Limited Loss Settlement for Windstorm or Hail Losses to Roof Surfacing
June 13, 2016
Summary: This new ISO endorsement provides limited coverage for hail or windstorm damage to roof surfaces. The new form, Limited Loss Settlement For Windstorm Or Hail Losses To Roof Surfacing, HO 06 46 04 16, was developed to clarify settlement if damage is caused by windstorm or hail.
Topics: Introduction Schedule and definitions Section I – conditions Additional provision
Introduction
Roofs, like any property, deteriorate as they age, and even more so since they are constantly exposed to the elements. Unfortunately roofs are often out of sight and mind unless the insured pays deliberate attention to it or something happens that gets his attention. Many insureds do not always remember to replace the roof in a timely manner. It is obvious when the siding fades and needs replacing, not so much with the roof unless it leaks. This failure to replace the roof in a timely manner may make a loss more severe due to wear that already exists on the roof. Therefore, this endorsement was created in order to allow a loss to be settled by taking into account the age of the roof. This allows the payment to more closely match the actual loss and not include the underlying wear and tear that existed before the loss occurred.
DEFINITIONS
With respect to the provisions of this endorsement, the following definition is added:
“Roof surfacing” means the:
1. Shingles or tiles;
2. Cladding;
3. Metal or synthetic sheeting or similar materials covering the roof; and
4. Roof flashing.
This includes all materials used in securing the roof surface and all materials applied to or under the roof surface for moisture protection.
Analysis
The endorsement begins with a schedule for the type of roofing material and year of installation. The types of material that can be selected are composition shingle, built up/roll, tile, shake/wood shingle, metal, slate, asphalt shingle, and other. Various materials wear at different speeds, so the type of material and how long it has been installed are important.
The definition of “roof surfacing” is straightforward: shingles or tiles, cladding, metal or synthetic sheeting or similar materials, and roof flashing are all considered roofing materials. Also included are materials used in attaching the roof and any materials applied for moisture protection, either to or under the roof surface. This form applies to roof surfaces only, and not siding, windows, or doors.
Paragraph D. Loss Settlement is replaced by the following:
D.Loss Settlement
In this Condition D., the terms “cost to repair or replace” and “replacement cost” do not include the increased costs incurred to comply with the enforcement of any ordinance or law, except to the extent that coverage for these increased costs is provided in E.11. Ordinance Or Law under Section I – Property Coverages. Covered property losses are settled as follows:
1.Property of the following types:
a.Personal property;
b.Awnings, carpeting, household appliances, outdoor antennas and outdoor equipment, whether or not attached to buildings;
c.Structures that are not buildings; and
d.Grave markers, including mausoleums; at actual cash value at the time of loss but not more than the amount required to repair or replace.
2.”Roof surfacing” on buildings covered under Coverage A or B if the loss is caused by the peril of windstorm or hail at the percentage of the replacement cost shown in the Roof Surfacing Loss Percentage Table found in this endorsement, based on the age and type of “roof surfacing” damaged, but not more than the least of the following amounts:
a.The limit of liability under this Policy that applies to the building;
b.The cost to repair or replace that portion of the “roof surfacing” damaged with material of like kind and quality and for like use, without deduction for depreciation; or
c.The necessary amount actually spent to repair or replace the damaged “roof surfacing”.
Analysis
As with most property coverages, any increased costs due to the enforcement of any ordinance or law are not covered except for what is provided for in the policy for such claims. Most policies provide limited ordinance or law coverage, with more being available by endorsement. From there property that is covered at actual cash value is listed. Roof surfacing has its own unique replacement values based on the percentage of replacement cost shown in the percentage table found later in the endorsement. No more than the lesser of the limit of liability, the cost to repair or replace with like kind and quality without depreciation, or the necessary amount to repair or replace the dwelling is what is paid out.
3.Except to the extent that Paragraph D.2. applies, buildings, including “roof surfacing”, covered under Coverage A or B at replacement cost without deduction for depreciation, subject to the following:
a.If, at the time of loss, the amount of insurance in this Policy on the damaged building is 80% or more of the full replacement cost of the building immediately before the loss, we will pay the cost to repair or replace, without deduction for depreciation, but not more than the least of the following amounts:
(1)The limit of liability under this Policy that applies to the building;
(2)The replacement cost of that part of the building damaged with material of like kind and quality and for like use; or
(3)The necessary amount actually spent to repair or replace the damaged building. If the building is rebuilt at a new premises, the cost described in (2) above is limited to the cost which would have been incurred if the building had been built at the original premises.
b.If, at the time of loss, the amount of insurance in this Policy on the damaged building is less than 80% of the full replacement cost of the building immediately before the loss, we will pay the greater of the following amounts, but not more than the limit of liability under this Policy that applies to the building:
(1)The actual cash value of that part of the building damaged; or
(2)That proportion of the cost to repair or replace, without deduction for depreciation, that part of the building damaged, which the total amount of insurance in this Policy on the damaged building bears to 80% of the replacement cost of the building.
c.To determine the amount of insurance required to equal 80% of the full replacement cost of the building immediately before the loss, do not include the value of:
(1)Excavations, footings, foundations, piers, or any other structures or devices that support all or part of the building, which are below the undersurface of the lowest basement floor;
(2)Those supports described in (1) above which are below the surface of the ground inside the foundation walls, if there is no basement; and
(3)Underground flues, pipes, wiring and drains.
d.We will pay no more than the actual cash value of the damage until actual repair or replacement is complete. Once actual repair or replacement is complete, we will settle the loss as noted in 2.a. and b. above.
However, if the cost to repair or replace the damage is both:
(1)Less than 5% of the amount of insurance in this Policy on the building;
and
(2)Less than $2,500;
we will settle the loss as noted in 2.a. and b. above whether or not actual repair or replacement is complete.
e.You may disregard the replacement cost loss settlement provisions and make claim under this Policy for loss to buildings on an actual cash value basis. You may then make claim for any additional liability according to the provisions of this Condition D. Loss Settlement, provided you notify us, within 180 days after the date of loss, of your intent to repair or replace the damaged building.
Analysis
The conditions list the standard coinsurance clause, which states that if the insurance is 80 percent or more of the value of the property, the loss is covered at the least of the limit of liability, the replacement cost using like kind and quality, or the necessary amount to repair or replace the property. If the building is rebuilt at a new premises then the cost is limited to what it would have cost to rebuild at the original location. If the insurance on the property is less than 80 percent of the value of the property, then the loss is paid at the greater of actual cash value or the proportion of the cost to repair or replace bears to the 80 percent of the replacement cost of the building. Remember coinsurance is what the insured had divided by what he should have had, multiplied by the amount of the loss. For example, the home is valued at $200,000, but the insurance limit is $140,000. This is 70 percent of the value of the building. If the insured sustains a loss of $50,000, then settlement could be for $35,000 which is 70 percent of the $50,000 loss. Not included in the calculation of the percentage are the value of excavations, footings, foundations, piers, or any other structures that support all or part of the building or that are under the lowest basement floor, supports inside the foundation walls if there is no basement, or underground flues, pipes, wiring, or drains.
As with most policies, payment is on an actual cash value basis until the actual repair or replacement is complete, unless the damage is below 5 percent of the amount of insurance and less than $2,500. Then settlement is as explained whether or not repair/replacement is complete.
The insured always has the option of settling at actual cash value; the insured can also change his mind as long as he notifies the carrier of his intent to repair or replace the damaged building within 180 days of the loss.
ADDITIONAL PROVISION
The provisions of this endorsement do not apply to structures insured under either the:
1.Coverage B – Other Structures Away From The Residence Premises endorsement; or
2.Specific Structures Away From The Residence Premises endorsement; if made a part of the Policy.
All other provisions of this Policy apply.
Analysis
An additional provision exists that applies to coverage B, other structures away from the premises, that are insured under a separate endorsement. Structures away from the premises generally are not as large as the main premises or even an other structure on the main premises; it could be a hunting blind used seasonally, a farm stand near the crops, or other such structure. Therefore the limited loss settlement provisions do not apply to these other structures away from the premises.
Roof Surfacing and Loss Percentage Table
| Roof Surfacing Loss Percentage Table | |||||||
| Age Of Roof∗
(In Years) |
Type Of Roof Surfacing Material | ||||||
| Composition Shingle | Built Up/ Roll |
Tile | Shake/Wood Shingle |
Metal |
Slate | Asphalt Shingle And Other | |
| Less than 1 | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| 1 | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| 2 | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| 3 | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| 4 | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| 5 | 91.7% | 91.7% | 95.0% | 93.8% | 96.7% | 96.7% | 91.7% |
| 6 | 90.0% | 90.0% | 94.0% | 92.5% | 96.0% | 96.0% | 90.0% |
| 7 | 88.3% | 88.3% | 93.0% | 91.3% | 95.3% | 95.3% | 88.3% |
| 8 | 86.7% | 86.7% | 92.0% | 90.0% | 94.7% | 94.7% | 86.7% |
| 9 | 85.0% | 85.0% | 91.0% | 88.8% | 94.0% | 94.0% | 85.0% |
| 10 | 83.3% | 83.3% | 90.0% | 87.5% | 93.3% | 93.3% | 83.3% |
| 11 | 81.7% | 81.7% | 89.0% | 86.3% | 92.7% | 92.7% | 81.7% |
| 12 | 80.0% | 80.0% | 88.0% | 85.0% | 92.0% | 92.0% | 80.0% |
| 13 | 78.3% | 78.3% | 87.0% | 83.8% | 91.3% | 91.3% | 78.3% |
| 14 | 76.7% | 76.7% | 86.0% | 82.5% | 90.7% | 90.7% | 76.7% |
| 15 | 75.0% | 75.0% | 85.0% | 81.3% | 90.0% | 90.0% | 75.0% |
| 16 | 73.3% | 73.3% | 84.0% | 80.0% | 89.3% | 89.3% | 73.3% |
| 17 | 71.7% | 71.7% | 83.0% | 78.8% | 88.7% | 88.7% | 71.7% |
| 18 | 70.0% | 70.0% | 82.0% | 77.5% | 88.0% | 88.0% | 70.0% |
| 19 | 68.3% | 68.3% | 81.0% | 76.3% | 87.3% | 87.3% | 68.3% |
| 20 | 66.7% | 66.7% | 80.0% | 75.0% | 86.7% | 86.7% | 66.7% |
| 21 | 65.0% | 65.0% | 79.0% | 73.8% | 86.0% | 86.0% | 65.0% |
| 22 | 63.3% | 63.3% | 78.0% | 72.5% | 85.3% | 85.3% | 63.3% |
| 23 | 61.7% | 61.7% | 77.0% | 71.3% | 84.7% | 84.7% | 61.7% |
| 24 | 60.0% | 60.0% | 76.0% | 70.0% | 84.0% | 84.0% | 60.0% |
| 25 | 58.3% | 58.3% | 75.0% | 68.8% | 83.3% | 83.3% | 58.3% |
| 26 | 56.7% | 56.7% | 74.0% | 67.5% | 82.7% | 82.7% | 56.7% |
| 27 | 55.0% | 55.0% | 73.0% | 66.3% | 82.0% | 82.0% | 55.0% |
| 28 | 53.3% | 53.3% | 72.0% | 65.0% | 81.3% | 81.3% | 53.3% |
| 29 | 51.7% | 51.7% | 71.0% | 63.8% | 80.7% | 80.7% | 51.7% |
| 30 or older | 50.0% | 50.0% | 70.0% | 62.5% | 80.0% | 80.0% | 50.0% |
| ∗The Age of Roof is determined by subtracting the Year of Installation, as indicated in the Schedule, from the year of the current policy period effective date. | |||||||
Analysis
The roof surfacing loss percentage table gives the average amount of wear that can be expected by year for the lifespan of a thirty year roof. A thirty year old roof is not worthless; it just has thirty years of wear on it and for the carrier to replace it with a brand new roof is in effect performing the maintenance the insured should have performed before the loss occurred. The use of this chart allows the insured to receive a premium deduction in exchange for payment of repairs based on the condition of the roof before the loss occurred. For example, the insured has a shake/wood shingle roof that is twelve years old and sustains a fire; the roof is a total loss. The cost to replace the roof is $6,600. Because the roof is twelve years old, only 85 percent of the loss will be paid since some of the damage is from standard wear and tear. Therefore, $5,610 is what will be paid to the insured for replacement of his roof.