December 4, 2012
Summary: The conditions applicable to both section I and section II of the Insurance Services Office 2011 homeowners forms are the subject of this discussion, with reference to the 2000 forms.
Topics covered:
The 2000 forms contained seven conditions that applied to both the section I and section II coverages, and the 2011 forms contain the same seven conditions.
A. 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.
Analysis
If the insurer, during the policy period or within sixty days prior to the policy period as shown in the policy declarations, 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. Changes contained in the 2011 forms will not apply to the 2000 forms; as changes made in the 2000 forms do not apply to the 1991 homeowners forms.
The liberalization clause states that changes made to forms either through special provisions endorsements or through subsequent editions of the policy may contain both broadenings and restrictions of coverage. Since the clause is intended to benefit the insured policyholder, a change containing both broadenings and restrictions of coverage obviously will not do so. Hence, the statement exists that the liberalization clause does not apply to any changes that include both broadenings and restrictions.
Analysis
This clause 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. The insurance contract is a contract of adhesion; that is, the insurer draws up the contract and offers it on a "take it or leave it basis." It is not subject to negotiation by the prospective insured. The insurer, from this vantage point, does have the ability to make a change or waive policy provision but must do so in writing. This condition might come into play with a loss to covered property, as when an insured requests additional time to furnish a signed, sworn proof of loss.
C. Cancellation1.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 cancelled, 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.
Analysis
The discussion that follows is on the general cancellation (and nonrenewal) conditions that are contained within the policy forms themselves. Remember, though, that state-specific provision endorsements modify these forms. Some states have more stringent rules on cancellation than are provided in the policy. For example, in New York, fifteen days notice, rather than ten, is required for cancellation for nonpayment of premium. For a discussion of the endorsements used with the 2000 homeowners forms, see Special Provisions.
The cancellation clause explains how the policy may be cancelled 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. The notice must be delivered to the insured or mailed to the insured's mailing address shown on the declarations. Proof of mailing is sufficient proof of notice, so the insured's acknowledgment of receipt is unnecessary.
Ten days notice to the insured is required for cancellation for nonpayment of premium. When a new policy has been in effect for less than sixty days (often called the underwriting period), the insurer may cancel for any reason. For a renewal policy, or a new policy in effect sixty 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 cancelled 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."
D. NonrenewalWe may elect not to renew this policy. We may do so by delivering to you, or mailing to you at your mailing 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
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. Some states have different requirements, which are found in the specific state endorsements.
Analysis
Assignment of the rights under the policy is not valid without the written consent of the insurer. This reflects the concept that 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. (See The Standard Fire Policy, for further discussion and examples of this principle.)
Many insurers prefer that a policy be rewritten for a new insured. A new application provides information on the new insured, as well as giving the insurer a chance to re-underwrite the exposure.
F. SubrogationAn "insured" may waive in writing before a loss all rights of recovery against any person. If not waived, we may require an assignment of rights or recovery for a loss to the extent that payment is made by us.
If an assignment is sought, an "insured" must sign and deliver all related papers and cooperate with us.
Subrogation does not apply Coverage F or Paragraph C. Damage to Property of Others under section II — Additional Coverages.
Analysis
The subrogation clause, a common element of virtually all property insurance policies, was adapted from the standard fire policy and simplified under homeowners 76 and subsequent policies. The clause gives the insured permission to waive rights of recovery against others prior to loss. But the waiver must be in writing; oral waiver can jeopardize the insured's right of payment for the loss, as can any waiver of rights of recovery after the loss has occurred.
Also, the condition requires that when assignment of rights is sought by the insurer, the insured will sign and deliver all related papers to, and cooperate with, the insurer in this endeavor. The subrogation clause does not apply to the medical payments to others or damage to property of others coverages of section II.
G. DeathIf any person named in the Declarations or the spouse, if a resident of the same household, dies, the following apply:
1.We insure the legal representative of the deceased but only with respect to the premises and property of the deceased covered under the policy at the time of death; and
2."Insured" includes:
a.An "insured" who is a member of your household at the time of your death, but only while a resident of the "residence premises"; and
b.With respect to your property, the person having proper temporary custody of the property until appointment and qualification of a legal representative.
Analysis
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 premises and property of the deceased. Also, coverage continues for members of the household who were insureds (as defined in definition five of the policy) at the time of death and remain residents of the premises, and extends (as to the property) to anyone having "proper temporary custody" of the property until appointment and qualification of a legal representative.