrailer can also qualify as a motorized vehicle, but only while attached to, carried on, or towed by a “motorized vehicle” as defined. Such a trailer or semitrailer is also a motorized vehicle if it should become detached while being carried on or towed by a motorized vehicle. Under these circumstances, coverage is found under an auto policy, not the homeowners form.
18. ”Pollutant” means:
a. any solid, liquid, gaseous, thermal, or radioactive irritant or contaminant, including acids, alkalis, chemicals, fumes, smoke, soot, vapor, and waste. Waste includes materials to be recycled, reclaimed, or reconditioned, as well as disposed of; and
b. electrical, magnetic, or electromagnetic particles or fields, whether visible or invisible, and sound.
20. ”Terms” means all provisions, limitations, exclusions, conditions, “declarations”, and definitions used in this policy.
21. ”Vermin” means an animal of a type that is prone to enter or burrow into or under a structure to seek food or shelter, including but not limited to:
a. armadillos;
b. bats;
c. opossums;
d. porcupines;
e. raccoons;
f. skunks; and
g. snakes.
Analysis
Part a. of the definition of “pollutant” is similar to the definition in the ISO homeowners, except that the AAIS form adds “radioactive,” which could lead to some interesting coverage interpretations. According to the Idaho State University Department of Physics, “Our world is radioactive and has been since it was created. Over 60 radionuclides (radioactive elements) can be found in nature, and they can be placed in three general categories: Primordial – from before the creation of the Earth… Cosmogenic – formed as a result of cosmic ray interactions…Human produced – enhanced or formed due to human actions (minor amounts compared to natural). Radionuclides are found naturally in air, water and soil. They are even found in us, being that we are products of our environment.” The FC&S editors have always been of the opinion that the definition has always been intended to refer to pollutants that occur, for example, as by-products of the manufacturing or industrial processes and are prone to pollute the environment. Thus, if an insured committed suicide in his or her dwelling, the clean-up was not considered clean-up of pollutants. But if humans are radioactive, then clean-up becomes another matter.
The definition of “pollutant” includes electrical and magnetic emissions and sound emissions. An ear-drum ruptured because of an insured’s boom-box could therefore be a loss attributed to pollution.
A welcome addition to the definitions is that for “vermin.” Left undefined, a common desktop dictionary definition was used: “various insects, bugs or small animals regarded as pests because destructive, disease-carrying, etc., as flies, lice, rats, or weasels” (Webster’s New World College Dictionary). Webster’s adds that these are animals that compete with men for food; thus, a raccoon is not vermin but a mouse is. Under this new definition, an animal must be “prone” to—that is, having a natural bent or disposed to—enter or burrow into or under a structure.
The special building and contents form HO 0005 contains two additional definitions. In that form, number 20 is “sinkhole collapse,” defined as “the sudden settlement or collapse of earth supporting covered property. The earth settlement or collapse must result from subterranean voids created by the action of water on a limestone or similar rock formation. ‘Sinkhole collapse’ does not include the cost of filling sinkholes.”
Number 21, “specified perils,” essentially consists of the form HO 0003 coverage C named perils: accidental discharge, aircraft, explosion, falling objects, fire or lightning, freezing, riot or civil commotion, sinkhole collapse (as defined), sudden and accidental damage from smoke, sudden and accidental damage from artificially generated electric current, sudden and accidental tearing apart of a steam or hot water heating system, theft, vandalism or malicious mischief, vehicles, volcanic eruption, weight of ice, snow, or sleet, and windstorm or hail. Number 22 is “terms,” and number 23 is “vermin.”
1. Coverage A—Residence
a. ”We” cover the residence on the “described location”. This includes additions attached to the residence and built-in components and fixtures, as well as building materials and supplies located on or adjacent to the “described location” for use in the construction, alteration, or repair of the residence or related private structures on the “described location”.
b. ”We” do not cover:
1) land, including the land on which covered property is located, except as provided under the Incidental Property Coverage for Liquid Fuel Remediation;
2) underground water or surface water;
3) trees, plants, shrubs, or lawns, except as provided under Incidental Property Coverage for Debris Removal and the Incidental Property Coverage for Trees, Shrubs, Or Lawns; or
4) grave markers or mausoleums, except as provided under the Incidental Property Coverage for Grave Markers.
c. The “limit” that applies to Coverage A is the most “we” pay per occurrence for all property covered under Coverage A.
Analysis
The Coverage A insuring agreement has been considerably revised. It is clear now that additions must be attached to the residence. Building materials are covered if they are on or adjacent to the “described location” and intended for use in construction, repair, or alteration of the insured residence or a related private structure (the earlier form contained coverage for materials designated for the repair, construction, or alteration of a related private structure under coverage B). So, if a kind next-door neighbor stores building supplies for the insured, and they are destroyed in a fire, coverage A should respond.
The contents broad form (tenant homeowners form HO 0004) makes no reference to coverage A, since there is no residence to be insured. Coverage A—Residence in unit-owners form HO 0006 omits reference to the residence as well, covering instead “fixtures, alterations, decorations, additions, installations, and appliances that are part of the unit.” Coverage A for the unit-owner also includes “structures at the described location owned solely by the ‘insured’ other than the ‘described location’; property that is ‘your’ insurance responsibility under an agreement with an association or corporation of property owners; and items of real property pertaining to the ‘insured premises’.” So, for example, the unit-owners form covers such items within the unit as built-in cabinetry or wall-to-wall carpeting if the condominium association agreement requires the insured to provide insurance. Other items covered could include an outdoor carport or a patio privacy fence.
The insuring agreement also makes it clear which incidental property coverages provide coverage for trees, shrubs, and lawns, and where coverage for grave markers is to be found. A new incidental coverage—for liquid fuel remediation—has been added and will be discussed later in this article. The insuring agreement specifies that land is not covered both in this agreement and in the coverage B insuring agreement.
The insuring agreement notes that the “limit” (see Definitions) is the most that will be paid per occurrence. Occurrence as used here is not a defined term; the definition in the policy is only applicable to the liability coverages. Therefore, a common dictionary (Webster’s New World College Dictionary) serves: “something that occurs; event; incident—Syn—occurrence is the general word for anything that happens or takes place; an event is an occurrence of relative significance, especially one growing out of earlier happenings or conditions…” Note that an occurrence, as used here, need not be “sudden and accidental,” but, as will be discussed later in this article, can take place over a period of time.
2. Coverage B—Related Private Structures
a. ”We” cover related private structures on the “described location” that are not attached to the residence covered under Coverage A. Structures that are connected to the residence covered under Coverage A by only a fence, a utility line, or a similar connection are not considered attached.
b. ”We” cover fences, driveways, sidewalks, and other permanently installed outdoor fixtures.
c. ”We” do not cover:
1) land, including the land upon which covered property is located, except as provided under the Incidental Property Coverage for Liquid Fuel Remediation;
2) underground water or surface water;
3) trees, plants, shrubs, or lawns, except as provided under the Incidental Property Coverage for Debris Removal and the Incidental Property Coverage for Trees, Plants, Shrubs, Or Lawns;
4) grave markers of mausoleums, except as provided under the Incidental Property Coverage for Grave Markers; or
5) any structure:
a) rented or held for rental to any person who is not a tenant of the residence covered under Coverage A, other than a structure used solely for private garage purposes;
b) used, in while or in part, for the direction or operation of a “business”; or
c) used, in while or in part, for the storage of “business” property.
However, this exclusion does not apply to a structure used by an “insured” or a tenant of the residence covered under Coverage A to store “business” property that:
(1) is a private passenger auto, a pickup truck, a van, or a “motorized vehicle” designed for grounds maintenance activities such as lawn mowing or snow plowing; or
(2) is owned solely by such “insured” or tenant and is not a “motorized vehicle”; and
does not consist of or contain gaseous or liquid fuel, other than fuel contained in a permanently installed fuel tank of a vehicle, craft, or grounds maintenance machine or in a portable container that is designed to hold fuel and has a capacity of no more than five U.S. gallons.
d. The “limit” that applies to Coverage B is the most “we” pay per occurrence for all property covered under Coverage B.
Analysis
Structures that are not attached to the residence, or are attached by only a fence or a utility line—wiring or plumbing running to the structure—are covered, unless they are used for business purposes. The forms make it clear, unlike the equivalent ISO forms, that fences, drives, sidewalks and the like are covered under coverage B. As noted earlier, materials located either on the described location or one adjacent to it and intended for use in construction, repair, or alteration of a related private structure are now covered under coverage A, not coverage B. Coverage B does not apply to land, water, or trees, shrubs, plants, or lawns. And, the reference to grave markers except as covered in the incidental coverages does not apply to form HO 0008, since the form does not include this coverage.
The exclusion, and the exceptions to the exclusion, for related private structures used for business purposes, has been expanded. In form HO 0006 it appears under coverage A, since the condo form does not contain a separate insuring agreement for coverage B.
The insurer will not cover related private structures rented or held for rental to any person not a tenant of the insured residence, unless for private garage purposes. The private structure cannot be used for “direction or operation” of a business, or used in whole or in part for the storage of “business” property. However, the exception states that the “business” property that will not eliminate coverage—that is, that can be stored without a penalty—includes a private passenger auto, pickup, van, or a “motorized vehicle” designed for grounds maintenance. Allowable as well is business property that does not consist of or contain gaseous or liquid fuel (other than that in a vehicle’s or watercraft’s fuel tank) or in no more than a 5 gallon fuel tank. The new wording clarifies that an auto might be used for business, and be garaged in the family garage without eliminating coverage. (Some were of the opinion that a strict reading of the previous exclusion meant that no coverage would apply, since the garage was used to protect “business” property.)
Finally, the coverage B limit is the most that would be paid for all property damaged in any one occurrence.
3. Coverage C—Personal Property
a. ”We” cover personal property owned or used by an “insured”. At “your” option:
1) personal property owned by a guest or “domestic employee” is covered while it is in that part of any residential premises occupied by an “insured”; and
2) personal property owned by a person other than a guest or “domestic employee” is covered while it is in that part of the “described location” occupied by an “insured.”
b. Limitation On Property At Residential Premises Other Than The Described Location—Coverage for personal property usually on residential premises of an “insured” other than the “described location” is limited to 10% of the Coverage C “limit” or $1,000, whichever is greater.
However, this limitation does not apply to personal property:
1) that is removed from the “described location” because the “described location” is undergoing alteration, reconstruction, or repair and is unfit for use as a residence or a place in which to store property; or
2) in “your” newly acquired principal place of residence for 30 days from the date that “you” first move property there.
Analysis
There are changes from the earlier form 3. The previous form stated the insurer would cover personal property owned by “or in the care of an ‘insured’”; the HO 0003 states the property must be actively “used by” an insured. Thus, property could have been stored at an insured’s home, but not used by an insured. Now, property must be used by an insured, or, if not, the insured has the option of providing coverage for property of others under certain circumstances. Unlike the ISO forms, the AAIS forms do not state that the personal property can be located anywhere in the world for coverage to apply; however, neither does it state there are any restrictions. (The HO 0008, though, only covers personal property away from the described location for 10 percent of coverage C or $1,000, whichever is greater, unless removed because of reconstruction, etc.) And, unlike the ISO forms, the AAIS forms do not clarify that the insured’s option to provide coverage for property of others is activated following a loss. Were this the case, though, it would place insureds in the position of having to notify insurers following receipt of a policy that occasion might warrant a coverage request.
Form HO 0008 does not provide coverage for personal property for a guest or domestic employee while at any residence occupied by an insured other than at the described location.
The limit on property at another residence of an insured has been changed to either 10 percent of the coverage C amount, or $1,000, whichever is greater (the earlier forms limited coverage to 10 percent of the coverage C amount).
The limitation does not apply if the property has been moved because the described location is undergoing alteration, reconstruction, or repair and is unfit either for a residence or as a place to store property. There is no restriction that the repairs must follow a covered loss; thus, if an insured wishes to undergo a major reconstruction project such that the family is obliged to move out for a period of time, and store possessions in, say, their seasonal residence, the limitation will not apply.
The limitation does not apply to personal property in the named insured’s newly acquired principal residence. The earlier form simply referred to “a newly acquired principal place of residence,” which could have been interpreted as any insured’s principal residence.
c. Limitations on Certain Property–The special “limits” shown below do not increase the Coverage C “limit”. The “limit” for each class is the total “limit” per occurrence for all items in that class.
1) $250 on money; bank notes; bullion; gold other than goldware and goldplated ware; silver other than silverware and silver-plated ware; platinum other than platinum-plated ware; coins; medals; scrip; smart cards; and cards or other devices on which a cash value is stored electronically.
2) $1,500 on securities, stamps, letters of credit, notes other than bank notes, personal records, tickets, accounts, deeds, evidence of debt, passports, and manuscripts. This special “limit” applies regardless of the medium on which these items exist, and includes the cost of research or other expenses necessary to reproduce, replace, or restore the item.
3) $1,500 on electronic devices and accessories while in or on a “motorized vehicle” or watercraft, if the device can be operated from the electrical system of the “motorized vehicle” or watercraft and by another source of power.
Accessories include antennas, films, tapes, wires, discs, records, or other media that can be used with such devices.
4) $1,500 on electronic devices and accessories used primarily for “business” purposes while away from the “described location” and not in or on a “motorized vehicle” or watercraft, if the device can be operated from the electrical system of a “motorized vehicle” or watercraft and by another source of power. Accessories include antennas, films, tapes, wires, discs, records, or other media that can be used with such devices.
5) $1,500 on watercraft, including their furnishings, equipment, engines, motors, trailers, and semitrailers.
However, this does not apply to:
a) model watercraft that is not designed or used to carry people or cargo; or
b) hovercraft.
6) $1,500 on trailers and semitrailers, other than trailers and semitrailers, designed for or used with watercraft.
7) For loss by theft:
a) $2,500 on jewelry, watches, precious and semiprecious stones, gems, and furs;
b) $2,500 on silverware, goldware, pewterware, and items plated with gold, silver, or platinum; and
c) $2,500 on guns and items related to guns.
8) For loss to personal property used primarily for “business” purposes, other than property rented or held for rental to others:
a) $2,500 on property while on the “described location”; and
b) $500 on property while away from the “described location”.
However, this special “limit” does not apply to electronic devices and accessories described in 3) and 4) above.
These special “limits” include the cost of research or other expenses necessary to reproduce, replace, or restore “business” data.
Analysis
In common with other homeowners forms, the AAIS forms restrict coverage for certain classes of property. These classes often represent theft exposures, or classes of property not normally owned by the “average” homeowner. For these reasons, such property should be scheduled. These special limits of insurance do not increase the total limit of insurance applying to property covered under coverage C.
The limitations in form HO 0003 are the same that were in form 3. Form HO 0005 limitations are: $2,500 for securities, etc.; $2,500 for categories 3) and 4); $2,500 for category 5); and $2,500 for category 6). Category 7) includes loss by theft, misplacing, or losing. The HO 0008 does not include category 7) at all.
There are some significant changes to these limitations. Category 1) for money has been broadened to recognize that mechanisms other than currency exist to effect financial transactions. Scrip, for example, defined as “a temporary paper to be exchanged for money, goods, land etc.; a certificate of indebtedness, issued as currency, as by a local government during a financial depression” (Webster’s New World Dictionary, College Edition) could refer to a gift certificate, while a card with an amount loaded into it, such as the type commonly seen during the holidays, is also limited in this category.
The category for electronic equipment away from the insured premises has been changed to read that the equipment (such as a laptop) be used primarily for business, rather than “in whole or in part” as in the earlier form. Thus, an insured might have developed a business presentation on a personal laptop, but that is the only “business” item on it. The laptop would therefore not fall into this category, and no limitation should apply.
The limitation on guns has been broadened to include “and items related to guns.” The category now includes such gun-related items as scopes, sights, gun cases, bullets, and cleaning materials.
d. Personal Property Not Covered—”We” do not cover:
1) property separately described and specifically insured by this or any other policy, regardless of the “limit” that applies to such property under such insurance;
2) animals, birds, fish, or insects;
3) ”motorized vehicles.
a) This includes:
(1) their parts, equipment, and accessories, other than property described in c.3) above; and
(2) electronic devices and accessories that can be operated only from the electrical system of a “motorized vehicle”, including films, tapes, wires, discs, records, or other media that can be used with such devices;
while in or on a “motorized vehicle”.
b) However, this does not include a “motorized vehicle”:
(1) that is designed to assist the handicapped; or
(2) that is:
(a) owned by an “insured”;
(b) designed only for use off of public roads; and
(c) used only to service an “insured premises” or a premises of another;
If such “motorized vehicle” is not required by law or governmental regulation to be registered for use on public roads or property and is not used for “business” purposes;
4) aircraft, meaning apparatus or devices designed or used for flight. This includes parts or equipment of aircraft, whether or not attached.
However, this does not include model aircraft that are not designed or used to carry people or cargo;
5) hovercraft, meaning self-propelled motorized ground effect machines or air cushion vehicles, including but not limited to flarecraft, designed or used to travel over land or water. This includes parts or equipment of hovercraft, whether or not attached.
However, this does not include model hovercraft that are not designed or used to carry people or cargo;
6) property of roomers, boarders, or other tenants, but this does not include property of roomers or boarders who are related to an “insured”;
7) property rented or held for rental to others by an “insured”, but this does not include property in:
a) that part of the “described location” normally occupied solely by “your” household while rented to others on an occasional basis for residential purposes;
b) the portion of that part of the “described location” normally occupied by “your” household that is rented or held for rental to no more than two roomers or boarders for use as a residence; or
c) an apartment on the “described location” regularly rented or held for rental to others by an “insured”, but only to the extent that coverage for such property is provided under the Incidental Property Coverage for Property in Rental Units;
8) loss that results from credit cards, electronic fund transfer cards, or electronic access devices that make possible the deposit, withdrawal, or transfer of funds, except as provided under the Incidental Property Coverage for Credit Card; Electronic Fund Transfer Card Or Access Device; Forgery; And Counterfeit Money;
9) grave makers or mausoleums, except as provided under the Incidental Property Coverage for Grave Markers;
10) land, including the land on which covered property is located, except as provided under the Incidental Property Coverage for Liquid fuel Remediation;
11) underground water or surface water; or
12) trees, plants, shrubs, or lawns, except as provided under the Incidental Property Coverage for Debris Removal or the Incidental Property Coverage for Trees, Plants, Shrubs, Or Lawns.
e. Subject to the limitations described in b. and c. above, the “limit” that applies to Coverage C is the most “we” pay per occurrence for all property covered under Coverage C.
Analysis
There are some changes in the current forms’ “property not covered.” Rather than stating that property covered by scheduled insurance is not covered, the current form says that property separately described and specifically insured is not covered, and makes it clear that even if the limit for the other property is not sufficient to cover the property at the time of a loss, the coverage under this policy will not apply.
There is a significant difference between the ISO denial of coverage for motorized vehicles and the AAIS form. In the AAIS form, motorized vehicles are not covered, unless they are designed to assist the handicapped, or, are: owned by an insured; designed only for use off of public roads; and used only to service an “insured premises” or a premises of another. In the ISO form, coverage is eliminated unless the vehicle is used solely to service an “insured’s” residence. So, if a helpful neighbor uses his lawn tractor to mow an elderly neighbor’s grass, the AAIS forms provide coverage, but not the current ISO forms.
There are revisions to clarify what is meant by aircraft, and to explain that aircraft and hovercraft are not covered, unless they are of the hobby type not used to carry persons or cargo. Unlike “motorized vehicles,” parts and equipment of aircraft or hovercraft are not covered, whether or not they are attached.
Property rented or held for rental to others is excluded, with certain exceptions. In the earlier forms, coverage for such property was subject to the limits applicable to business property. But in the current forms, there is coverage for property in the part of the described location normally occupied solely by the named insured’s household while it is rented to others for residential purposes on an occasional basis. For example, if the named insured rents his sea-side dwelling one week during the summer to vacationers, there is coverage for the property (but see the named peril of theft in coverage C). There is also coverage for property in the portion of the described location normally occupied by the named insured’s household, but rented or held for rental to no more than two roomers or boarders. So, for example, furniture owned by the named insured in a rented furnished room located in the insured residence is covered. There is coverage for property in a distinct furnished apartment on the described location, but only that provided in the incidental coverages (except for form HO 0008, which does not include this coverage).
There are some differences between the homeowners forms in the list of “property not covered.” The HO 0008 does not provide any coverage for grave markers or mausoleums, nor for any property in an apartment on the described location rented to others, so items 7)c) is omitted, and 9) simply states that grave markers or mausoleums are not covered. Also, the HO 0008 does not provide incidental property remediation (see later in this discussion), so 10) says that land is not covered.
Excluded from coverage are any losses, except as provided under the incidental coverages, arising from credit or debit cards, or to any property of roomers or boarders who are not insureds.
4. Coverage D—Additional Living Costs And Loss Of Rent
a. ”We” pay for the necessary and reasonable increase in living costs “you” incur to maintain the normal standard of living of “your” household if that part of the “described location” occupied by “your” household is made unfit for use as a residence by loss covered under the Property Coverages.
”We” pay only for the period of time reasonably required to make the “described location” fit for use or, if “your” household is permanently relocated, only for the period of time reasonably required for relocation. This period of time is not limited by the policy period.
b. ”We” pay for the fair rental value of that part of the “described location” rented or held for rental to others by “you” if it is made unfit for use as a residence by a loss covered under the Property Coverages.
However, “we” will deduct from the fair rental value any charges or expenses that do not continue while the part of the “described location” rented or held for rental to others is unfit for use.
”We” pay only for the period of time reasonably required to repair or replace the part of the “described location” rented or held for rental to others. This period of time is not limited by the policy period.
c. ”We” pay for “your” additional living costs and fair rental value as described in a. and b. above for up to two weeks if a premises neighboring the “described location” is directly damaged by a Peril Insured Against covered by this policy and “you” may not, by order of civil authority, use the “described location”. This period of time is not limited by the policy period.
d. ”We” do not pay for loss, cost, or expense due to the cancellation of a lease or an agreement.
e. The “limit” that applies to Coverage D is the most “we” pay for all of the coverages described in a., b., and c. above.
Analysis
If the described location is damaged so that it is unfit for use, then an increase in living expenses is covered. If part of the described location is rented, or held for rental, and a covered loss renders that part unfit for use as a residence, then the insurance will respond. However, from this amount any non-continuing expenses are to be deducted. For example, if the insured owns a duplex and rents half to a tenant for $600 a month, which includes an average of $120 for heat and electricity, and a covered loss occurs, the $120 from the discontinued heat and electric service will be deducted. Although the period of time that payment can be made is not limited by the policy period, it is limited to the period of time “reasonably required” to make the premises fit for use, or until new permanent accommodation is found.
Although any rent lost until the premises are restored is recoverable, if a covered loss results in a tenant canceling the remainder of a lease after that time, this amount cannot be claimed.
Additional living expense or fair rental value is available for a period no greater than two weeks if a “neighboring” premises is directly damaged by a peril insured against. For an in-depth discussion of the meaning of “neighboring premises” and an order of civil authority, see By Order of Civil Authority.
This policy provides the following Incidental Property Coverages. They are subject to all of the “terms” of the applicable Coverage A, Coverage B, or Coverage C. These coverages provide additional insurance unless otherwise stated.
1. Association Deductible
a. ”We”‘ pay for “your” share of a deductible applicable to the insurance held by a homeowners, condominium, or similar residential association. Coverage applies only when the deductible:
1) is charged against “you”, during the policy period, as owner or tenant of the “described location; and
2) that results from direct loss to property that:
a) would be eligible for coverage by this policy if it were owned by “you”;
b) is covered under the insurance held by “your” association; and
c) is caused by a Peril Insured Against described under Coverage A in this policy, but this does not include:
(1) earthquake; or
(2) land shock waves or tremors before, during, or after a volcanic eruption.
b. The most “we” pay is $1,500 per occurrence unless a higher “limit” for Association Deductible is shown on the “declarations”. The “limit” that applies is the most “we” pay for any one loss, regardless of the number of deductibles charged against “you”.
c. The Policy Period condition under Conditions Applicable to Property Coverages Only does not apply to this Incidental Property Coverage.
2. Collapse
a. ”We” pay for direct physical loss to covered property involving the collapse of a building or a part of a building if the collapse was caused only by one or more of the following:
1) a Peril Insured Against described under Coverage C;
2) insect, rodent, or “vermin” damage, but only if no “insured” could reasonably be expected to suspect the presence of such damage prior to the collapse;
3) decay, but only if no “insured” could reasonably be expected to suspect the presence of such decay prior to the collapse;
4) weight of animals, equipment, people, or personal property;
5) weight of rain that collects on a roof; or
6) the use of defective materials or methods in construction or repair if the collapse occurs during the course of construction or repair.
However, “we” do not pay for loss to awnings, bulkheads, cesspools, decks, docks, drains, fences, flues, foundations, patios, paved areas, piers, retaining walls, septic tanks, swimming pools, wharves, underground pipes, or wharves caused by a peril described in 2) through 6) above unless the loss is the direct result of the collapse of a building or a part of a building. With respect to loss caused by a peril described in 2) through 6) above, awnings, bulkheads, cesspools, decks, docks, drains, fences, flues, foundations, patios, paved areas, piers, retaining walls, septic tanks, swimming pools, underground pipes, and wharves are not considered to be buildings or parts of buildings, whether or not such property is attached to or connected to one or more buildings.
b. In this Incidental Property Coverage:
1) collapse of a building or a part of a building means an abrupt caving in, falling in, falling down, or giving way of the building or the part of the building that prevents the building or the part of the building from being occupied for the purpose for which it was intended just before caving in, falling in, falling down, or giving way; and
2) the following are not considered to be in a state of collapse:
a) a building or a part of a building that has not caved in, fallen in, fallen down, or given way even if it displays evidence of bending, bowing, bulging, cracking, expansion, inadequate load bearing capacity, leaning, sagging, settling, or shrinkage;
b) a building or a part of a building in danger of caving in, falling in, falling down, or giving way; or
c) a part of a building that has not caved in, fallen in, fallen down, or given way even if it has separated from another part of the building.
However, the “terms” stated in 1) and 2) above do not limit coverage for direct loss to covered property caused by a Peril Insured Against described under Coverage C.
c. With respect to this Incidental Property Coverage, the peril of Weight of Ice, Snow Or Sleet means the weight of ice, snow, or sleet that causes damage to a building.
d. This coverage does not increase the “limits” that apply to the property covered.
e. The Bacteria, Fungi, Wet Rot, Or Dry Rot and Errors, Omissions, And Defects exclusions under Exclusions That Apply To Property Coverages do not apply to this Incidental Property Coverage.
Analysis
The incidental coverages (additional coverages in the ISO forms) have been rearranged in the current forms, and new coverages have been added. (Remember, form HO 0008 does not contain all of the incidental coverages.) There is now $1,500 to be used to pay an insured’s share of an association deductible. Because of the number of losses in recent years to condominium association property, it has become common to see increasingly large deductibles on a master policy. This new coverage should be a welcome addition. This coverage is distinct from the coverage for loss assessment (discussed later), which now states that it will not respond to payment of an association deductible.
Some exclusions apply to the coverage for association deductible; namely, the loss must have been caused by a peril that would have been covered by the policy, and must occur to property that would have been eligible for coverage, if it had been owned by the named insured.
The coverage for collapse (this coverage is not in HO 0008) has been extensively revised. Coverage has been broadened so that collapse resulting from rodent damage is covered. Coverage for hidden insect, rodent, or vermin damage has been revised; now, no insured must reasonably suspect the presence of such damage. So, if an insured sees termite damage but does nothing, and the house collapses around him, the insurer can properly deny coverage. Foundations, decks, underground pipes, etc., are not considered to be a building or a part of a building; however, these items are covered if damaged by the collapse of a building or part of a building. For example, if an insured’s deck collapses because of weight of people, it is not covered since it is not considered to be part of a building. However, if the deck collapses or sustains damage because the dwelling collapses onto it, the loss is covered.
A definition for collapse has been added, as well as a description of what collapse is not. A building that has not fallen down or caved in, even if it is in danger of doing so or gives an indication it might collapse, is not considered to have collapsed. In other words, a state of structural impairment is not collapse for coverage purposes. This is similar to the revisions made to the ISO 2000 homeowners, with the intent that courts that have made a case for structural impairment being covered as “collapse” can no longer do so. Note that some exclusions do not apply, such as for bacteria and fungi and errors and omissions. Note also that in the named peril coverage for weight of ice or snow, the portion in form HO 0003 “that causes damage to property inside a building” does not apply for coverage purposes, otherwise coverage for collapse resulting from this peril would be difficult to prove, if not nonexistent.
3. Credit Card; Electronic Fund Transfer Card Or Access Device; Forgery; And Counterfeit Money
a. ”we” pay for loss if an “insured”:
1) by law must pay for the theft or unauthorized use of credit cards issued or registered in the name of an “insured”;
2) has a loss resulting from the theft or unauthorized use of:
a) an electronic fund transfer card; or
b) an electronic access device that makes possible the deposit, withdrawal, or transfer of funds;
issued or registered in the name of an “insured”;
3) has a loss when checks, drafts, notes, or negotiable instruments are forged or altered; or
4) accepts in good faith counterfeit United States or Canadian paper money.
The most “we” pay is $1,500 per occurrence unless a higher “limit for Credit Card; Electronic fund Transfer Card Or Access Device; Forgery; And Counterfeit Money is shown on the “declarations”. All loss resulting from a series of acts committed by any one person or in which any one person is involved or implicated is considered one occurrence.
b. ”We” will defend a suit seeking damages against an “insured” if the suit results from the theft or unauthorized use of:
1) a credit card;
2) an electronic fund transfer card; or
3) an electronic access device that makes possible the deposit, withdrawal, or transfer of funds;
issued or registered in an “insured’s” name.
Subject to the limitation set forth in d. below, “we” will pay for the expense of such defense. Defense will be provided by counsel that “we” choose.
c. At “our” option, “we” may defend an “insured” or an “insured’s” bank against a suit for the enforcement of payment when checks, drafts, or negotiable instruments are forged or altered. If “we” choose to provide such defense, “we” will pay for the expense. Defense will be provided by counsel that “we” choose.
d. ”We” may make investigations and settle all claims or suits under this coverage that “we” decide are appropriate. “We” do not have to provide a defense after “we” have paid an amount equal to the “limit” that applies to Credit Card; Electronic Fund Transfer Card Or Access Device; Forgery; And Counterfeit Money as a result of a judgment or a written settlement agreed to by “us”.
e. ”We” do not pay for a loss:
1) that results from the use of a credit card, an electronic fund transfer card, or an electronic access device that makes possible the deposit, withdrawal, or transfer of funds:
a) if an “insured” has not complied with the rules under which the credit card, fund transfer card, or access device was issued or granted;
b) by a resident of “your” household; or
c) by a person who has the credit card, fund transfer card, or access device with the consent of an “insured”;
2) caused by the dishonesty of an “insured”‘ or
3) that results from the “business” of an “insured”;
nor do “we” provide a defense for suits resulting from such loss.
Analysis
The HO 0005 provides $5,000 for this additional coverage. The title has been changed; a reflection of modern methods of accessing personal accounts or paying for goods. Although modern law limits a person’s credit card loss to $50 if the use is unauthorized, currently only some debit card issuers limit the amount should a debit card be stolen or used without authorization. Previously, the coverage was seldom invoked. But now, with many persons’ credit or debit card numbers, including personal identification numbers (PINs) being stolen, the coverage may prove to be invaluable. Additionally, with persons paying for advertised goods by means of fraudulent cashiers’ checks (a common E-Bay scam), the coverage might be put to use.
The coverage has been changed from the prior edition. The coverage now includes a provision for defense of suits resulting from misuse of credit cards, or resulting from enforcement of laws concerning payment when a check or other negotiable instrument has been forged or altered. Loss resulting from misuse of a credit card or fund transfer card by a resident of the named insured’s household is not covered.
4. Debris Removal
a. We” pay for the reasonable cost to remove the debris of covered property after a loss. The loss must be caused by a Peril Insured Against that applies to the damaged property. “We” also pay for the reasonable cost to remove volcanic ash, dust, or particulate matter that causes direct physical loss to a covered building or covered property contained in a building.
We” will not pay more for direct physical loss to property and debris removal combined than the “limit” that applies to the damaged property.
However, if the covered loss plus the cost of debris removal is more than the applicable “limit”, “we” will pay up to an extra 5 % of the applicable “limit” to cover the cost of debris removal.
This coverage does not include any cost or expense to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effects of “pollutants”.
b. Subject to the limitations set forth in c. below, “we” also pay for the reasonable cost to remove from the “described location”:
1) ”your” fallen tree or trees if the falling of the tree or trees is caused by the peril of:
a) Windstorm Or Hail; or
b) Weight Of Ice, Snow, Or Sleet;
or
2) a neighbor’s fallen tree or trees if the falling of the tree or trees is caused by any of the Perils Insured Against described under Coverage C in this policy.
Regardless of the number of fallen trees, the most “we” will pay is $1,000 per occurrence.
However, “we” pay no more than $500 of this “limit” to remove any one tree.
With respect to this Incidental Property Coverage, the peril of Weight Of Ice, Snow, Or Sleet means the weight of ice, snow, or sleet that causes a tree to fall.
c. The coverage described in b. above applies only to a fallen tree that:
1) causes damage to a covered structure;
2) prevents a “motorized vehicle” that is registered for use on public roads or property from using a driveway on the “described location”; or
3) obstructs a ramp or other fixture designed to make the residence on the “described location” accessible to a handicapped person.
Analysis
This coverage has been broadened in that now, the “reasonable” costs for debris removal are covered. In the previous forms, coverage was limited to 25 percent of coverage A except for form 5 (now HO 0005), which had no limit. Coverage for removal of volcanic ash is limited to the cost to remove ash that causes direct physical loss to a building or property contained in a building; previously the forms referred to “all property covered under coverages A, B, and C.”
Coverage for removal of trees felled by wind or hail, or weight of ice, snow, or sleet, applies if the tree damages a covered structure, prevents a motorized vehicle (as defined), registered for use on public roads, from accessing a driveway on the “described location” (except in form HO 0006, since it insures units) or that obstructs a ramp or other fixture designed to make the residence handicap-accessible. Coverage also applies if a neighbor’s trees felled by any of the coverage C named perils damages an insured structure or blocks access to a drive or ramp. The limit has been increased to $1,000, with no more than $500 applying to any one tree.
5. Emergency Removal—”We” pay for direct physical loss to covered property that is moved from a premises to prevent a loss from a Peril Insured Against. The property is covered for up to 30 days, however this coverage does not extend past the date on which this policy expires.
This coverage does not increase the “limits” that apply to the property being removed.
The Exclusions That Apply To Coverage A And Coverage B and the Exclusions That Apply To Property Coverages do not apply to such property while removed.
However, “we” do not pay any “insured” for loss which results from any act committed by or at the direction of any “insured” with the intent to cause a loss. This applies even with respect to an “insured” who was not involved in the commission or direction of the act that caused the loss.
6. Fire Department Service Charge—”We” pay for charges assumed by “you” under a contract or agreement when a fire department is called to save or protect covered property from a peril insured against.
However, “we” do not pay for such charges when the property is located within the limits of the city, municipality, or protection district that provides the fire department response.
The most “we” pay is $500 per occurrence unless a higher “limit” for Fire Department Service Charge is shown on the “declarations”.
7. Glass Or Safety Glazing Material
a. ”We” pay for:
1) the breakage of glass or safety glazing that is part of a covered building or storm door or window; and;
2) direct physical loss to covered property caused only by broken pieces of glass or safety glazing material that, before breaking, was part of a building or storm door or window.
b. The Earth Movement exclusion under Exclusions That Apply To Property Coverages does not apply with respect to the coverage described in a. above.
c. Under this Incidental Property Coverage, “we” do not pay for loss:
1) to covered property that occurs because of the breakage of glass or safety glazing material, except as provided in a.2) above; or
2) on the “described location” if the residence covered under Coverage A was vacant for more than 60 days in a row just before the loss.
However, this does not apply to loss caused by breakage of glass or safety glazing material that is the direct result of earth movement.
A residence being built is not vacant.
d. This coverage does not increase the “limits” that apply to the property covered.
8. Grave Markers—”We” pay up to $2,500 for direct physical loss to grave markers and mausoleums on or away from the “described location” caused by a Peril Insured Against described under Coverage C.
With respect to this Incidental Property Coverage, the peril of Weight Of Ice, Snow, Or Sleet includes the weight of ice, snow, or sleet that causes damage to a mausoleum.
Analysis
Changes made to these incidental coverages include the deletion of payment of a towing charge if a mobile home must be moved from the Emergency Removal Incidental Coverage. Remember, these forms are no longer used for the mobile homeowners program. The AAIS form limits the coverage to 30 days which does not extend beyond the expiration date; the ISO form does not include this limitation.
A “described location” situated within the limits of a city, municipality, or protection district that provides fire protection services is not eligible for the fire department service charge.
Coverage for glass breakage has been amended to include safety glazing material, and has been broadened to apply when the residence is vacant for no more than 60 consecutive days, rather than 30 consecutive days.
There is coverage for glass breakage from any cause. The prior forms did not specifically state that the earth movement exclusions did not apply, which led to confusion. The addition of the statement should prevent denying coverage for glass loss caused by earth movement. The coverage also applies to property damaged directly by the broken glass. Say, for example, a thief breaks a glass storm door and makes off with property. This coverage will not apply. However, if the thief breaks through glass blocks, and the pieces scratch and damage a table, the coverage will apply to the table.
Although form HO 0008 contains coverage for glass breakage, it is limited to $100.
The coverage for grave markers has been increased from $1,500 to $2,500 ($5,000 in form HO 0005). Coverage applies to markers and mausoleums whether or not they are on the described location. This is not, however, “open perils” coverage; damage must have been caused by a coverage C named peril.
9. Increased Cost—Ordinance Or Law
a. When loss to the residence covered under Coverage A or a related private structure covered under Coverage B is caused by a Peril Insurance Against and “you” elect to repair or replace the damage, “you” may apply up to 10% of the Coverage A “limit” to cover the increased cost that “you” incur due to the enforcement of a code, ordinance, or law that regulates the construction, repair, replacement, or demolition of the damaged residence or structure.
b. ”You” may use all or part of this Increased Cost—Ordinance Or Law coverage to cover the increased cost “you” incur to remove debris resulting from the construction, repair, replacement, or demolition of the residence covered under Coverage B when:
1) loss to the residence or structure is caused by a Peril Insured Against; and
2) a code, ordinance, or law regulates its construction, repair, replacement, or demolition.
This does not increase the “limit” that applies to this Incidental Property Coverage.
c. However, “we” do not pay for:
1) any loss in value of property which results from the enforcement of a code, ordinance, or law; or
2) any loss, cost, or expense which results from the enforcement of a code, ordinance, or law requiring that an “insured” or others test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effects of “pollutants”.
Analysis
Coverage for costs resulting from enforcement of any ordinance or law is no longer included in form HO 0008. And, in form HO 0004, this coverage will be a separate coverage; previously it was included as a sublimit of the Tenants Improvements Incidental Coverage.
The previous forms limited coverage to 25 percent of the limit applying to the damaged property, but the 25 percent was not an additional amount of insurance. However, if the covered loss plus the increased cost was more than the applicable limit, an additional 10 percent was available. But in the current forms, 10 percent of the coverage A limit is available; again, though, this amount does not increase the limit of insurance. All or part of this coverage can be used to apply to debris removal, even though the applicable ordinance or law does not apply directly to debris removal; that is, the ordinance or law must regulate construction, repair, replacement, or demolition.
10. Liquid Fuel Remediation
a. ”We” pay for loss to:
1) property covered under Coverage A, Coverage B, or Coverage C;
2) land:
a) within the “described location”‘
b) owned by an “insured” and
c) on which the residence covered under coverage A or a structure covered under coverage B is located;
but this does not include farm land; or
3) property covered under the Incidental Property Coverage for Trees, Plants, Shrubs, Or Lawns;
caused directly or indirectly by the discharge, dispersal, emission, escape, leaching, leakage, migration, release, seepage, or spillage of liquid fuel from the fuel system of a heating or air-conditioning system, water heater, or domestic appliance located on the “described location”.
b. When there is a discharge, dispersal, emission, escape, leaching, leakage, migration, release, seepage, or spillage of liquid fuel from a fuel system described in a. above, “we” also pay for:
1) cost or expense “you” incur to take temporary measures to stop any further discharge, dispersal, emission, escape, leaching, leakage, migration, release, seepage, or spillage of such fuel from such system;
2) cost or expense “you” incur to prevent or hinder the spread of the discharged, dispersed, emitted, escaped, leached, leaked, migrated, released, seeped, or spilled fuel over a larger area;
3) cost or expense “you” incur to clean up or treat such fuel on or remove such fuel from:
a) property covered under Coverage A, Coverage B, or Coverage C;
b) land:
(1) within the “described location”;
(2) owned by an “insured”‘ and
(3) on which the residence covered under coverage A or a structure covered under Coverage B is located;
but this does not include farm land; or
c) property covered under the Incidental Property Coverage for Trees, Plants, Shrubs, Or Lawns.
This includes cost or expense to remove the debris of such property or land;
4) cost or expense “you” incur to remove and replace those parts of covered property necessary to gain access to the system from which such fuel discharged, dispersed, emitted, escaped, leached, leaked, migrated, released, seeped, or spilled;
5) the necessary and reasonable increase in living costs “you” incur to maintain the normal standard of living of “your” household if that part of the “described location” occupied by “your” household is made unfit for use as a residence; and
6) cost or expense “you” incur to assess, monitor, or test the effects of discharged, dispersed, emitted, escaped, leached, leaked, migrated, released, seeped, or spilled liquid fuel.
However, “we” will pay for such cost or expense only if the assessment, monitoring, or testing:
a) is necessitated by a statutory or regulatory requirement or is in response to a request, demand, or order by a governmental body or authority or court of law; and
b) arises out of loss for which payment is made under a., b.1), b.2), or b.3) above.
c. The Policy Period condition under Conditions Applicable to Property Coverages Only does not apply to this Incidental Property Coverage.
d. Under Exclusions That Apply To Coverage A And Coverage B, the exclusion for loss caused by the discharge, dispersal, emission, escape, leaching, leakage, migration, release, seepage, or spillage of “pollutants” does not apply to the coverage provided under this Incidental Property Coverage for the discharge, dispersal, emission, escape, leaching, leakage, migration, release, seepage, or spillage of liquid fuel.
e. ”We” do not pay for:
1) loss, cost, or expense involving underground water or surface water;
2) loss, cost, or expense involving trees, plants, shrubs, or lawns grown for “business;
3) loss, cost, or expense due to the cancellation of a lease or an agreement;
4) the replacement of discharged, dispersed, emitted, escaped, leached, leaked, migrated, released, seeped, or spilled fuel;
5) any loss in the market value of property or land, whether or not damaged by discharged, dispersed, emitted, escaped, leached, leaked, migrated, released, seeped, or spilled fuel;
6) any damages resulting from:
a) a loss of; or
b) a reduction in value of;
an agreement to sell property or land; or
7) any cost or expense to repair, replace, remove, or demolish any part of the fuel system from which the fuel discharged, dispersed, emitted, escaped, leached, leaked, migrated, released, seeped, or spilled, except as provided under b. above.
f. The “terms” and “limits” applicable to:
1) Coverage D—Additional Living Costs And Loss Of Rent; and
2) the Incidental Property Coverage for Debris Removal;
do not apply to any loss, cost, or expense arising out of the discharge, dispersal, emission, escape, leaching, leakage, migration, release, seepage, or spillage of fuel from a fuel system described in a. above.
g. The most “we” pay for this Incidental Property Coverage for Liquid Fuel Remediation is $10,000 unless a higher “limit” for Liquid Fuel Remediation is shown on the “declarations”. The “limit” for this Incidental Property Coverage for Liquid Fuel Remediation:
1) is the most “we” pay for the total of:
a) all discharges, dispersals, emissions, escapes, leachings, leakages, migrations, releases, seepages, or spillages of liquid fuel that an “insured” first discovers or is made aware of during the policy period; and
b) all coverages described in a. and b. above; and
2) applies regardless of the number of:
a) claims made;
b) discharges, dispersals, emissions, escapes, leachings, leakages, migrations, releases, seepages, or spillages of liquid fuel that an “insured” first discovers or is made aware of during the policy period; or
c) locations insured under this policy.
With respect to loss to property covered under the Incidental Property Coverage for Trees, Plants, Shrubs, Or Lawns, the most “we” pay is an amount equal to 5% of the Coverage A “limit”, but not more than $500 for any lawn or any one tree, plant or shrub. This does not increase the “limit” that applies to this Incidental Property Coverage for Liquid Fuel Remediation.
With respect to coverage for the necessary and reasonable increase in living costs incurred to maintain the normal standard of living of “your” household, “we” pay only for the period of time reasonably required to make the “described location” fit for use or, if “your” household is permanently relocated, only for the period of time reasonably required for relocation. This period of time is not limited by the policy period. This does not increase the “limit” that applies to this Incidental Property Coverage for Liquid Fuel Remediation.
Analysis
This coverage is new in forms HO 0002, HO 0003, HO 0004, HO 0005, and HO 0006. The insurer promises to pay up to $10,000 to cover expenses associated with escape of liquid fuel from an insured heating or air-conditioning system, hot water heater, or domestic appliance. Coverage applies to loss to property under coverages A, B, or C, and to land, other than farm land, so long as it is within the “described location.” Coverage also applies to the incidental coverage for trees, shrubs, plants, and lawns.
Included within the limit are expenses incurred by the named insured for temporary measures to stop any further discharge of fuel, cost to prevent the dispersal over a larger area, cost to access the system or appliance from which the fuel escaped, and cost to clean up or remove the escaped fuel from the covered property. The limit of this coverage also applies to any debris removal expense, rather than the incidental coverage for debris removal. There is also coverage here for any increased living expenses incurred if the part of the “described location” in which the named insured resides is unfit to live in because of the escaped fuel; again, however, the $10,000 limit includes any such expenses, rather than coverage D. Testing or monitoring the effects of the escape is also covered, but only if statutorily required.
Certain limitations apply. There is no coverage for loss or costs involving: underground or surface water; cancellation of a lease or other agreement; lawns, trees, plants or shrubs grown for business; loss in market value; or for repair or replacement of the part of the system from which the fuel escaped.
The limit is the most the insurer will pay during any one policy period, no matter how many locations are insured under the policy. The policy period condition does not apply to this incidental coverage.
11. Loss Assessment
a. ”We” pay for “your” share of an assessment levied by a homeowners, condominium, or similar residential association. Coverage applies only when the assessment:
1) is levied during the policy period;
2) results from direct loss to the property that is:
a) owned collectively by all association members;
b) of the type that would be eligible for coverage by this policy if it were owned by “you”; and
c) caused by a Peril Insured Against described under Coverage A in this policy, but this does not include:
(1) earthquake; or
(2) land shock waves or tremors before, during, or after a volcanic eruption; and
3) is levied against “you” as owner or tenant of the “described location”.
b. However, “we” do not pay for an assessment that:
1) results from a deductible in the insurance held by the association; or
2) is levied against “you” or the association by any governmental body or authority.
c. The most “we” pay is $1,500 per occurrence unless a higher “limit” for Loss Assessment is shown on the “declarations”. The “limit” that applies is the most “we” pay for any one loss, regardless of the number of assessments.
d. The Policy Period condition under Conditions applicable to Property Coverages Only does not apply to this Incidental Property Coverage.
12. Property in Rental Units—”We” pay for direct physical loss to “your” appliances, carpeting, and other household furnishings in an apartment on the “described location” regularly rented or held for rental to others by an “insured” when the loss is caused by a Peril Insured Against described under Coverage C, other than the peril of Theft.
The most “we” pay for loss to such property in each apartment rented or held for rental to others is $2,500 per occurrence. The “limit” applies regardless of the quantity of appliances, carpeting, or other household furnishings damaged.
This coverage does not increase the “limits” that apply to the property covered.
Analysis
The coverage for loss assessment does not apply to any assessment resulting from application of an association’s insurance deductible; that is because incidental coverage 1. association deductible, new in this coverage form, applies.
Coverage for property in a rental unit on the described location is now provided. Coverage is limited to $2,500, and applies to loss resulting from the coverage C named perils, other than theft. In the previous forms, the coverage for personal property, used in whole or in part for business purposes, would have applied to property on the insured premises. This new coverage applies on a “per apartment” basis. So, for example, if the insured owner occupant of a four-family building had property in each of the rented three units, the total coverage could be $7,500. This amount, however, is included within other policy limits. If the damage was to furniture, then that loss would be included in the insured’s coverage C; if the damage was to wall-to-wall carpet, the loss would be included in the insured’s coverage A.
13. Reasonable Repairs
a. ”We” pay for the reasonable costs incurred by “you” for necessary measures performed solely to protect covered property from further damage by a Peril Insured Against if a Peril Insured Against has already caused a loss.
b. If the measures described in a. above involve repair to other damaged property, “we” pay only if the property that is repaired is covered by this policy and only if the damage that necessitates the repair is caused by a Peril Insured Against. This coverage does not:
1) increase the “limit” that applies to the property covered; or
2) relieve “you” of the duties described in 1.b.Protecting Property, under What Must Be Done In Case Of Loss Or Occurrence.
14. Refrigerated Property—”We” pay for direct loss to covered property stored in a freezer or refrigerated unit on the “described location” caused by:
a. complete or partial disruption of electrical power due to conditions beyond an “insured’s” control, if such disruption is caused by damage to the generating or transmission equipment; or
b. mechanical breakdown of the freezer or refrigerator unit
Coverage applies only if the freezer or refrigerated unit had been maintained in proper working order prior to the loss.
The most “we” pay is $500 per occurrence unless a higher “limit” for Refrigerated Property is shown on the “declarations”.
The Power Failure and Bacteria, Fungi, Wet Rot, Or Dry Rot exclusions under Exclusions That Apply To Property Coverages do not apply to this Incidental Property Coverage.
15. Trees, Plants, Shrubs, or Lawns—”We” pay for direct physical loss to trees, plants, shrubs, or lawns on the “described location” caused by:
a. Fire Or Lightning, Explosion, Riot Or Civil Commotion, Aircraft;
b. Vehicles if not owned or operated by an occupant of the “described location”; or
c. Vandalism or Theft.
”You” may apply up to 5% of the Coverage A “limit” to cover trees, plants, shrubs, or lawns. “We” do not pay more than $500 for each tree, plant, or shrub. This includes the cost to remove the debris of the covered item.
”We” do not cover trees, plants, shrubs, or lawns grown for “business”.
Analysis
The new incidental coverage for reasonable repairs previously was found in the section What You Must Do In Case Of Loss Or Claim. The insurer promised to pay “reasonable costs” incurred by the named insured for necessary repairs or emergency measures performed solely to protect property from further damages.
Coverage for trees, shrubs, plants or lawns has been changed from 10 percent of the coverage C limit to 5 percent of the coverage A limit.
To recap, the incidental coverages vary by form. Form HO 0004 contains an incidental coverage for tenant’s improvements. Form HO 0005 contains an incidental coverage for lock and garage door transmitter replacement (limited to $500) if keys to the exterior doors or a garage door transmitter are lost or stolen. Form HO 0008 does not contain coverage for collapse, liquid fuel remediation, property in rental units, grave markers, or for ordinance or law.
1. Coverage A—Residence And Coverage B—Related Private Structures—”We” insure property covered under Coverage A or Coverage B for risks of direct physical loss, unless the loss is excluded under the Exclusions That Apply To Coverage A And Coverage B.
a. Exclusions That Apply To Coverage A And Coverage B
1) ”We” do not pay for loss excluded under the Exclusions That Apply To Property Coverages.
2) Freezing, Discharge, Leakage, Or Overflow—Subject to the exceptions stated in a) and b) below, “we” do not pay for loss caused by freezing of, or the resulting discharge, leakage, or overflow from, a plumbing, heating, air-conditioning, or automatic fire protective sprinkling system, water heater, or domestic appliance.
a) When the building is protected by an automatic fire protective sprinkling system, this exclusion does not apply if “you” have taken reasonable care to:
(1) maintain heat in the building; and
(2) continue the water supply.
b) When the building is not protected by an automatic fire protective sprinkling system, this exclusion does not apply if “you” have taken reasonable care to:
(1) maintain heat in the building; or
(2) shut off the water supply and completely empty water from all systems, heaters, and appliances.
With respect to this exclusion and the exceptions stated in a) and b) above, plumbing systems and domestic appliances do not include roof drains, gutters, downspouts, or like equipment or sumps, sump pumps, or related equipment.
3) Freezing, Thawing, Pressure, Or Weight Of Ice Or Water—”We” do not pay for loss caused by freezing, thawing, pressure, or weight of ice or water, whether driven by wind or not, to:
a) fences, patios, paved areas, or swimming pools;
b) bulkheads, footings, foundations, walls, or other structures or features that support all or part of a building or other structure;
c) bulkheads or retaining walls that do not support all or part of a building or other structure; or
d) docks, piers, or wharves.
4) Theft—”We” do not pay for loss caused by theft in or to a residence being built, or theft of materials or supplies for use in construction of the residence, until the residence is occupied for its intended use.
5) Vandalism Or Malicious Mischief—”We” do not pay for loss:
a) caused by vandalism or malicious mischief; or
b) that ensues from a wrongful act committed intentionally in the course of vandalism or malicious mischief:
if the residence covered under Coverage A was vacant for more than 60 days in a row just before the loss. A residence being built is not vacant.
6) Water, Humidity, Moisture, Or Vapor—”We” do not pay for loss caused by:
a) continuous or repeated discharge, seepage or leakage of water; or
b) the presence or condensation of humidity, moisture, or vapor;
over a period of weeks, months, or years, unless no “insured” could reasonably be expected to suspect such discharge, seepage, or leakage of water or the presence or condensation of humidity, moisture, or vapor.
Under Exclusions That Apply To Property Coverages, 1) and 3) of the Water Damage exclusion do not apply with respect to loss by water covered under the exception to this exclusion.
7) Collapse Or Impairment—”We” do not pay for loss involving:
a) collapse; or
b) impairment of structural integrity, including but not limited to sagging, bowing, bending leaning, or inadequacy of load bearing capacity except as provided under the Incidental Property Coverage For Collapse.
8) Settling, Cracking, Shrinking, Bulging, Or Expanding—”We” do not pay for loss caused by the settling, cracking, shrinking, bulging, or expanding of:
a) bulkheads;
b) ceilings;
c) floors;
d) footings;
e) foundations:
f) patios;
g) paved areas;
h) roofs; or
i) walls.
9) Birds, Vermin, Rodents, Insects, Or Animals—”We” do not pay for loss caused by:
a) birds;
b) ”vermin”;
c) rodents;
d) insects; or
e) any animal owned or kept by an “insured”;
except as provided under the Incidental Property Coverages.
10) Smoke—”We” do not pay for loss caused by smoke from agricultural smudging or industrial operations.
11) Pollutants—”We” do not pay for loss caused by the discharge, dispersal, disposal, emission, escape, leaching, leakage, migration, release, seepage, or spillage of “pollutants”, unless the discharge, dispersal, disposal, emission, escape, leaching, leakage, migration, release, seepage, or spillage is caused by a Peril Insured Against described under Coverage C.
12) Wear And Tear—”We” do not pay for loss caused by:
a) wear and tear, marring or deterioration;
b) mechanical breakdown, latent defect, inherent vice, or any quality, fault or weakness in property that causes it to damage or destroy itself;
c) rust or other corrosion or smog; or
d) pressure from or the presence of roots of trees, plants, shrubs, or other vegetation.
b. Exceptions To Exclusions That Apply To Coverage A And Coverage B
1) ”We” pay for an ensuing loss that results from a.2) through a.12) above, unless the ensuing loss itself is excluded.
2) Unless the loss is otherwise excluded by this policy, “we” pay for loss to property covered under Coverage A or Coverage B that results from water or steam that, due to a cause or event excluded under a.8) through a.12) above, accidentally discharges or overflows from:
a) a storm drain, or a water, steam, or sewer pipe, away from the “described location”; or
b) a plumbing, heating, air-conditioning, or automatic fire protective sprinkling system, water heater, or domestic appliance on the “described location”. This includes the reasonable cost of removing and replacing those parts of a building or other structure on the “described location” needed to repair the system, heater, or appliance.
However, “we” will pay the cost of removing and replacing part of a structure that is not a building only if the water or steam causes direct physical loss to a building on the “described location”.
”We” do not pay for loss to the system, heater, or appliance from which the water or steam escaped.
In this exception, plumbing systems and domestic appliances do not include roof drains, gutters, downspouts, or like equipment or sumps, sump pumps, or related equipment.
Under Exclusions That Apply To Property Coverages, 1) and 3) of the Water Damage exclusion do not apply with respect to loss by water covered under this exception.
Analysis
As is common with “open perils” forms, coverage is provided and then restricted or eliminated through use of exclusions. The exclusions applicable to coverages A and B have been considerably revised in this current edition. Although the above exclusions are similar to those in the ISO form HO 00 03, there are differences. Since the ISO exclusions are extensively discussed elsewhere—see Homeowners Exclusions page A.5—we will only note the differences in the exclusions, and focus on the AAIS wording and the changes made from the earlier edition. Of the above, exclusions 2), 3), 5), 6), 8), 9), 10), 11), and 12) apply to coverages A, B, and C, while those for vandalism and collapse apply only to property covered under coverages A and B in form HO 0005. This is because the HO 0005 provides open perils coverage for dwelling, other structures, and contents, and so exclusions are used to restrict coverage. Because form HO 0003 provides named peril coverage for contents, this is unnecessary.
Exclusion 2) limits coverage for loss caused by freezing, with any resulting discharge, leakage, or overflow from any plumbing, heating, air-conditioning or sprinkler system, water heater, or domestic appliance. In the previous form, the exclusion applied only if the residence was vacant, unoccupied, or under construction and unoccupied. Both the AAIS and the ISO HO 0003 have changed this exclusion to apply whether the described location is vacant, unoccupied, under construction, or none of these. By changing the exclusion, it is now not necessary to decide if a family on vacation for a week had left the dwelling unoccupied, for example. However, there are certain exceptions. The exclusion does not apply if the insured has taken care to maintain heat or shut off and drain the system. If the home is sprinklered, the insured must take reasonable care to maintain heat and continue the water supply. An addition to this exclusion is the statement that plumbing systems and domestic appliances do not include gutters, downspouts, sump pumps and the like—a similar statement is found in the ISO homeowners HO 00 03. This statement should not be construed to eliminate coverage for loss to a dwelling caused by a frozen gutter, as when melting water is forced up between shingles and damages the interior walls, say. It is simply saying that these items are not to be considered as part of the plumbing.
Exclusion 2) has been expanded so that unlike the earlier form, which eliminated coverage for structures other than buildings or carports and included items such as swimming pools and fences, the current exclusion extensively lists items not covered. Among these are pools, fences, patios, foundations, walls, or other structures that support buildings or other structures.
Theft, including attempted theft, is excluded in or to a dwelling being built. The structure of the exclusion, wherein a comma is inserted between “dwelling” and “until” means that the phrase “until the dwelling is occupied for its intended use” precludes coverage for theft in or to the dwelling or theft of building materials or supplies unless the dwelling is occupied, presumably as a residence.
Exclusion 5) for vandalism or malicious mischief to a vacant dwelling has been changed so that it does not apply until after 60 consecutive days just before the loss. Additionally, and similarly to the ISO form, loss ensuing from a wrongful act committed intentionally in the course of vandalism—arson, perhaps—is excluded.
The exclusion for continuous or repeated seepage, leakage, or discharge of water over a period of time, which does not appear in the ISO HO 00 03, has been reworked. Heretofore, the exclusion eliminated coverage even if unknown to an insured. Thus, an insured could be gone from his or her home for a two weeks’ vacation, and return home to find a slow leak. The exclusion could then be used to deny coverage. Now, however, the exclusion eliminates coverage only if “no ‘insured’ could reasonably be expected to suspect” such leakage. This same provision would also allow coverage in the event an air conditioner went out and humidity built up so that floors warped, all unbeknownst to the absent homeowner. The ISO form does not contain any exclusion for “humidity”; the closest could be weather conditions leading to humidity indoors, but even then an ensuing loss is covered unless otherwise excluded. The exclusion no longer precludes coverage for leakage or seepage of liquids other than water, such as fuel oil; however, the exclusion for loss caused by discharge of pollutants still applies. Parts 1) and 3) of the water damage exclusion do not apply to the exception in the exclusion
Exclusions 7) collapse, and 8) settling, cracking, etc., have been amended. The exclusion for collapse reiterates that collapse does not consist of structural impairment, and explains that the only coverage for loss involving collapse is found in the incidental coverage for collapse. (The exclusion does not apply to coverage C personal property in the HO 0005.) Exclusion 8) has been broadened to enumerate the items that are not covered. In the earlier edition, the exclusion applied to buildings, pavements, patios, and other outdoor structures.
Exclusion 9) birds, vermin, etc., remains the same, but remember that the definition of “vermin” has expanded the scope of this exclusion. Currently, the ISO HO 00 03 has not expanded the definition of “vermin” so that loss caused by raccoons, say, is covered.
Loss caused by smoke from agricultural smudging or industrial operations is not covered, nor is loss caused by discharge of pollutants (as defined) unless caused by a coverage C named peril or, in HO 0005, one of the “specified perils.” Loss caused by wear and tear, marring, deterioration, latent defect, rust, or other corrosion is not covered. An addition to this list is “pressure from or the presence of roots of trees, plants, shrubs, or other vegetation.” Note that exclusion 12) wear and tear lists those things that will occur over time, and are thus uninsurable. Aging furnaces are subject to mechanical breakdown; a wood floor left untreated will become marred. The exclusion should not be used however, to deny coverage when an unforeseen event occurs. Say, for example, in moving a large piece of furniture it severely scratches and dents a hardwood floor. There is coverage, but not for a floor regularly marred by the action of a rocker. In the earlier edition, this exclusion was found in the general exclusions (following “errors, omissions, and defects”) applicable to coverages A and B; ensuing loss not otherwise excluded was covered as it is in this placement.
Form HO 0005 adds exclusions applicable only to coverage C: for breakage; refinishing, renovating, or repairing; and acts or decisions.
The earlier form added that the insurer would “pay for an ensuing loss that results from any of the above, unless the ensuing loss itself is excluded.” The current HO 0003 makes the same statement, with some changes. Loss caused by accidental discharge or overflow from a storm drain or water, steam, or sewer pipe away from the “described location” is now covered. (Although this loss was covered because it was not excluded in the ISO 1991 HO 00 03, it is now explicitly covered in the ISO 2000 HO 00 03.) Loss from accidental discharge of a plumbing, heating, air conditioning, or fire sprinkler system or appliance is covered, as is the cost to remove and replace that part of a building or other structure necessary to repair the system. Loss to the system or appliance is not covered. The cost to remove and replace part of an other structure is covered only if the water or steam causes direct physical damage to a building on the “insured location.” Parts 1) and 3) of the water damage exclusion do not apply to loss by water covered under this exception.
2. Coverage C—Personal Property—”We” insure against direct physical loss to property covered under Coverage C caused by the following perils, unless the loss is excluded under the Exclusions That Apply To Property Coverages:
a. Fire Or Lightning
b. Windstorm Or Hail
However, “we” do not pay for loss:
1) to property inside a building caused by dust, rain, sand, sleet, or snow, all whether driven by wind or not, that enters through an opening in the building not made by the direct force of wind or hail; or
2) to watercraft or their furnishings, equipment, engines, motors, trailers, or semitrailers unless inside a fully enclosed building.
c. Explosion
d. Riot or Civil Commotion
e. Aircraft—This includes self-propelled missiles and spacecraft.
f. Vehicles
g. Sudden and Accidental Damage from Smoke—This includes sudden and accidental damage from fumes, smoke, soot or vapors that emit or back up from a boiler, furnace, or related equipment.
However, “we” do not pay for loss caused by smoke from agricultural smudging or industrial operations.
h. Volcanic Eruption
However, this does not include loss caused by earthquake, land shock waves, or tremors.
i. Vandalism Or Malicious Mischief
Analysis
Forms HO 0001, HO 0002, HO 0004, HO 0006, and HO 0008 provide coverage for dwelling (as applicable) and personal property (as applicable) on a named peril basis. In form HO 0003, the named perils apply to personal property. Not all of the named peril forms contain all of the named perils.
There are some changes to note. First, the windstorm or hail exclusion previously eliminated coverage for property inside a structure; now, there is no coverage for property inside a building when the dust, rain, sand, sleet enters through an opening not caused by direct force of the wind. So, in the earlier form, property could be under an outdoor canopy and if wind tore it so that the property underneath was damaged there would be coverage. Now, however, the property must be more safely secured than that—in a building—before there can be coverage. Also, in the earlier edition, rowboats and canoes were exempt from this requirement; they are no longer.
In the previous form, volcanic action was defined as “airborne volcanic blast or airborne shock waves; ash, dust, or particulate matter; and lava flow.” But in the current form, the term “volcanic eruption” is used, and exclusions define the coverage by stating volcanic eruption does not include.
j. Theft—This includes attempted theft and loss of property from a known place when it is likely that theft occurred.
However, “we” do not pay for loss:
1) caused by theft by an “insured”;
2) caused by theft in or to a residence being built, or theft of materials or supplies for use in construction of the residence, until the residence is occupied for its intended use;
3) of a precious or semiprecious stone from its setting;
4) that results from the theft of:
a) a credit or debit card;
b) an electronic fund transfer card; or
c) an electronic access device that makes possible the deposit, withdrawal, or transfer of funds;
except as provided under Incidental Property Coverage for Credit Card; Electronic Fund Transfer Card Or Access Device; Forgery; and Counterfeit Money;
5) caused by theft from a part of the “described location” rented by an “insured” to a person other than another “insured”‘ or
6) caused by theft that occurs away from the “described location” of
a) trailers or semitrailers;
b) campers or camper bodies; or
c) watercraft or their furnishings, equipment, engines, or motors.
d) property while on the part of residential premises which an “insured” owns, rents, or occupies, except for the time while an “insured” temporarily resides there. “We” do cover the property of an “insured” who is a student while it is in the living quarters occupied by the student at school if the student has been at such living quarters at any time during the 60 days just before the loss.
Analysis
The coverage for “theft” contains the usual exclusions of coverage for theft caused by an insured, theft of watercraft, trailers (the current form adds “semitrailers”), and campers while away from the “insured premises,” and theft from a residence owned, rented, or occupied by an insured is not covered, unless the insured is temporarily residing there. Theft coverage for personal property of an insured who is a full time student is exempt from the exclusion of theft from an insured’s other residence, so long as the property is in the student’s living quarters. The earlier form included no provision that the student must have been there at some time in the days preceding the loss; the current form states the student must have been there sometime in the 60 days preceding the loss, as is the case with the ISO form.
There is no coverage for loss of a precious or semi-precious stone from its setting, even though it is loss of property from a known place and, in all probability, a lost stone will eventually be stolen. There is no coverage for theft in or to a residence being built, or for any materials or supplies for use in the construction, until it is occupied. Theft from a part of an “insured premises” rented to other than another insured is not covered. So, for example, if an insured has a vacation condo insured on a form HO 0006, and rents the unit, there is no coverage for stolen personal property.
Theft is a newly added peril in form HO 0008, but coverage is limited to $1,000 and the theft must have occurred on the described location.
k. Falling Objects
However, “we” do not pay for loss to:
1) property inside a building, unless the falling object has first damaged an outside wall or the roof of the building by impact; or
2) the object which falls.
l. Weight Of Ice, Snow, Or Sleet that causes damage to property inside a building.
m. Sudden And Accidental Tearing Apart, Cracking, Burning, Or Bulging of a steam or hot water heating system or automatic fire protective sprinkling system, or a water heater.
However, “we” do not pay for loss caused by freezing, except as provided under the peril of Freezing.
n. Accidental Discharge Or Overflow of Water or Steam from a plumbing, heating, air-conditioning, or automatic fire protective sprinkling system, water heater, or domestic appliance.
However, “we” do not pay for loss:
1) caused by continuous or repeated discharge, seepage or leakage of water, or the presence or condensation of humidity, moisture, or vapor, over a period of weeks, months, or years, unless no “insured” could reasonably be expected to suspect such discharge, seepage, or leakage of water or the presence or condensation of humidity, moisture, or vapor;
2) caused by or resulting from freezing, except as provided under the peril of Freezing;
3) on the “described location” caused by accidental discharge or overflow that comes from off the “described location”; or
4) to the system or appliance from which the liquid or steam escaped.
In this peril, plumbing systems and domestic appliances do not include roof drains, gutters, downspouts, or like equipment or sumps, sump pumps, or related equipment.
Under Exclusions That Apply To Property Coverages, 1) and 3) of the Water Damage exclusion do not apply with respect to loss by water covered under this peril.
o. Freezing—This means freezing of a plumbing, heating, air-conditioning, or automatic fire protective sprinkling system, water heater; or domestic appliance, subject to the requirements stated in 1) and 2) below. In this peril, plumbing systems and domestic appliances do not include roof drains, gutters, downspouts, or like equipment or sumps, sump pumps, or related equipment.
1) When the building is protected by an automatic fire protective sprinkling system, coverage for loss caused by the peril of Freezing applies only if “you” have taken reasonable care to:
a) maintain heat in the building; and
b) continue the water supply.
2) when the building is not protected by an automatic fire protective sprinkling system, coverage for loss caused by the peril of Freezing applies only if “you” have taken reasonable care to:
a) maintain heat in the building; or
b) shut off the water supply and completely empty water from all systems, and appliances.
p. Sudden And Accidental Damage From Artificially Generated Electrical Currents
However, “we” do not pay for loss to tubes, transistors, electronic components, or circuitry that are a part of any type of an electronic apparatus, including but not limited to appliances, fixtures, computers, and home entertainment units.
q. Sinkhole Collapse—This means the sudden settlement or collapse of earth supporting covered property. The earth settlement or collapse must result from subterranean voids created by the action of water on a limestone or similar rock formation.
However, “we” do not cover the value of land or the cost of filling sinkholes.
Analysis
Six of these perils are not included in forms HO 0001 or HO 0008: falling objects; weight of ice; sudden and accidental tearing apart; accidental discharge; freezing; or sudden and accidental damage from artificial electrical current.
In the earlier forms, the perils of falling objects and weight of ice and snow referred to property in a structure; both have been changed so that they refer to property in a building—a much more restrictive term.
The peril of sudden and accidental tearing apart refers to steam or hot water heating systems, rather than to “heating systems.” The intent is to limit coverage for the tearing apart of a heating system containing liquid fuel to the incidental property coverage for this peril.
Note, again, the exclusion of coverage for loss caused by continuous or repeated seepage or leakage; however, in the current edition there is coverage if no insured could reasonably have suspected such loss. Also, the peril has been amended so that there is now no reference to a discharge of liquid fuel. The incidental coverage for escape of liquid fuel now applies.
This peril, in the earlier edition, contained an exclusion for the residence’s being vacant for more than 30 days prior to the loss, but this exclusion has been removed. Parts 1) and 3) of the water damage exclusion do not apply.
The peril of freezing has been amended to apply whether or not a dwelling is vacant, unoccupied, or under construction—coverage is provided only if the named insured has taken reasonable care to maintain heat and continue the water supply if the dwelling has an automatic fire protection system; or, if there is no fire protection system, then the named insured must have taken reasonable care to maintain heat or turn off the water supply.
The exclusion for artificially generated electrical current now includes, as do the 2000 ISO forms, reference to electronic components and circuitry. The AAIS form, however, clearly states that the limitation refers to appliances, computers, and home entertainment systems, among other items, so there can be no doubt as to what is covered (or not covered) under this peril.
The peril of sinkhole collapse no longer refers to the value of the land not being covered, since “land” is not covered at all in the policy.
1. ”We” do not pay for loss or damage caused directly or indirectly by one or more of the following excluded causes or events. Such loss or damage is excluded regardless of other causes or events that contribute to or aggravate the loss, whether such causes or events act to produce the loss before, at the same time as, or after the excluded causes or events.
These exclusions apply whether or not an extensive area suffers damage from or is affected by the excluded cause or event.
a. Ordinance or Law—”We” do not pay for:
1) any loss or increased cost which results from the enforcement of a code, ordinance, or law that regulates the construction, repair, or demolition of property or the removal of its debris, except as provided under Incidental Property Coverage for Increased Cost—Ordinance Or Law;
2) any loss in value of property that results from the enforcement of a code, ordinance, or law; or
3) any loss, cost, or expense that results from the enforcement of a code, ordinance, or law requiring that an “insured” or others test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effects of “pollutants”.
This applies whether or not there has been physical damage to covered property.
b. Civil Authority—”We” do not pay for a loss caused by the confiscation, destruction, or seizure of property covered under Coverage A, Coverage B, or Coverage C by order of civil authority.
”We” do pay for loss which caused by acts ordered by a civil authority at the time of a fire to prevent its spread, but only if loss caused by the fire would be covered by this policy.
c. Nuclear Hazard
1)”We” do not pay for loss caused by nuclear reaction, radiation, or radioactive contamination:
a) whether controlled or uncontrolled; or
b) however caused;
or any consequence of such reaction, radiation, or contamination.
2) Loss caused by nuclear reaction, radiation, or radioactive contamination is not considered loss caused by:
a) fire;
b) explosion; or
c) smoke;
even if this policy provides coverage for loss caused by one or more of these perils.
3) Direct loss by fire resulting from nuclear reaction, radiation, or radioactive contamination is covered.
d. War And Military Action—”We” do not pay for loss caused by:
1) war, including undeclared or civil war;
2) warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign, or other authority using military personnel or other agents; or
3) insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.
With respect to any action that comes within the “terms” of this exclusion and involves nuclear reaction, radiation, or radioactive contamination, this War And Military Action exclusion supersedes the Nuclear Hazard exclusion.
Discharge of a nuclear weapon is deemed a warlike action even if it is accidental.
e. Neglect—”We” do not pay for loss caused by the neglect of an “insured” to use all reasonable means to save and preserve covered property at and after the time of a loss.
f. Earth Movement—”We” do not pay for loss caused by earth movement whether the earth movement results from or is caused by human or animal forces or an act of nature.
Earth movement means:
1) earthquake;
2) land shock waves or tremors before, during, or after a volcanic eruption;
3) landslide, mudflow, mudslide;
4) subsidence, erosion; or
5) any other earth movement, including but not limited to earth sinking, rising, shifting, expanding, or contracting.
However, this does not include Sinkhole Collapse as described under the Perils Insured Against that apply to Coverage C.
”We” do pay for direct loss to covered property caused by fire or explosion resulting from earth movement.
”We” do pay for the direct loss caused by theft that is otherwise covered by this policy.
g. Water Damage—”We” do not pay for loss caused by water damage whether the water damage results from or is caused by human or animal forces or an act of nature.
Water damage means:
1) flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, all whether driven by wind or not;
2) water or matter present in water that backs up through sewers or drains or that overflows or is discharged from:
a) a sump, sump pump, or related equipment; or
b) any other type of system designed to remove subsurface water which is drained from the foundation area; or
3) water or matter present in water below the surface of the ground. This includes water or matter present in water that exerts pressure on, or seeps or leaks through or into, a building, sidewalk, driveway, foundation, swimming pool, or other structure.
”We” do pay for direct loss caused by fire or explosion resulting from water damage.
This exclusion does not apply to loss caused by theft that is otherwise covered by this policy.
h. Power Failure—”We” do not pay for loss caused by the failure of power or other utility service, whether or not it is caused by a Peril Insured Against, if the cause of the failure is not on the “described location”.
”We” do pay for direct loss that is otherwise covered by this policy that occurs on the “described location” as a result of the failure of power or other utility service.
i. Intentional Acts—”We” do not pay any “insured” for loss that results from any act committed:
1) by an “insured”, alone or in collusion with another; or
2) at the direction of an “insured”;
with the intent to cause a loss.
This exclusion applies even with respect to an “insured” who was not involved in the commission or direction of the act that caused the loss.
j. Bacteria, Fungi, Wet Rot, Or Dry Rot—”We do not pay for loss, cost, or expense caused by, consisting of, or relating to the existence or any activity of bacteria, “fungi”, wet rot, or dry rot that is not the direct result of a Peril Insured Against.
”We” do pay for direct loss to covered property caused by a Peril Insured Against resulting from bacteria, “fungi”, wet rot, or dry rot.
Analysis
Exclusions 1.a. through 1.j. are subject to concurrent causation language. Loss resulting from any of these perils is not covered, whether or not another peril (covered or not) contributes in any way to the loss. Note, however, that there is coverage for loss arising from enforcement of any ordinance or law governing demolition, debris removal, repair, or construction (except for testing or clean-up of pollutants) under the incidental coverage for increased cost—ordinance or law.
Excluded from coverage is any loss caused by confiscation, destruction, or seizure of property resulting from an order of civil authority, except action taken to prevent the spread of fire (the fire must be of a type covered by the policy). This leaves open the possibility that the local government, mistakenly believing the insured is a drug dealer, could order the residence leveled and there would be no coverage.
The exclusion for the nuclear hazard has been clarified. The earlier form stated that “loss caused by nuclear hazard is not considered loss caused by fire, explosion, or smoke.” Thus, an insured could point to the named perils of fire, explosion, or smoke and claim the statement meant he or she was entitled to coverage under these named perils. But now, the exclusion clearly states that the hazard is not considered loss by fire, smoke, or explosion, even if these perils are elsewhere covered by the policy.
The exclusion for war and military action has been amended from the earlier edition. Exclusion d.2), however, could prove troublesome because of the way it is phrased. There is no coverage for loss caused by “warlike action by a military force.” The phrase “including action in hindering or defending against an actual or expected attack” should therefore serve to modify warlike action. But then, the exclusion continues: “by any government, sovereign, or other authority using military personnel or other agents.” We would then have a “warlike action by a military force… by any government,” which is not grammatically correct. The probable intent is to preclude coverage for action by a military force, which includes any governmental action taken to hinder or defend against any attack or expected attack by any government. The exclusion also makes the statement that the war and military action exclusion supersedes the nuclear hazard exclusion, should any action within the terms of the exclusion involve nuclear reaction, radiation, or radioactive contamination. Discharge of a nuclear weapon, even if accidental, is deemed a warlike action.
Neglect, which is failure to take reasonable steps to protect property at the time of a loss, now states that “an” (one or more insureds) insured failing to protect and preserve property bars coverage for loss. Prior to this, one insured could claim that she did not neglect the property; rather, it was another insured, and thus she should be covered. This loophole has been closed.
The earth movement exclusion now encompasses earth movement whether caused by an act of nature or an act of man or animal. Sinkhole collapse, which is a coverage C named peril, is exempt. Heretofore, property covered under coverage C of form 5 was given coverage for earthquake, but in HO 0005 the exclusion applies to personal property. As is the case with the ISO homeowners forms, direct loss caused by fire or explosion resulting from earth movement is covered. Theft resulting from earth movement is also covered, if otherwise covered by the policy. In the ISO forms, and, indeed, in the earlier AAIS forms, the exclusion simply stated that theft as a result of earth movement was covered. So, the phrasing left open the possibility that any jewelry stolen following an earthquake was covered despite the limitation for theft of jewelry. The AAIS wording makes it clear that if the theft is otherwise covered, the earthquake exclusion does not bar coverage for theft.
Likewise, the water damage exclusion exempts direct loss to covered property caused by fire, explosion, or theft otherwise covered that results from water damage. Remember, exclusions 1) and 3) of this exclusion do not apply to: the exception to exclusion 6) water, humidity; the coverage in exception b.2)a) and b.2)b); or to the coverage under peril n. accidental discharge. The wording has been changed to exclude water and “matter present in water” rather than “water or sewage.”
Exclusion h. power failure now precludes coverage for loss of power or other utility service—now, presumably water, cable, or telephone service fall within the exclusion. The exclusion now states that power failure, rather than power disruption, whether or not caused by an insured cause of loss, is not covered if the failure occurs off the described location. However, an ensuing loss on the described location not otherwise excluded is covered.
Acts committed by any insured with the intent to cause a loss will eliminate coverage for all insureds.
The final exclusion j. eliminates coverage for fungi, bacteria, or wet or dry rot that is not a direct result of a peril insured against. This exclusion clarifies the intent of homeowners policies—to cover fungi or wet rot resulting from a covered loss. It is not explicitly found in the ISO forms. Say, for example, a tornado damages a large area of a town, with the result that many roofs are blown off. Remediation cannot be immediate because of the widespread damage. Homeowners who therefore sustain mold damage are afforded coverage. However, mold or mildew that builds up in a nonvented bathroom is not covered—the presence of humidity over weeks, months, or years has caused the loss.
2. ”We” do not pay for loss or damage to property covered under Coverage A or Coverage B that is caused by or results from one or more of the following excluded causes or events. However, “we” do pay for an ensuing loss to property covered under coverage A or Coverage B that is otherwise covered by this policy.
a. Weather Conditions—”We” do not pay for loss caused by weather conditions that initiate, set in motion, or in any way contribute to losses excluded under the preceding Exclusions That Apply To Property Coverages (Numbers 1.a. through 1.j.).
b. Errors, Omissions, And Defects—”We” do not pay for loss caused by one or more of the following:
1) an act or decision of any person, group, organization, or governmental body or authority to act or decide; or
2) a defect, a weakness, the inadequacy, a fault, or unsoundness in the:
a) development, planning, siting, surveying, zoning;
b) construction, compaction, design, grading, remodeling, renovation, repair, specification, workmanship;
c) materials used in construction, remodeling, renovation, or repair; or
d) maintenance;
of any property whether on or away from the “described location”, except as provided under the Incidental Property Coverage for Collapse.
The final two exclusions (as noted earlier, the exclusion for “wear and tear” was located here) preclude coverage, but provide coverage for ensuing losses not otherwise excluded. Loss caused by weather conditions that contribute in any way to a cause or event excluded in 1.a. through 1.j. is excluded.
The use of “person” in b.1) should be read in context. The remainder of the statement—group, organization or governmental body or authority—suggests that the exclusion refers to persons with authority to carry out actions that should not, if the outcome results in loss to the homeowner, become the province of his or her insurer to remedy. The classic example is the California case of Safeco Insurance Company of America v. Guyton, 692 F.2d 551 (C. A. Cal. 1982). Here, the insureds refuted the insurer’s denial of a flood loss by asserting that the flood had been caused by the local water district’s negligence in maintaining flood control structures, and the policy did not contain any exclusion for negligence. Hence, the inclusion of the “acts or decisions” exclusion.
The earlier exclusion for errors and omissions included those relating to land use; the current language refers to development, planning, siting, surveying, and zoning, which certainly encompasses “land use.” However, if a loss caused by defective materials or methods in construction or repair causes collapse during the course of construction or repair, the incidental coverage for collapse responds.