Topics covered:

Limit of liability

Severability of insurance

Duties after an "occurrence"

Conditions applicable to medical payments coverage F

Suit against the insurer

Bankruptcy of an "insured"

Other insurance

Policy period

Concealment or fraud

Limit of Liability

A.Limit of Liability

     Our total liability under Coverage E for all damages resulting from any one "occurrence" will not be more than the Coverage E limit of liability shown in the Declarations. This limit is the same regardless of the number of "insureds", claims made or persons injured. All "bodily injury" and "property damage" resulting from any one accident or from continuous or repeated exposure to substantially the same general harmful conditions shall be considered to be the result of one "occurrence".

     Our total liability under Coverage F for all medical expense payable for "bodily injury" to one person as the result of one accident will not be more than the Coverage F limit of liability shown in the Declarations.

Analysis

The first condition, A., limit of liability, provides that the insurer's total liability under coverage E, personal liability, resulting from any one occurrence will not exceed the limit shown in the declarations, regardless of the number of insureds, claims made, or persons injured. The definition of occurrence can be found in the current homeowners forms. See ISO Homeowners Definitions; for a discussion of the meaning of "occurrence," see Occurrence.

Also, the first condition provides that liability under coverage F—medical payments to others—for all medical expense payable for bodily injury to one person as the result of one accident will not be more than the coverage F limit.

Severability of Insurance

B.Severability of Insurance

This insurance applies separately to each "insured". This condition will not increase our limit of liability for any one "occurrence."

Analysis

The second condition, B., provides that the insurance applies separately to each insured, but does not increase the limit of liability. This clause has been a basic part of liability policies, giving every insured under the policy the status of the only insured with respect to claims by others. An exclusion first introduced in the 1982 edition created what appeared to be a conflict between an exclusion and the severability of insurance condition. That exclusion, found in the current forms, states that personal liability coverage does not apply to bodily injury to the named insured, or to an insured who is a resident relative of the named insured's household, or someone under age twenty-one in the care of the named insured or a resident relative ("you" or an "insured" as defined under Definition 5.a. or b.). The principle behind this exclusion had been part of the established common law until the mid-twentieth century. But once the principle that close family members could not sue each other began to erode, insurers resorted to the explicit exclusion. Thus, the introduction of the exclusion did not narrow the severability of insurance provision from its original scope. For a discussion of the exclusion and what led up to its introduction, see Intrafamily or Household Exclusions. Also, see Homeowners Section II Exclusions.

 Duties after an Occurrence

C.Duties After "Occurrence"

     In case of an "occurrence," you or another "insured" will perform the following duties that apply. We have no duty to provide coverage under this policy if your failure to comply with the following duties is prejudicial to us. You will help us by seeing that these duties are performed:

1.Give written notice to us or our agent as soon as is practical, which sets forth:

a.The identity of the policy and the "named insured" shown in the Declarations;

b.Reasonably available information on the time, place and circumstances of the "occurrence"; and

c.Names and addresses of any claimants and witnesses;

2.Cooperate with us in the investigation, settlement or defense of any claim or suit;

3.Promptly forward to us every notice, demand, summons or other process relating to the "occurrence";

4.At our request, help us:

a.To make settlement;

b.To enforce any right of contribution or indemnity against any person or organization who may be liable to an "insured";

c.With the conduct of suits and attend hearings and trials; and

d.To secure and give evidence and obtain the attendance of witnesses;

5.With respect to C. Damage to Property of Others under Section II—Additional coverages, submit to us within 60 days after the loss, a sworn statement of loss and show the damaged property, if in an "insured's" control;

6.No "insured" shall, except at such "insured's" own cost, voluntarily make payment, assume obligation or incur expense other than for first aid to others at the time of the "bodily injury."

Analysis

The wording of the third condition, C., allows for any insured, not just the named insured, to fulfill the required duties. Cooperation with the insurer is vital, particularly concerning a liability claim, since the insurer must often provide a defense for an insured. Additionally, the forms specifically state that the insurer has no duty to provide coverage if an insured's actions (or lack thereof) are prejudicial to the insurer's position.

For this reason, the insured must give written notice to the insurer or its agent "as soon as is practical" setting forth: the identity of the policy and insured; reasonably available information on the time, place, and circumstances of the occurrence; and names and addresses of claimants and witnesses. The wording "as soon as practical" is important. Sometimes insureds are not aware there is a pending claim; however, once an insured becomes aware, or even suspects, there may be a claim, a report to the insurer should be made. Where witnesses are involved, memories of an event can often fade over time, thus making a defense difficult.

At the insurer's request, the insured must provide further assistance—help the insurer make the settlement, enforce any right of contribution or indemnity against anyone (including any organization) who may be liable to an insured, help with the conduct of suits, attend hearings and trials, and secure and give evidence and obtain the attendance of witnesses.

For damage to property of others coverage, the insured must submit to the insurer within sixty days after the loss a sworn statement of loss and show the damaged property if within an insured's control. Note that unlike the requirement for section I claims, this is sixty days after loss rather than after the company's request. The requirement of a statement, rather than a proof of loss (a distinction that is explained under "Conditions Applicable to Medical Payments Coverage F," which follows) probably reflects the fact that the owner of the property, and not the insured, often has control over the damaged property after the loss.

It is important to note that the insured must not, except at his or her own cost, voluntarily make payment, assume obligations, or incur expense other than for first aid to others at the time of bodily injury. This is because to do so could be construed as an admission of guilt, thus affording the insurer no opportunity for defense.

Conditions Applicable to Medical Payments Coverage F

D.Duties of an Injured Person—Coverage F—Medical Payments to Others

1.The injured person or someone acting for the injured person will:

a.Give us written proof of claim, under oath if required, as soon as is practical; and

b.Authorize us to obtain copies of medical reports and records.

2.The injured person will submit to a physical exam by a doctor of our choice when and as often as we reasonably require.

E.Payment of Claim—Coverage F—Medical Payments to Others

     Payment under this coverage is not an admission of liability by an "insured" or us.

Analysis

Conditions D. and E. apply to medical payments to others (coverage F) only. The fourth condition, duties of an injured person, requires that to make claim under the policy, the injured person, or someone acting on behalf of the injured person, must give the insurer written proof of claim, under oath if required, as soon as practical and authorize the insurer to obtain medical reports and records. In addition, the injured person must submit to physical examination by a doctor of the insurer's choice when and as often as the insurer may reasonably require. The proof of claim requirement has been part of this condition at least as far back as the pre-simplified 1971 forms. The difference between requiring a statement of a claim or loss, and a proof of claim or loss is that the latter indicates that the insured must submit actual proof—not merely a sworn statement—to support the claim.

The fifth condition, E., provides that payment under coverage F is not an admission of liability by the insured or the insurer. Remember that medical payments coverage is often viewed as a way to avoid a larger claim for damages. For example, a visitor to the insured premises could fall on the insured's porch steps, and break a leg. If this injury is dealt with promptly, it may make the visitor less likely to sue the insured for negligence in failing to maintain the steps.

 Suit Against the Insurer

F.Suit Against Us

1.No action can be brought against us unless there has been full compliance with all of the terms under this Section II.

2.No one will have the right to join us as a party to any action against an "insured".

3.Also, no action with respect to Coverage E can be brought against us until the obligation of such "insured" has been determined by final judgment or agreement signed by us.

Analysis

The sixth condition, F., provides that no action can be brought against the insurer unless there has been compliance with all of the section II terms. If an insured has not cooperated fully with the carrier and this lack of cooperation has hindered the settlement of the claim, it makes no sense to tie up the courts with a suit. Therefore, uncooperative insureds may not sue the carrier unless they have followed all the required conditions of the policy. Current language again clarifies that determination of the obligation of any insured governs the action, since failure of "such insured" to comply with all policy requirements before or after loss may be grounds for denial of a claim or loss. The failure to comply generally must be such that the insurer's ability to defend or respond to a claim is seriously jeopardized.

This condition further provides that no one has the right to join the insurer as a party to any action against any insured.

 Bankruptcy of an Insured

G.Bankruptcy of an Insured

 Bankruptcy or insolvency of an "insured" will not relieve us of our obligations under this policy.

Analysis

Condition G. provides that bankruptcy or insolvency of an insured does not relieve the insurer of its obligations under the policy. This provision precludes the insurer's using the defense of the insured's financial failure to avoid responding to claims under section II.

 Other Insurance

H.Other Insurance

     This insurance is excess over other valid and collectible insurance except insurance written specifically to cover as excess over the limits of liability that apply in this policy.

Analysis

Condition eight, H., concerning other insurance and personal liability coverage, provides that the personal liability coverage is excess over valid and collectible insurance, except insurance written specifically to cover as excess over the limits of liability of section II of the homeowners policy. This recognizes the possible existence of umbrella or other excess liability policies purchased with the specific intent to provide coverage in excess of the homeowners personal liability limits.

Policy Period

I.Policy Period

     This policy applies only to "bodily injury" or "property damage" which occurs during the policy period.

Analysis

Although it may be easy to fix the time and place "property damage" occurs, it may not be so easy with bodily injury. "Bodily injury," remember, includes sickness or disease. Further, "occurrence" includes continuous or repeated exposure to substantially the same harmful conditions. Will the occurrence thereof be tied to first manifestation, or last known exposure? Will courts tend to hold the policy tied to the last known exposure accountable, as in most workers compensation laws? See the "Occurrence" article. Occurrence.

 Concealment or Fraud

J.We do not provide coverage to an "insured" who, whether before or after a loss, has:

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

The section II condition differs from its counterpart section I condition in that the section I condition states that the insurer will provide coverage to no insured if an insured ("an" insured may be read as "any" insured) has intentionally misrepresented or concealed material facts. The section II condition, however, excludes coverage for an insured (again, "an" may be "any" insured) who has intentionally misrepresented or concealed any material fact or circumstance, or who has engaged in fraudulent conduct relating to the insurance.

A look at the history of the condition is instructive. The 1991 forms gave the insurer the right to void the entire policy "if, whether before or after a loss, an 'insured' ha[d] intentionally concealed or misrepresented any material fact or circumstance; engaged in fraudulent conduct; or made false statements" relating to the insurance. This condition applied to both section I property and section II liability coverages. In 1994, with the filing of the special provisions applicable to the 1991 forms, this condition was modified. The insurer would no longer void the entire policy, and the condition was broken into two parts, although both parts remained in the conditions applying to sections I and II.

The 1994 concealment or fraud condition applicable to section I property coverages stated that "with respect to all 'insureds'" the insurer would provide "no coverage for loss … if, whether before or after a loss one or more 'insureds' ha[d]: intentionally concealed or misrepresented any material fact or circumstance; engaged in fraudulent conduct; or made false statements." The concealment or fraud condition applicable to section II liability coverages contained the same circumstances under which the insurer might deny coverage, but stated that coverage might be denied "to one or more 'insureds'." If coverage were denied to all insureds because of the actions of one insured, the section II severability of insurance condition would be rendered useless.

The 2000 forms break the "concealment or fraud" condition into two parts, and place the part applicable to property coverages within the section I conditions; similarly, the part applicable to the section II liability coverages is now located in the section II conditions. Likewise, the language has been changed: no insured will have section I property coverage if any insured has committed concealment or fraud. But for section II liability coverage, an insured ("an" encompasses "any insured" or "one or more"—the 1994 wording) who has committed concealment or fraud will not be provided coverage. Innocent insureds, though, will be afforded liability coverage under the policy.