Includes copyrighted material of Insurance Services Office, Inc., with its permission.
May 31, 2017
Basic, Broad, and Special Forms
Summary: There are twenty-five conditions applicable to the broad and special dwelling property forms, and twenty-six applicable to the basic form. Conditions in each form are essentially identical, with two variations: one the glass replacement condition (found in the basic but not the other forms) and the other the loss settlement provision. Changes in the conditions in the 2014 edition dwelling property forms are discussed, along with differences from the earlier editions. Most changes are cosmetic or for clarification purposes.
Topics covered:
Insurance Services Office (ISO) has developed a new edition (July 2014) of the dwelling program. The forms are close in design to the ISO homeowners 2011 forms. The ISO dwelling program consists of a DP 00 01 07 14 basic form, DP 00 02 07 14 broad form and DP 00 03 07 14 special perils form.
Policy Period, Insurable Interest, Concealment or Fraud, Duties After LossA. Insurable Interest and Limit of Liability
Even if more than one person has an insurable interest in the property covered, we will not be liable in any one loss:
1. For an amount greater than the interest of a person insured under this Policy at the time of loss; or
2. For more than the applicable limit of liability.
Analysis
This condition limits recovery under the policy, regardless of insurable interests of more than one person in the property, to the interest of the insured under the policy or the stated limits. Therefore, if the insured's insurable interest rises only to one-half of the value of the property, as if might if there were a mortgage on the property, the insured's recovery would be limited to the amount of the insured's interest.
B. DeductibleUnless otherwise noted in this Policy, the following deductible provision applies:
With respect to any one loss:
1. Subject to the applicable limit of liability, we will pay only that part of the total of all loss payable that exceeds the deductible amount shown in the Declarations.
2. If two or more deductibles under this Policy apply to the loss, only the highest deductible amount will apply.
Analysis
The deductible section has been moved from the first section of the policy. Newly added is the statement that if two or more deductibles apply that only the highest will be applied to the loss. This is prevent confusion when two deductibles could possibly be applied to one loss.
C. Concealment or FraudWe provide coverage to no persons insured under this Policy if, whether before or after a loss, one or more persons insured under this Policy have:
1. Intentionally concealed or misrepresented any material fact or circumstance;
2. Engaged in fraudulent conduct; or
3. Made false statements;
relating to this insurance.
Analysis
An earlier version of this condition, that the policy would be rendered void, was amended to much its present form beginning with the 1994 amendatory endorsements. Now, the policy is not voided; however, there will be no coverage for any person insured under the policy if one or more engage in fraudulent conduct with regards to the insurance. There are various aspects to the interpretation of this provision: What is a material fact? Does the material fact or circumstance have to be related in some way to the loss at hand? Does the false statement have to do with the loss at hand, or could it be an unrelated statement, such as misrepresenting the age of the named insured? This topic is dealt with in-depth elsewhere; see Effect of Insureds' Declarations or Statements.
D. Duties After LossIn case of a loss to covered property, we have no duty to provide coverage under this Policy if the failure to comply with the following duties is prejudicial to us. These duties must be performed either by you or your representative:
1. Give prompt notice to us or our agent;
2. Protect the property from further damage. If repairs to the property are required, you must:
a. Make reasonable and necessary repairs to protect the property; and
b. Keep an accurate record of repair expenses;
3. Cooperate with us in the investigation of a claim;
4. Prepare an inventory of damaged personal property showing the quantity, description, actual cash value and amount of loss. Attach all bills, receipts and related documents that justify the figures in the inventory.
5. As often as we reasonably require:
a. Show the damaged property;
b. Provide us with records and documents we request and permit us to make copies; and
c. Submit to examination under oath, while not in the presence of any other named insured, and sign the same;
6. Send to us, within 60 days after our request, your signed, sworn proof of loss which sets forth to the best of your knowledge and belief:
a. The time and cause of loss;
b. Your interest and that of all others in the property involved and all liens on the property;
c. Other insurance which may cover the loss;
d. Changes in title or occupancy of the property during the term of the policy;
e. Specifications of damaged buildings and detailed repair estimates;
f. The inventory of damaged personal property described in D.3.; and
g. Receipts for additional living expenses incurred and records that support the fair rental value loss.
Analysis
The duties after loss condition has six subsections with several subdivisions for several of these. It lists in detail all of the things the insured must do following a loss to obtain payment from the insurer for the loss. The requirements are, for the most part, a more readable version of lines 90-122 of the New York Standard Fire Policy, with differences, however, in intent and effect.
The insured is put on notice, as it were, that if the duties are not fulfilled, and the insurer finds this has prejudiced the insurer's position, then there is no duty to provide coverage. The duties may be carried out by the insured, or, if that party is unable, the insured's representative.
Clause D.2. requires the insured to protect the property from further damage, make reasonable and necessary repairs to protect the property, and keep an accurate record of repair expenses. Although not stated, the costs of protecting and making necessary repairs to protect the property are covered in addition to the direct property loss—but only to the extent that the entire loss does not exceed the limit of liability, and so creates the need to keep accurate records of the expenditures. The prior form added that the insured must cooperate with the insurer in the investigation of a claim (3.).
Clause D.5.c. imposes upon the insured a requirement to submit to examination under oath while not in the presence of any other named insured. This language resulted from the outcome of a Missouri case, USF&G v. Hill, 710 S.W. 2d 171 (Mo. App. 1986), wherein the court decided that without an express policy provision, an insurer could not require an insured to submit to questioning away from other insureds.
The importance of keeping accurate records—particularly if the property is rented to others—is highlighted by clause D.6.g.
E. Loss Settlement (basic form DP 00 01)Covered property losses are settled at actual cash value at the time of loss but not more than the amount required to repair or replace the damaged property.
E. Loss Settlement (broad and special forms DP 00 02, DP 00 03)
In this Condition E., 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 Other Coverages F.12. Ordinance Or Law. 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; and
c. Structures that are not buildings;
at actual cash value at the time of loss but not more than the amount required to repair or replace.
2. Buildings 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 for with material of like kind and quality and for like use;
(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 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 $2500;
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 E. 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
Covered losses on the DP 00 01 are settled on an actual cash value basis. Some states require the modified loss settlement DP 00 08 be attached to the DP 00 01. This endorsement states that if a building is repaired or replaced to restore the building for the same occupancy and use at the same site within one hundred eighty days of the loss, then the lesser of the limit of liability or the amount actually spent to repair or replace will be paid. The insured can elect not to repair or replace, however, in which case he receives the least of the limit of liability, the market value, or the amount it would have cost to repair or replace the building. Repair or replacement does not include any costs attributable to comply with an ordinance or law governing repair or rebuilding.
Personal property, awnings, carpeting, household appliances, outdoor antennas and outdoor equipment, whether or not attached to buildings, and structures that are not buildings all are valued at actual cash value, but not for more than the amount required to repair or replace them.
The recovery of loss to buildings under coverages A and B, other than building items listed above, depends on the percentage of insurance carried to replacement cost and whether the property is actually repaired or replaced. If, at the time of loss, the insured has an amount of insurance equal to at least 80 percent of the damaged building's full insurable replacement cost immediately before the loss, the insurance will (after applying any deductible and with no deduction for depreciation) pay the lowest of: the limit of liability applicable to the building; the replacement cost "with material of like kind and quality and for like use" of the damaged part of the building (although actual replacement need not occur on the same premises); or the necessary amount actually spent to repair or replace the damaged building.
Note that the building may be rebuilt (or replaced) at a new premises; however, the payment then is limited to what it would have cost to rebuild the dwelling at the insured location. This is a new provision in the current form. An insured cannot, say, decide to rebuild in an area where costs are much greater and expect the insurer to pay the additional amount.
If there is less than 80 percent insurance to replacement value, the insurance pays the greater of (a) the actual cash value of that part of the building damaged, or (b) that proportion of the cost to repair or replace the damage (after deductible and without depreciation) that the amount of insurance on the building bears to 80% of the building's replacement cost, but never for more than the applicable limit of liability. This is similar to a coinsurance clause.
Disagreements often arise between insurers and insureds regarding the appropriate amount of recovery under this provision, as evidenced by Higginbotham v. New Hampshire Indemnity Co., 498 So.2nd 1149 (La. Ct. App. 1987). Here the court reviewed whether the insurance company was correct in paying only to repair and not replace a roof that was damaged by windstorm. Three expert witnesses testified that due to the extent of damages, unless the roof was completely replaced, it could not be guaranteed leak-proof. The court ruled that the insurer's original payment for repairs was arbitrary and capricious, and therefore required the insurer to replace the roof and pay all penalties and attorney fees.
In no event will the policy pay more than actual cash value unless actual repair or replacement is completed or the cost to repair or replace the damage is both less than $2,500 and less than 5 percent of the amount of insurance on the building. The insured may claim the actual cash value initially—before repair or replacement is completed—and then may make an additional claim based on replacement cost. The wording of this provision has been amended. Previously, it appeared that repair or replacement had to be completed within one hundred eighty days and a claim made for the additional amount. An insured whose dwelling was one of many leveled by a tornado might have found this clause impossible to comply with because of the shortage of contractors and builders. Now, with the current wording, the intent is clear. The insured must notify the insurer within one hundred eighty days of the date of loss that he or she intends to make a claim for the additional liability; repair or replacement need not be complete.
F. Loss To A Pair Or SetIn case of loss to a pair or set, we may elect to:
1. Repair or replace any part to restore the pair or set to its value before the loss; or
2. Pay the difference between actual cash value of the property before and after the loss.
Analysis
This condition provides that if there is a loss to part of a pair or set the insurer may elect to either repair or replace any part of the pair or set to restore the pair or set to its value before the loss, or pay the difference between the actual cash value of the set before and after loss. Note that the choice is the insurer's whether to replace or pay.
G. Glass Replacement (form DP 00 01 only)Loss for damage to glass caused by a Peril Insured Against will be settled on the basis of replacement with safety glazing materials when required by ordinance or law.
Analysis
When the law requires replacement of broken or damaged glass with safety glazing materials, the insurance will pay the higher cost necessary to comply with the law. This higher payment is allowed only when the law requires safety glazing. Where replacement with safety glazing material is not required by law, the policy pays no more than the cost of replacement with the same material as the damaged property. The provision is included in the DP 00 01 conditions since there is no coverage for ordinance or law unless endorsed. The provision is not necessary in forms DP 00 02 and DP 00 03, because the additional coverage for ordinance or law would respond.
G. AppraisalIf you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent and impartial appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the Described Location is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss.
Each party will
1. Pay its own appraiser; and
2. Bear the other expenses of the appraisal and umpire equally.
Analysis
The appraisal condition provides the method for resolving the question of the amount of loss when the insurer and insured cannot agree. This clause is essentially the same as the provisions of lines 123-140 of the standard fire policy. See The Standard Fire Policy. The current form states that each party is to choose a competent and impartial appraiser; the earlier forms required only a competent one.
H. Other Insurance And Service Agreement.If property covered by this Policy is also covered by:
1. Other fire insurance, we will pay only the proportion of a loss caused by any peril insured against under this policy that the limit of liability applying under this Policy bears to the total amount of fire insurance covering the property.
2. A service agreement, this insurance is excess over any amounts payable under any such agreement. Service agreement means a service plan, property restoration plan, home warranty or other similar service warranty agreement, even if it is characterized as insurance.
Analysis
This condition contains two parts. The first part provides that where there is other insurance also covering a loss covered under the dwelling property form, the policies will pro rate the loss payment based on the proportional relationship that each policy limit has to the total amount of insurance on the loss. For example, if two policies cover a $10,000 loss, policy A with a limit of $50,000 and policy B with a limit of $70,000, payment under A is $4,200 [50,000/120,000 = .42; $10,000 x .42 = $4,200] and under B is $5,800 [70,000/120,000 = .58; $10,000 x .58 = $5,800].
The 2002 edition forms contained a new condition which applies when the "other insurance" is in the form of a warranty or service agreement. This condition has remained the same in the 2014 form. For example, it is not uncommon to purchase a warranty on a dwelling that states that if certain conditions are met the warranty's subject will be repaired or replaced. When such a warranty or service agreement is in place, the dwelling policy will be excess rather than share a loss pro rate.
I. SubrogationYou may waive in writing before a loss all rights of recovery against any person. If not waived, we may require an assignment of rights of recovery for a loss to the extent that payment is made by us.
If an assignment is sought, the person insured must sign and deliver all related papers and cooperate with us.
Analysis
Recognizing the importance of a free right of entering into contracts absolving others from liability in certain situations (such as hold-harmless agreements and certain provisions in leases), the subrogation condition allows the waiving—in writing and prior to a loss—of rights of recovery against persons. If the insured has not waived his right of recovery prior to a loss, the condition permits the insurer to require the insured's assignment of rights to the insurer.
J. Suit Against UsNo action can be brought against us unless there has been full compliance with all of the terms under this Policy and the action is started within two years after the date of loss.
K. Our Option
If we give you written notice within 30 days after we receive your signed, sworn proof of loss, we may repair or replace any part of the damaged property with material or property of like kind and quality.
L. Loss Payment
We will adjust all losses with you. We will pay you unless some other person is named in the Policy or is legally entitled to receive payment. Loss will be payable 60 days after we receive your proof of loss and
1. Reach an agreement with you;
2. There is an entry of a final judgment; or
3. There is a filing of an appraisal award with us.
M. Abandonment Of Property
We need not accept any property abandoned by you.
Analysis
These conditions spell out various rights and responsibilities of the insurer. They closely parallel similar provisions found in lines 141-161 of the standard fire policy. See "The New York Standard Fire Policy", Fire & Marine, Misc. Property.
The 2002 forms changed the time for bringing suit against the insurer from one to two years from the date of loss. This time frame remains in the 2014 forms. Wording has been added to the effect that the insured must fully comply with all terms and conditions of the policy before bringing suit.
N. Mortgage Clause.1. If a mortgagee is named in this Policy, any loss payable under Coverage A or B will be paid to the mortgagee and you, as interests appear. If more than one mortgagee is named, the order of payment will be the same as the order of precedence of the mortgages.
2. If we deny your claim, that denial will not apply to a valid claim of the mortgagee if the mortgagee:
a. Notifies us of any change in ownership, occupancy or substantial change in risk of which the mortgagee is aware;
b. Pays any premium due under this Policy on demand if you have neglected to pay the premium; and
c. Submits a signed, sworn statement of loss within 60 days after receiving notice from us of your failure to do so. Policy conditions relating to:
(1) Appraisal;
(2) Suit Against Us; and
(3) Loss Payment;
also apply to the mortgagee.
3. If we decide to cancel or not to renew this Policy, the mortgagee will be notified at least 10 days before the date of cancellation or nonrenewal takes effect.
4. If we pay the mortgage for any loss and deny payment to you:
a. We are subrogated to all the rights of the mortgagee granted under the mortgage on the property; or
b. At our option, we may pay to the mortgagee the whole principal on the mortgage plus any accrued interest. In this event, we will receive a full assignment and transfer of the mortgage and all securities held as collateral to the mortgage debt.
5. Subrogation will not impair the right of the mortgagee to recover the full amount of the mortgagee's claim.
Analysis
The mortgage clause is a standard provision in property forms. For a comprehensive examination of issues related to this condition, see IDL:Standard Mortgage Clause.xml^"The Standard Mortgage Clause", Fire & Marine, Misc. Property^The Standard Mortgage Clause]..
In the current forms, reference to a mortgagee as including a trustee has been removed. This is because the dwelling forms (as is now the case with the ISO 2000 homeowners forms) may be used to insure a trust, with the trust shown as named insured.
O. No Benefit to BaileeWe will not recognize any assignment or grant any coverage that benefits a person or organization holding, storing or moving property for a fee, regardless of any other provision of this Policy.
P. Cancellation
1. You may cancel this Policy at any time by returning it to us or by letting us know in writing of the date cancellation is to take effect.
2. We may cancel this Policy only for the reasons stated below by letting you know in writing of the date cancellation takes effect. This cancellation notice may be delivered to you, or mailed to you at your mailing address shown in the Declarations. Proof of mailing will be sufficient proof of notice.
a. When you have not paid the premium, we may cancel at any time by letting you know at least 10 days before the date cancellation takes effect.
b. When this Policy has been in effect for less than 60 days and is not a renewal with us, we may cancel for any reason by letting you know at least 10 days before the date cancellation takes effect.
c. When this Policy has been in effect for 60 days or more, or at any time if it is a renewal with us, we may cancel:
(1) If there has been a material misrepresentation of fact which if known to us would have caused us not to issue the Policy; or
(2) If the risk has changed substantially since the policy was issued.
This can be done by letting you know at least 30 days before the date cancellation takes effect.
d. When this Policy is written for a period of more than one year, we may cancel for any reason at anniversary by letting you know at least 30 days before the date cancellation takes effect.
3. When this Policy is canceled, the premium for the period from the date of cancellation to the expiration date will be refunded pro rata.
4. If the return premium is not refunded with the notice of cancellation or when this Policy is returned to us, we will refund it within a reasonable time after the date cancellation takes effect.
Q. Nonrenewal
We may elect not to renew this Policy. We may do so by delivering to you, or mailing to you at your address shown in the Declarations, written notice at least 30 days before the expiration date of this Policy. Proof of mailing will be sufficient proof of notice.
Analysis
The "no benefit to bailee" condition makes clear that coverage is for the benefit of the insured, and there is no coverage in favor of anyone holding, storing, or moving property for a fee. Such coverage would amount to liability insurance for the bailee. This is not to say that the insured cannot collect for a covered loss; it simply means that another party cannot reap the benefits of the coverage.
The cancellation clause explains how the policy may be canceled by the insured or the insurer. The insured may cancel at any time by returning the policy or by notice in writing, stating the date cancellation is to be effective. For the insurer, cancellation rights are more restricted and written notice in advance of cancellation must be given.
Ten days notice is required for cancellation for nonpayment of premium, and for any reason before a new policy has been in effect for sixty days. For a renewal policy or a new policy in effect 60 days or more, the insurer may cancel by giving at least thirty days notice only if there has been a material misrepresentation that would, if known, have caused the insurer to decline to issue a policy, or if the risk has changed substantially since the policy was issued. A policy written for more than one year may be canceled at any anniversary with thirty days advance notice.
All premium refunds due to cancellation are pro rata to the expiration date. The insurer is required to return the unearned premium within a reasonable time after the date cancellation takes effect. Some states have more stringent rules on cancellation than are provided in the policy. For those states, special state endorsements are used that contain modified cancellation provisions conforming to the various state's individual requirements.
Written notice of the insurer's intent not to renew a policy—with the same notice requirement as for cancellation—must be given at least thirty days before expiration.
R. Liberalization ClauseIf we make a change which broadens coverage under this edition of our Policy without additional premium charge, that change will automatically apply to your insurance as of the date we implement the change in your state, provided that this implementation date falls within 60 days prior to or during the policy period stated in the Declarations.
This Liberalization Clause does not apply to changes implemented with a general program revision that includes both broadenings and restrictions in coverage, whether that general program revision is implemented through introduction of:
1. A subsequent edition of this Policy; or
2. An amendatory endorsement.
S. Waiver or Change of Policy Provisions
A waiver or change of a provision of this policy must be in writing by us to be valid. Our request for an appraisal or examination will not waive any of our rights.
T. Assignment
Assignment of this Policy will not be valid unless we give our written consent.
Analysis
The liberalization clause provides that if the insurer, during the policy period or within 60 days prior to the policy period, adopts a revision that broadens the coverage without additional premium, the broadened coverage applies immediately to the existing policy. The liberalization clause does not apply to changes made through the introduction of subsequent form editions. For example, when the 1989 dwelling program replaced the 1977 dwelling program, the liberalization condition did not apply to broadening of coverage under the replacement program. Likewise, when the 1994 amendatory endorsements which added coverage (as the other coverage for ordinance and law) were introduced the broadened coverage did not apply to the 1989 forms.
The waiver or change of policy provisions condition provides that any waiver or change of policy provisions must be made in writing by the insurer, and that the insurer's request for an appraisal or examination does not waive any of the insurer's rights under the policy.
Assignment of rights under the policy are not valid without the written consent of the insurer. This reflects the concept the insurance policy is a personal contract between insured and insurer, and the insurer retains the right to accept or reject assignment of the policy rights to a new insured.
U. DeathIf you die, we insure:
1. Your legal representatives but only with respect to the property of the deceased covered under the Policy at the time of death;
2. With respect to your property, the person having proper temporary custody of the property until appointment and qualification of a legal representative.
V. Nuclear Hazard Clause
1. "Nuclear hazard" means any nuclear reaction, radiation or radioactive contamination, all whether controlled or uncontrolled or however caused, or any consequence of any of these.
2. Loss caused by the nuclear hazard will not be considered loss caused by fire, explosion or smoke, whether these perils are specifically named in or otherwise included within the Perils Insured Against.
3. This Policy does not apply to loss caused directly or indirectly by nuclear hazard, except that direct loss by fire resulting from the nuclear hazard is covered.
W. Recovered Property. If you or we recover any property for which we have made payment under this Policy, you or we will notify the other of the recovery. At your option, the property will be returned to or retained by you or it will become our property. If the recovered property is returned to or retained by you, the loss payment will be adjusted based on the amount you received for the recovered property.
X. Volcanic Eruption Period. One or more volcanic eruptions that occur within a 72-hour period will be considered as one volcanic eruption.
Y. Loss Payable Clause
If the Declarations show a loss payee for certain listed insured personal property, that person is considered an insured in this Policy with respect to that property.
If we decide to cancel or not renew this Policy, that loss payee will be notified in writing.
Analysis
The death condition provides that in the event that the named insured or spouse (if a resident of the same household) dies, the policy extends coverage immediately to the deceased's legal representative (executor or administrator of the estate) with respect to the insured premises and property of the deceased. Coverage also extends (as to the property) to anyone having proper temporary custody of the property until appointment and qualification of a legal representative.
For a comprehensive review of nuclear exclusion clauses, see Nuclear Exclusion Clauses.
The recovered property condition provides a means of readjusting loss when property on which a claim has been paid is recovered by either the insurer or the insured. The prevailing practice prior to this clause was that once the insurer had paid the claim all ownership rights to the property belonged to the insurer, who could sell the property for salvage or sell it back to the insured, at the insurer's option.
Now, under this provision, the insured has the option to retain the property (or have it returned if recovered by the insurer) or let it become the property of the insurer. If the insured chooses to retain or regain the property, the loss payment is to be adjusted based on the amount the insured received for the recovered property. This implies that any salvage or recovery costs incurred by the insurer are borne by the insurer, and the insured need only pay back the amount received from the insurer for the loss in order to regain the property. This is of great benefit to the insured, especially in cases where the property was underinsured and the amount paid was less than the full value of the property.
With the addition of the peril of volcanic eruption it was felt necessary to define "volcanic eruption" in terms of successive eruptions. So all successive volcanic eruptions that occur within a seventy-two hour period are to be considered a single eruption. This clause does not address the further problem of successive eruption over more than seventy-two hours by with less than seventy-two hours separating any two of them. Presumably the insured would have the benefit of the most favorable treatment in such a case.
The current forms have added a condition governing a loss payee for personal property; for example, when property is purchased under a rent-to-own or a purchase agreement for appliances or furniture. Heretofore, a policy could be cancelled and the loss payee would not know there was no insurance protection for the property.
Z. Policy PeriodThis Policy applies only to loss which occurs during the policy period.
Analysis
This section has been moved from an earlier place in the policy. The dwelling property policy is written on an occurrence basis, meaning that only incidents occurring within the policy period listed on the declarations page are covered. Claims made for incidents falling outside that policy period are not covered, whether or not the claim is presented during the applicable policy period.
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.