Summary: Insurance for mobilehome owners has been written on a package basis subject to standard rules and forms since the introduction of the mobilehome policy program of Insurance Services Office in the late 1960s. Current ISO manual rules provide for the writing of mobilehome insurance by means of endorsements to either homeowners form HO 00 02 05 11 or HO 00 03 05 11. The endorsements tailor standard homeowners coverage to the exposures characteristic of mobilehomes.
This discussion centers on the 2011 edition of mobilehome endorsement MH 04 01 05 11. Differences with the prior edition are noted. (Differences, however, are primarily in format. Changes in coverage are in the HO 00 02 and HO 00 03 to which the MH 04 01 is attached.) Optional endorsements for use with it, plus eligibility and other rules contained in the mobilehome supplement to the ISO homeowners manual, are included.
Topics Covered:
The homeowners eligibility rule against the insuring of mobilehomes is deleted by mobilehome supplement rules, which provide that coverage under endorsement MH 04 01 may be written on mobilehomes designed for portability and year-round living. To be eligible for coverage, the mobilehome must be at least 10 feet wide and 400 square feet in area.
Homeowners eligibility rules applicable to HO 00 02 or HO 00 03 policies apply to mobilehome risks as well with respect to such questions as owner-occupancy, eligibility of non-occupant joint owners to insure their interest in the building and their premises liability exposure, and permitted incidental occupancies. Mobilehomes, however, are not eligible for insuring as residences held in trust. The rules specify that only one to four family dwellings are eligible.
An HO 00 04 05 11 may be written for a tenant (non-owner) of a mobilehome. For a review of these eligibility rules, see ISO Homeowners Program.
Rules of the mobilehome supplement specify minimum required limits of liability for each coverage of the policy that differ from those specified for a homeowners policy. Coverage A, which applies to the described mobilehome, attached structures and utility tanks, and permanently installed items such as appliances, cabinets, and floor coverings, must be written for at least the minimum limit provided in the homeowners base premium tables. The coverage B limit has the same relationship to the coverage A limit as in the homeowners program—10 percent—but if 10 percent of the coverage A amount is less than $2,000, the endorsement provides a minimum of $2000. This amount of coverage does not reduce the coverage A limit.
Often coverage C is written with a limit equal to 40 percent of the Coverage A limit, rather than the 50 percent specified for homeowners coverage, but this is not a requirement. Policy limits for coverages C, D, E, and F may be increased for an additional premium. Mobilehome supplement rules also permit an additional amount of insurance to be written on specific structures insured under coverage B. Mobilehome supplement manual rules permit the coverage C limit to be written for amounts down to 30 percent of the coverage A limit, for a premium credit, when there are no permitted incidental occupancies.
Loss of use coverage D is 20 percent of the coverage A limit.
Limits of liability for section II coverages (personal liability and medical payments to others) of mobilehome insurance are governed by applicable homeowners general rules, and accordingly, basic limits may be increased as specified for the homeowners program.
As noted above, mobilehome endorsement MH 04 01 may be attached to homeowners form HO 00 02 or HO 00 03. Except for the changes made to property coverage by attachment of the endorsement, the coverage provisions of the applicable homeowners form apply. Thus, section II coverage provisions for owners of mobilehomes are those found in the homeowners form to which the endorsement is attached.
Definitions:
Paragraph B.11. "residence premises" is replaced by the following:
11. "Residence premises" means the mobilehome and other structures located on land:
a. Owned or leased by you where you reside; and
b. Which is shown as the "residence premises" in the Declarations.
Analysis
Endorsement MH 04 01 changes the homeowners policy's definition of "residence premises" to refer not to a one to four family dwelling, but to "the mobilehome and other structures located on land owned or leased by" the named insured and where the named insured resides.
SECTION I – PROPERTY COVERAGES
A. Coverage A – Dwelling
Paragraph 1. is replaced by the following:
1. We cover:
a. The mobilehome on the "residence premises":
(1) Shown in the Declarations.
(2) Used principally as a private residence.
b. Structures and utility tanks attached to the mobilehome and the following and similar type items installed on a permanent basis:
(1) Floor coverings;
(2) Appliances; and
(3) Dressers and cabinets.
c. Materials and supplies located on or next to the "residence premises" used to:
(1) Construct;
(2) Alter; or
(3) Repair;
the mobilehome or other structures on the "residence premises".
Analysis
The coverage A insuring agreement's description of the insured dwelling is revised by the mobilehome endorsement to refer to the described mobilehome used principally as a private residence, and to attached structures and utility tanks, as well as floor coverings, appliances, dressers, cabinets, and "similar type items" when installed on a permanent basis. This description brings all the described property within the replacement cost provision of the policy loss settlement condition (whereas the homeowners forms provide only actual cash value for carpeting and household appliances). However, permanently attached awnings, outdoor antennas, and outdoor equipment are covered at actual cash value, just as in the homeowners forms.
The endorsement leaves unchanged the coverage A insuring agreement's inclusion of on-premises construction materials and supplies as insured property.
Coverage B—Other Structures
Paragraph 3. is deleted and replaced by the following:
3. The limit of liability for this coverage will not be more than 10% of the limit that applies to coverage A. However, if 10% of the coverage A limit of liability is less than $2,000, we will provide a minimum limit of $2,000 for this coverage. Use of this coverage does not reduce the Coverage A limit of liability.
Analysis
As noted earlier, the endorsement provides a minimum of $2000 for other structures on the residence premises. Coverage A is not reduced because the insured makes use of the coverage.
E. Additional Coverages
5. Property Removed
The following paragraph is added:
At any time, if:
a. The mobilehome is endangered by a Peril Insured Against; and
b. Removal is necessary to avoid damage,
we will pay the reasonable expense you incur, not to exceed $500, for its removal and return. No deductible applies to this expense.
11. Ordinance or Law
This Additional Coverage does not apply.
Analysis
Homeowners additional coverage 5, which applies to property removed to protect it from a peril insured against, is expanded by endorsement MH 04 01 to apply to moving costs in instances when the mobilehome itself needs to be moved to avoid damage. The endorsement provides payment of up to $500 (no deductible applies to this coverage) in such circumstances to cover the cost incurred in transporting the mobilehome to a safe place. For an additional premium, this $500 limit may be increased in increments of $250, up to a maximum of $2,500. Note that as "covered property," the mobilehome is also protected by the property removed coverage with respect to "loss from any cause" during the first 30 days of its removal. If the insured is moving the mobilehome for some reason other than impending loss by a covered peril, it may be desirable to add endorsement MH 04 03 05 11 (transportation/permission to move—discussed below).
It is important to note that the homeowners forms exclude liability coverage arising out of the transporting of the insured mobilehome. Liability is excluded except when the trailer is not "being carried on, towed by or hitched for towing by a vehicle described in a. above" {a self-propelled land or amphibious vehicle). For this reason, coverage should be arranged through the company engaged in the transportation.
There is no additional coverage 11, ordinance and law, found in forms HO 00 02 and HO 00 03. Since many types of ordinances and laws are specific to mobilehomes, such as tie-down requirements, and since losses to a mobilehome are frequently total losses, this coverage is not automatically included. The coverage may be added by endorsement MH 04 08 (see below).
Endorsement MH 04 01 changes three of the homeowners section I conditions to adapt the policy's coverage to unique features of mobilehome ownership or to bring the conditions into line with the revised coverage already provided elsewhere in the endorsement.
D. Loss Settlement
Paragraph 1.b is replaced by the following:
b. Awnings, outdoor antennas and outdoor equipment, whether or not attached to buildings; and
E. Loss to a Pair or Set
The following paragraph is added:
3. Pay, in any loss involving part of a series of pieces or panels, the reasonable cost to:
a. Repair or replace the damaged part to match the remainder as closely as possible; or
b. Provide an acceptable decorative effect or use as conditions warrant. However, we:
(1) Do not guarantee the availability of replacements; and
(2) We will not be liable, in the event of:
(a) Damage to; or
(b) Loss of;
a part, for the value, repair or replacement of the entire series of pieces or panels.
L. Mortgage Clause
The following paragraph is added:
6. The word "mortgagee" includes lienholder.
All other provisions of this policy apply.
Analysis
Because it is written within the general format of homeowners coverage, including the homeowners loss settlement condition, mobilehome insurance provides for replacement cost settlement of losses to the mobilehome as long as the 80 percent insurance-to-replacement-value requirement is met. The MH 04 01 also gives replacement coverage to items insured as part of the mobilehome even though some of these items—carpeting and household appliances—are specifically excluded from the replacement cost provisions of the standard homeowners loss settlement condition.
The homeowners policy's pair or set condition is expanded to a "pair, set, or panels" condition that governs recovery in the event of damage to any of the mobilehome's component wall panels. When a loss to "a series of pieces or panels" occurs, endorsement MH 04 01 gives the insurer two options. It may pay the reasonable cost entailed in matching the remaining, undamaged panels "as closely as possible." Or it may instead pay the reasonable cost of providing "an acceptable decorative effect or use," an option that leaves the insurer some discretion in repairing the damaged mobilehome in a way that does not necessarily involve item-for-item or panel-for-panel replacement. What constitutes an "acceptable decorative effect" would, of course, be a subject for negotiation with the insured.
The endorsement specifies that the insurer does not guarantee the availability of replacements and is not liable, when a piece or panel is damaged, for "the value, repair, or replacement of the entire series of pieces or panels."
A final change made in the homeowners section I conditions by endorsement MH 04 01 is a stipulation in the mortgage clause that the term "mortgagee" includes a lienholder. This change gives anyone holding a lien against the insured mobilehome the rights of a mortgagee under the policy. Because the 2000 rules now make it possible to insure residences held in trust on homeowners forms, the word "trustee," appearing in the earlier edition, has been dropped from this condition. Mobilehomes are not eligible to be written in this manner.
Mobilehome coverage as written under endorsement MH 04 01 may be further modified by the use of any of five optional endorsements.
Because some older mobilehomes have depreciated in value to the point where replacement cost would not be appropriate, endorsement MH 04 02 05 11 actual cash value is available to change loss settlement to actual cash value. Under endorsement MH 04 02, the insurer may select from four different methods of loss settlement. In event of a covered loss, the insurer may: (1) pay the cost of repair; (2) replace the damaged property with similar property, though not necessarily by the same manufacturer; (3) pay the lowest of the difference in actual cash value before and after the loss, the cost of repair, or the cost of replacing the damaged property with similar property. The endorsement specifies that the cost to replace or repair does not include any costs associated with any increased costs to comply with enforcement of any ordinance or law.
The transportation/permission to move endorsement MH 04 03 05 11 gives coverage for the transportation perils of: (1) collision (but not with the transporting vehicle unless the vehicle itself is involved in an accident); (2) upset; and (3) stranding or sinking of the mobilehome (while being transported on a licensed ferry). Coverage applies for 30 days anywhere in the continental United States or Canada. Stranding or sinking coverage includes coverage for "general average" charges or salvage charges for which the insured is responsible. "General average" is a term used in marine insurance and means charges levied against all parties whose cargo is being transported for the loss suffered by some property owners when their cargo is jettisoned to save the rest from destruction. These losses are shared because they are suffered for the benefit of all. The endorsement specifies that none of the three perils it covers includes coverage for loss to tires unless such loss is part of a loss to other covered property by one of the covered perils. The insured selects a deductible applicable to this coverage, which is then indicated in the endorsement schedule.
Since section I, additional coverage 5 of the homeowners policy provides coverage for loss "from any cause" for 30 days when the mobilehome is moved to protect it from loss by a peril insured against, endorsement MH 04 03 is only necessary when the mobilehome is being moved for some other reason.
Mobilehome lienholder's single interest endorsement MH 04 04 10 00 covers the interest of the lienholder alone, or his assignee, with respect to two causes of loss: (1) collision (with either another object or with the transporting vehicle) or upset of the mobilehome while in transit; and (2) loss from conversion, embezzlement, or secretion by a retail purchaser or borrower. Seven "recovery conditions" apply; they must be satisfied for the lienholder to recover. These are: (1) no payments more than 30 days past due as of the endorsement's effective date; (2) the lienholder cannot make a loss settlement except at his own cost without the insurer's written consent; (3) in event of a covered loss, the lienholder must use all reasonable means to save the mobilehome, and will be reimbursed for those incurred expenses; (4) the purchaser must have defaulted; (5) the lienholder has repossessed the mobilehome; (6) the purchaser has abandoned the mobilehome because of a covered loss; and (7) in event of conversion, embezzlement or secretion the lienholder has made every reasonable effort to locate the purchaser to collect overdue money, and, failing that, has repossessed the mobilehome.
What type of loss settlement is made depends on whether the loss is caused by collision or upset, or by deception. The endorsement specifies that payment under either the collision peril or the conversion peril reduces the amount payable under "any other coverage." So, if the insured lienholder recovers for a collision loss, and later in the policy term the mobilehome is damaged by fire, payment for the fire will be reduced by the amount already paid for collision. The endorsement also states that the insurer will not allow the insured to abandon the property to the insurer.
The 2000 endorsement states that, under the settlement options, the terms "repair" or "replace" do not include any increased costs because of enforcement of any law or ordinance.
The property removed increased limit (endorsement MH 04 06 10 00 increases the $500 coverage limit applicable to moving expense when the insured mobilehome is endangered by a peril insured against as discussed above. Increases may be made in $250 increments up to $2,500.
Ordinance or law coverage endorsement MH 04 08 10 00 provides coverage for increased costs resulting from any ordinance or law requiring or regulating construction, demolition, remodeling, renovation, or repair of property when the property has been physically damaged by a covered peril. Part or all of this coverage may also be used to pay for the increased cost of debris removal caused by these activities. Coverage may be purchased at an amount equal to 10 percent , 25 percent , 50 percent , 75 percent , 100 percent , or more, in 25 percent increments, of the coverage A limit of liability.
In addition to the credit for reducing the coverage C limit to 30 percent of coverage A, discussed above, other credits are applied when insureds have taken steps to reduce the likelihood of damage to their mobilehomes.
If the insured has installed an insurer-approved alarm system or automatic sprinkler system, endorsement HO 04 16 10 00 can be added to acknowledge that the system is in place for purposes of applying the credit.
Mobilehomes are particularly prone to damage by windstorm because they are not heavy enough, without being specially anchored, to withstand rough weather. For this reason, a credit is given if the mobilehome has both a composition shingle roof and one of two versions of a "foundation"—with the base of the mobilehome being either an enclosed masonry foundation, or blocks or piers with skirting covering the open space under the home.
Another credit is available if the insured mobilehome is tied down. The tie-downs may be chassis only, over the top, or over the top and chassis.
Christine G. Barlow, CPCU
Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.