MSO Homeowners MHO6
Homeowners Coverage Form
August 3, 2012
Summary: The Mutual Service Office, Inc. (MSO), provides custom rates, statistical services, custom forms, and manuals for mutual insurers. The MHO6 homeowners coverage form is paired with the MPL01 common provisions form in order to provide complete coverage for an insured residence. The MHO6 is similar to the MHO4 and provides the covered perils, special limits, supplemental coverage limits, and additional policy provisions for personal property coverage only. This is a basic unit owners form, and includes coverage for additions and alterations that an insured may make to the property. There is little difference between this form and the MHO4. The MPL01 is the form that provides the common policy provisions including exclusions for the homeowners program. When combined with a declarations page these forms create an entire policy.
Topics covered:
Subject to all applicable provisions of this policy, property covered under Coverage C is insured for fortuitous direct physical loss, as follows:
That results from the following described causes of loss:
• Fire (hostile fire) or Lightning.
• Bursting of Fixtures: sudden accidental bulging, burning, cracking, or tearing apart of air conditioning or heating equipment, or home water heating appliances.
• Electricity: sudden accidental damage from an electrical current.
• Explosion.
• Falling Objects: damage to other property caused by falling objects.
• Freezing: freezing of air conditioning, heating, or plumbing equipment, or home appliances.
• Riot or Civil Commotion.
• Smoke: sudden accidental damage from smoke.
• Theft: theft or attempted theft, including disappearance of property from a known place if it is probable that the property was stolen.
• Vandalism: malicious damage to property.
• Vehicles or Aircraft.
• Water Damage: accidental discharge or overflow of water or steam – other than that caused by freezing – from within air conditioning, heating, or plumbing equipment, or home appliances on the residence premises.
• Weight of Ice, Sleet, or Snow: damage to other property within a building caused by the weight of ice, sleet, or snow.
• Wind or Hail.
Analysis
The covered causes of loss section is unique in that it simply lists the covered perils; exclusions to said perils are found in the MPL01 common provisions form. The covered causes of loss are identical to those in the MHO4 except for glass breakage; that peril is not listed in the MHO6. The information is recapped here. The fire or lightning peril specifies that the fire must be a hostile fire. A hostile fire is a fire that has escaped from its intended physical location, or was not started intentionally.
Bursting of fixtures is the next peril; accidental bulging, burning, cracking, or tearing apart of air conditioning or heating equipment, or home water heating appliances is covered. This is straightforward; if the hot water heater ruptures or cracks, there is coverage for that damage.
The electricity peril covers loss that is caused by sudden accidental damage from an electrical current; however electrical current is not defined. When you refer to the MPL01 form, the exclusion states that damage caused by artificially generated electrical currents that damages transistors, computers, or similar items or components is excluded. This includes increases or decreases in currents caused by brownouts, power surges, or spikes. Therefore, what is covered is naturally generated current, or artificially generated current as long as it does not damage certain items. A lightning strike to the patio furniture is covered. If a wall socket shorts the resultant fire to the sofa is covered too; it is an artificially generated current, but if the short damages transistors, computers, or other electrical components that damage is not covered.
Explosion is left undefined and unrestricted, so anything that can be construed as an explosion is covered. Merriam Webster online defines explosion as “a large-scare, rapid, or spectacular expansion or bursting out or forth”. A gunshot can be considered an explosion since the bullet bursts forth from the barrel. If an insured is cleaning his gun and accidentally shoots the television, coverage is available.
Falling objects is the next peril and simply states that damage to other property caused by falling objects is covered. However, in reviewing MPL01, there is an exclusion for damage caused by a falling object unless the object first penetrates the roof or exterior wall structure. Therefore the bust of Uncle George falling off the mantel and damaging a table is not covered, however if a meteor breaks through the roof and damages the table, there is coverage.
Freezing is another peril that has exclusions in the MPL01 form. The freezing of air conditioning, heating, plumbing equipment or home appliances is covered. There is an exclusion in MPL01 for such damage if the property is unoccupied, vacant, or under construction. The standard exception applies if the insured has maintained adequate heat in the building or such appliances or equipment has been drained and the water supply turned off.
Riot and civil commotion are standard perils and like the explosion peril, are undefined and extremely broad. Merriam Webster online defines riot as “a public violence, tumult or disorder, or a tumultuous disturbance of the public peace by three or more persons assembled together and acting with a common intent”. Commotion is defined as “a condition of civil unrest or insurrection”. The Occupy Wall Street supporters caused a civil commotion.
Smoke is another peril that is left undefined; sudden and accidental damage from smoke is covered. The exclusion in MPL01 applies to smoke from agricultural or industrial activities. Therefore all other forms of smoke are covered.
Theft, another standard peril, includes the disappearance of property from a known place if it is probable that the property was stolen. This allows the insured to file a claim without necessarily having to file a police report. If an insured rides his bike to the park to meet friends and forgets to lock his bike to the bike rack, and upon returning finds the bike missing, it is likely that the bike was stolen. The bike is therefore covered. Excluded in form MPL01 is theft committed by an insured, tenants, employees, or any other residents of the household. The form is not going to pay for the insured stealing from himself. Likewise the theft of furs, jewelry, money, securities, or silverware from any part of the premises that is rented is excluded. Valuables should be locked up since some tenants may not be able to resist temptation. When a dwelling is under construction building materials are excluded since they can be readily stolen from a worksite. If property is stolen from another residence that the insured owns, rents, or occupies, theft is excluded unless the insured is temporarily residing at the premises. If the insured inhabits the beach house only on occasion, it becomes attractive to thieves once they have discovered that the insured is not present. Also excluded while away from the residence premises is the theft of campers, trailers, or watercraft, including accessories and equipment. These items are portable and easily stolen.
The policy states that vandalism is malicious damage to property; excluded on the MPL01 is vandalism if the residence premises has been vacant for 30 consecutive days or more, or the vandalism is caused by an insured, tenants, or other residents of the household. Note that the vacancy must be continuous for 30 days; if the insured stays in the house with some furnishings for just one weekend that resets the 30-day requirement. Vacancy is often confused with the concept of unoccupancy. When a property is unoccupied, furniture, clothes, and other essentials for living may be in the house, but the insured is not currently living there. This is different than vacancy; when a property is vacant, there is nothing in the house; no furniture, clothes, dishes, or supplies. No one lives there, and the property is empty.
Vehicles and aircraft are covered perils and this is very broad. There are no exclusions or limiting factors; if an insured loads a dresser on to a truck, and in transporting the dresser to the refinishers the dresser falls out of the truck, the damage to the dresser is covered since a vehicle caused the damage.
Other than that caused by freezing, the accidental discharge or overflow of water or steam from within air conditioning, heating, plumbing equipment or home appliances on the residence premises is covered. Exclusions listed in MPL01 are for water or sewage that backs up through sewers or drains, overflow of sumps, or the discharge of sewers or water mains off the residence premises. Also excluded is underground, subsurface or surface water that exerts pressure on or flows, seeps, or leaks through walls, doors, driveways, windows, foundations, floors, pools, or other openings. Plumbing equipment is that which brings potable water into the home and drains carry used water away from the home into the sewer system. However, if an ensuing loss is caused by fire, explosion, glass breakage, or theft, that loss is covered.
The next peril is damage to other property within a building caused by the weight of ice, snow, or sleet. If snow accumulation causes the roof to collapse and damage the insured's bedroom suite, the damage is covered.
Wind or hail is the last named peril and like other perils, is not defined. The MPL01 contains an exclusion for damage to campers, trailers or watercraft, including equipment, motors, or parts caused by wind or hail when the items are not in a fully enclosed building. Anything left outdoors is subject to the weather; it is the insured's responsibility to protect his property.
The limits shown below are the maximum per occurrence limit for that category. Any revised limits are shown elsewhere in this policy.
A. Campers and trailers (not used with watercraft) . . . . . . . . . . . . . . . . . . . . . $ 1,000
B. Computers while off the residence premises . . . . . . . . . .. . . . . . . . . . . . . . . $ 3,000
C. Furs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000
D. Guns and accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,000
E. Grave markers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . $ 1,000
F. Jewelry, watches, precious and semiprecious stones . . . . .. . . . . . . . . . . . . . . $ 500
G. Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100
H. Property used or procured for use in business. . . . . . . . . .. . . . . . . . . . . . . . $ 3,000
Only 15% of the limit can be applied to property off the residence premises.
This limit does not apply to property held for sale.
I. Property in an apartment rented or held for rental to others . . .. . . . . . . . . $ 1,000
J. Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . $ 2,000
K. Silverware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,000
L. Watercraft and their equipment, motors, parts, or trailers . . . . . . . . . . . . . . $ 1,000
Analysis
The special limits are the maximum limits of coverage for specified items. Again, these are identical to the coverages in the MHO4. Certain items that are particularly valuable, or easily damaged or stolen should be scheduled with a specific value. These limits provide basic coverage for these items. Notice that the limit for computers is for computers while off the residence premises; computers off the premises are more likely to be stolen or damaged, therefore a limit applies. There is no limit for computers on the residence premises. An insured may have thousands of dollars worth of jewelry; the basic rate for homeowners contents does not contemplate that exposure, so coverage is at a minimum. Expensive amounts of jewelry should be scheduled. Likewise it is difficult for an insured to prove that he had $100,000 stuffed in the mattress that burned; only $100 worth of money is covered; for security large sums of cash should be put in a bank, or at least a fireproof safe.
Property used for business is also limited, and particularly when the property is off the residence premises. This is a homeowners policy, and if an insured has a large business then that property should be covered on a business policy. As mentioned earlier, property in an apartment rented to others has a higher risk of damage, therefore coverage for such items is limited. Watercraft of any significance should be on a boat policy.
The limits shown below are the maximum per occurrence limit for that category. Any revised limits are shown elsewhere in this policy.
Section I – Property
1.B. Lawns and Decorative Plants, Shrubs, and Trees Coverage Per Occurrence Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,000
Limit Per Plant, Shrub, or Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300
1.C. Water Damage Expense Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100
3.B. Computer Media and Computer Software Coverage . . . . . . . . . . . . . . . . . . . . . . $ 3,000
4. Credit Card Coverage . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . $ 2,000
5. Debris Removal Coverage
A. Additional limit for Coverage C . . .. . . . . . . . . . . . . . . .10% of Coverage C
B. Additional per occurrence tree debris removal limit . . . . . . . . . . . . . . $ 300
7. Fire Expense Coverages
A. Fire Department Service Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 500
B. Fire Extinguisher Recharge Expense . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . $ 500
8. Loss Assessment Coverage . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000
9. Portable Electronic Equipment, Cassette Tapes, Compact Disks, and Other Media Coverage . . . . . $ 200
10. Work Interruption Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,000
11. Building Code or Law Coverage . . . . . . . . . . . . . . . . . . . . . . . . 10% of Coverage C
13. Lock Replacement Coverage . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250
Section II — Liability
2. Damage to Property of Others Coverage (form MDL 2) . . . . . . . . . . . . . . . . $ 500
9 Loss Assessment Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000
Analysis
The supplemental limits are similar to the special limits in that they are the maximum limits for certain coverages. These are extra coverages, and as such do not have large limits. Except for building code or law, unit owner's property, and lock replacement coverage, the coverages themselves are explained in the discussion of MPL 01 Common Provisions form.
Section I B — Supplemental Coverage's Coverages 11, 12 and 13 are added:
11. Building Code or Law Coverage
(a) Coverage C is extended to cover the loss or expenses described in (1), (2), and (3) that ensues as a direct consequence of a covered loss at the residence premises.
We cover such for an amount determined by applying the applicable factor shown in Supplemental Coverage Limit 11 on page 1 to the Coverage C limit of liability shown in the Declarations. The losses or expenses covered are:
(1) The loss caused by enforcement of any building, land use, or zoning code or law in force on the date of the covered loss, that:
• Requires the demolition of parts of the same property not damaged by a covered cause of loss.
• Regulates the construction or repair of buildings.
• Establishes the building, land use, or zoning requirements at the described premises.
(2) The increased expense you incur to construct, rebuild, or repair the property caused by enforcement of building, land use, or zoning code
or law in force on the date of the covered loss. The property must be intended for the same use or occupancy as the current property unless otherwise prohibited by such code or law.
(3) The expense you incur to demolish undamaged parts of property and clear the site of such parts, caused by enforcement of building, land use, or zoning code or law in force on the date of the covered loss.
(b) We are not liable for payment under this Supplemental Coverage:
(1) Until the property is repaired or replaced by you or us as soon as possible after the loss at the same premises. The repair or replacement must be made within the time period described in condition 2.B.1. – Replacement Coverage of Section I E – Conditions in form MPL 01. We may waive, in writing, the requirement to replace at the same location if building laws prohibit replacement at the described location, or for any other reason acceptable to us.
(2) For any loss or expense arising out of the enforcement of any code, directive, law, ordinance, or regulation requiring any insured or others to clean up, contain, detoxify, monitor, neutralize, remove, test for or treat asbestos, or pollutants.
(c) Our maximum liability under this Supplemental Coverage (items (a) (1), (2), and (3) combined), subject to the limit of liability shown in the Declarations and the limitations on our liability described in Condition 2 – How Losses are Settled of Section I E – Conditions in form MPL 01, is the sum of the following:
(1) The cost to demolish the property and clear the site, and
(2) The cost to reconstruct or replace the property on the described premises.
(d) This Supplemental Coverage does not apply to buildings or structures on an actual cash value basis.
Analysis
The additional policy provisions add coverage for building code or law coverage, unit owner's property, and lock replacement coverage. Condominiums are unique in that the owner may make permanent additions to the property, even though the unit is the only thing owned.
The building code or law coverage provides up to 10% of coverage C when a building code or law requires the demolition of parts of undamaged property, regulates the construction or repair of a building, or establishes the building or land use or zoning requirements at the premises. The increased expense incurred by the insured to repair, rebuild or construct according to code is covered, as is the expense to demolish undamaged parts of property and clear the site of said parts. Since the unit owner does not own the building, at first blush this seems to be odd coverage. However, unit owners may make permanent additions and alterations to the unit, and these can be structural in nature. For example a unit owner had added a deck with a hot tub to the unit. A fire damages the unit and the deck, and the code requirement for the structure of the deck and the wiring for the tub has changed since the items were originally constructed. Those upgrades that are necessary for the code changes are covered up to the 10% of coverage C limit.
However, payment is not made until the property is repaired or replaced by either the insured or the carrier; repairs must be made as soon as possible after the loss. Excluded is coverage for any loss or expense for the monitoring, neutralizing, detoxifying, clean up or containment of any pollutants including asbestos.
The maximum payment is the cost to demolish the property, clear the site, and reconstruct or replace the property up to the policy limit. This coverage does not apply to buildings or structures on an actual cash value limit.
12. Unit Owner's Property
(a) Covered Property
The following unit owner's property is covered within the general limit for Coverage C:
• Permanent additions, alterations, appliances, decorations, fixtures, and other similar improvements made or acquired at your expense that are both part of the structure and within the unit where you or your tenant reside.
• Property that is your exclusive insurance responsibility under a property owners' agreement.
• Real property pertaining to your exclusive use of the residence premises.
• Related structures owned by you that are located at the residence premises and used exclusively by your household.
(b) Covered Causes of Loss
Any other fortuitous direct physical loss not otherwise excluded by this policy.
(c) Section I D — Losses Not Insured
Exclusion 13.B. (1) does not apply.
(d) Section I E — Conditions
The following is added to condition 2.B. – Types of Loss Settlement:
Loss to such property is covered on a replacement coverage basis unless this insurance is excess and the primary insurance provides actual cash value coverage.
(e) Sections I and II — General Conditions
The following is added to Condition 6 — Other Insurance:
If at the time of loss there is insurance in the name of the property owners' association covering the property described above, then this insurance is excess insurance.
Analysis
The unit owner's property coverage provides coverage for those additions or alterations that an insured makes to the unit that are part of the structure and within the unit. Likewise property that is the insured's responsibility to insured as part of the owner's agreement, real property pertaining to the exclusive use of the premises and related structures used exclusively by the insured's household are also covered. The deck and hot tub mentioned in the prior example are covered because they have been added to the structure of the unit; built in bookcases, wall to wall carpeting, and other such features would also be covered. The limit for these items is included in the general coverage C limit; there is no special limit and this is not an additional coverage.
The covered causes of loss are open perils; fortuitous loss that is not otherwise excluded is covered.
The exclusion in form MPL 01 for storms and the elements damage to the interior of a building does not apply. Loss are covered on a replacement cost basis unless this policy is excess coverage and the primary policy provides actual cash value coverage. This insurance is excess when an association policy provides coverage for property covered in this policy.
13. Lock Replacement Coverage
We will pay up, to the limit shown for Supplemental Coverage 13, the reasonable, necessary expenses incurred to replace or rekey locks at the residence premises. Coverage applies only if an insured's keys have been stolen. No deductible applies to this coverage.
Analysis
The supplemental lock replacement coverage is explained. The coverage applies the necessary and reasonable expenses to replace or rekey locks at the residence premises. In order for coverage to apply the insured's keys must have been stolen; there is no coverage if the insured simply misplaced or lost his keys. There is no deductible for this coverage.
A. Condominium Rented to Others — Endorsement MHO 45
If Endorsement MHO 45 is listed in the Declarations, it is understood by us that your unit is customarily rented by you to others. Special Limit 2.I does not apply to property in the unit rented by you to others.
B. Townhouse or Row House — Endorsement MPL 67, MPL 68, or MPL 69
If endorsement MPL 67, MPL 68, or MPL 69 is listed in the Declarations, it is understood by us that the covered dwelling is part of a row house or townhouse complex: MPL 67 – up to 4 units; MPL 68 – 5 to 8 units; MPL 69 – 9 or more units.
C. Protective Devices — Endorsement MPL 70
If endorsement MPL 70 is listed in the Declarations, the premium reflects installation of a smoke detector, or other protective devices or systems. You agree that you, and those you designate to care for the premises, will maintain all such in active working order, and to immediately notify us of any change in such status.
Analysis
Unique to MSO is the concept of trigger endorsements. These are endorsements that are preprinted in the main policy forms, and their coverage is activated if the endorsement number is shown on the declarations. Endorsement MHO45 provides coverage when the unit is regularly rented to others, such as a unit on the beach. If the unit is regularly rented the special limit for property in a unit rented or held for rental to others does not apply when this coverage is added.
Endorsements MPL 67, 68, and 69 modify the policy to indicate that the dwelling is part of a row house or townhouse complex. MPL 67 indicates up to 4 units, MPL indicates 5 to 8 units, and MPL 69 indicates 9 or more units. If none of these endorsements are listed on the declarations, then it is understood that the dwelling is a stand-alone home or unit as part of a complex. If one of these endorsements is added, then that endorsement applies.
Endorsement MPL 70 reflects installation of a smoke detector or other protective device and that this is reflected in the premium. The insured agrees that he will maintain such devices in working order, and notify the carrier of any change in status.