Part 4 – Common Conditions

TOPICS COVERED:

Part III C – Exclusions / Limitations

Part III D – Special Physical Damage Conditions

PART III C – EXCLUSIONS / LIMITATIONS

Here we find the policy exclusions and limitations that apply to physical damage coverage.

We do not cover the following property or loss except to the extent otherwise specifically provided for in this policy.

1. ELECTRONIC EQUIPMENT, DISKS, TAPES EXCLUSIONS

We do not insure loss to the following:

1. Any electronic equipment, regardless if permanently installed or not, that receives or sends audio, data, or visual signals and is not designed solely for the reproduction of sound. This includes any accessories used with such equipment.

However, this exclusion does not apply to electronic equipment that is permanently installed in the auto or removable from a housing unit which is permanently installed in the covered auto.

Refer to Certain Electronic Equipment Coverage in Supplemental Coverages under Part III B.

B.  Cassette tapes, compact disks, or other media devices designed for use with electronic audio, data, or visual equipment.

C.  Equipment designed or used to detect, jam, or locate radar or any other speed measurement devices.

Analysis:

In answer to the questions that might arise in the supplemental coverage for certain electronic equipment, this exclusion identifies items that are not covered, even if attached to or is an accessory for electronic equipment that is covered. Therefore, there is no coverage for items such as headphones, airpods, air buds, phones, tablets, compact disks, audio tapes, and the like. There is also no coverage for jamming apparatuses or any equipment used to detect or measure speed, such as a radar detector or speed camera. 

2. FARM EQUIPMENT AND TRACTORS EXCLUSION

For any covered auto that is farm equipment, machinery, or a tractor, we do not insure loss to the following:

1. Any other equipment that can be transported by such covered auto. This does not apply to such equipment furnished by its manufacturer as part of the covered auto's delivered price or if such is described in this policy as a covered auto.
2. Stationary equipment that can be powered by the covered auto.

Analysis:

This self-explanatory exclusion precludes coverage for equipment, machinery or tractors used in farming operations, or any equipment that can be transported by same. There is an exception for equipment furnished by its manufacturer as part of the covered auto's delivered price, or if added to the policy as a covered auto. For example, if a trailer hitch or bed liner is added to a pickup truck. The last part of the exclusion precludes coverage for nonmoving equipment that can be powered by the covered auto.

3. RACING EXCLUSION

We do not insure loss to any covered auto while being used in a prearranged demolition, racing, or speed contest or stunting activity, including preparation or practice for such.

Analysis:

This exclusion is self-explanatory, as racing and stunt vehicles require specialized insurance.

4. WEAR, TEAR AND OTHER SPECIFIED CAUSES OF LOSS EXCLUSIONS

1. We do not insure loss caused by or resulting from any of the following:

1. Wear and tear; corrosion; decay or deterioration; deficiency, error, or omission in design, materials, plans, or workmanship; dry or wet rot; electrical or mechanical breakdown; freezing; fungi, mold, spores, mildew, bacterium, or other natural growth; inherent vice (a customary characteristic of the property); latent defect (an original condition or fault leading to loss); rust.
2. Blowouts, punctures, or other road damage to tires.

B.  However, if loss otherwise covered under this insurance:

1. Ensues as a result of a loss described in the preceding Paragraphs A.1 or 2, we insure such resulting loss; or
2. Causes a loss described in the preceding Paragraphs A.1 or 2, we insure such resulting loss.

Analysis:

Paragraph A.1. of this exclusion lists a number of varying and self-descriptive types of conditions that are not fortuitous in nature and therefore are not insurable under the policy. Paragraph A.2. lists tire damages that are not covered by auto insurance in general.

Paragraph B. provides an exception to the excluded losses in Paragraph A. for loss that is a result of any of the excluded losses. For example, if a tire blowout results in a covered auto hitting a guardrail, that damage would be covered. 

5. DIMINISHED VALUE EXCLUSION

We do not insure any diminution in value to any covered auto.

Analysis:

To understand this exclusion, it is necessary to refer to the definition of diminution in value, which means the actual or perceived reduction in market or resale value that results from a loss. An auto policy pays for the repair or replacement of a covered auto, but sometimes an insured perceives that the value is diminished from its original value before the loss. This is a consequence of loss that is excluded, as it is subjective and also an exact loss in market value cannot be easily and objectively established. For example, a new car was stolen from an insured auto dealer's lot, driven to another state, and abandoned. When recovered, the vehicle had an additional 3,000 miles added to it by the thief, reducing its market value. This is an example of diminished value that would not be covered.

PART III D – SPECIAL PHYSICAL DAMAGE CONDITIONS

This section adds specifically described conditions that apply to physical damage losses under the policy. 

1. DUTIES WHEN LOSS / DANGER OF LOSS OCCURS

You, other insureds, and other coverage beneficiaries must do all of the following things:

1. Report the Loss

Immediately notify us of any loss. Also, immediately notify the police in case of theft, vandalism, or other violation of law. As soon as possible, give us a description of how, when, and where the loss occurred.

B.  Protect Property

Protect the covered auto if in imminent danger from a covered cause of loss or, if loss has occurred, from further loss. We cover the reasonable necessary expenses that you incur for such immediate safeguards.

Analysis:

The first two duties of the insured here apply at the time of loss. The insured must first report the loss immediately to the insurer, and if any law has been violated, including theft or vandalism, the police must be notified. While details may not be required at the time of loss, they are required to be provided as soon as possible.

The next duty of the insured is to protect the covered auto from any imminent danger or from further loss. For example, if the insured must have a company move their auto from impending flood waters the policy will cover the necessary expenses incurred by the insured to have the auto moved to the nearest safe location. These covered expenses are only when there is an immediate need for such safeguarding or loss prevention.

C.  Cooperation on the Loss

As often as we may reasonably request / require:

1. Allow us to examine and inspect the covered auto and any records proving the loss before its repair or disposition.
2. Submit to examination and provide statements under oath and sign and swear to such. If more than one person is examined, we reserve the right to make such examination of each person out of the presence of the others. We also reserve the right to video record any examinations.
3. Otherwise cooperate with us in the investigation / settlement of the claim.

Analysis:

The last duty listed applies once the loss has been reported, but it is no less important than the other two duties. There are three things the insurer requires the insured to be cooperative in, as often as requested by the insurer. All three items are necessary for the thorough review and determination of the insured's submitted claim. First is the insured's cooperation in permitting the carrier to inspect the covered auto and to examine any records to prove the loss, before the auto can be repaired or disposed of. Next, the insured must submit to examinations and provide statements under oath attested to by their signature, even to the point of having the examinations video-recorded if requested. These examinations may be conducted individually outside the presence of others. Throughout the investigation and settlement of the claim, the insured must cooperate in each step of the process. This can be especially difficult when there are many insureds listed or there are multiple claims to be handled, so it is important that the insured understands the necessity and extent of their required cooperation.

Failure to comply with these (or other conditions) can alter or void our obligations under this policy.

Analysis:

This last paragraph of the insured's duties carries with it the importance of cooperating with the carrier in all aspects of the policy, and the potential consequences of not doing so. All of these conditions apply in addition to other conditions of the policy; as such if the insured fails in their compliance with any condition then the carrier may alter or void coverage under the policy.

2. HOW LOSSES ARE SETTLED

1. Limit of Liability

1. Coverages F & G

Our maximum liability for loss in one accident is the least of the following amounts:

1. The actual cash value of the damaged or stolen property at the time of loss;
2. The cost of repairing or restoring the damaged property with like materials of comparable quality; or
3. The cost to replace the damaged or stolen property with like property of comparable quality.

2. Coverage H

Our maximum liability for incurred costs for any one disablement is the limit shown in the Declarations.

B.   Deductible

We are liable for loss to each covered auto only when the loss is in excess of the Deductible amount shown in the Declarations, and then only on the amount of loss less the deductible amount.

The Deductible does not apply under Comprehensive Coverage to any loss caused by fire or lightning.

Analysis:

The second part of the specific physical damage conditions begins with how the losses will be settled in regards to the limit of liability and the deductible application.

With respect to Coverages F & G, payment for a covered accident or theft will be at the lesser of either the actual cash value, the cost or repair or restoration of damaged property with similar materials of comparable quality, or the replacement of damaged or stolen property with comparable property. This is typical of all standard physical damage policies.

With respect to Coverage H, payment will be no greater than the limit shown in the Declarations for any one disablement.

The Deductible does not apply under Comprehensive to fire or lightning losses.

1. Appraisal

1. If you and we do not agree on the amount of the loss either one can require that the value of the items in dispute be set by appraisal. Within 30 days of receipt of a written demand for appraisal, each party is to select a competent and disinterested appraiser. Each party is to then notify the other of the appraiser selected.
2. The two appraisers are to select a competent and disinterested umpire. If the appraisers are unable to agree upon an umpire within fifteen days, you or we may petition a judge of a Court of Record to select an umpire.
3. The appraisers are to reach a mutual agreement on the value of the items in dispute. If the appraisers fail to agree within a reasonable time, they are to submit their differences to the umpire. Written agreement signed by any two of these three persons constitutes settlement on the items in dispute.
4. Each appraiser is paid by the party selecting the appraiser. All other expenses of the appraisal are paid equally by you and us.
5. If we agree to appraisal, we specifically retain our right to deny the claim.

Analysis:

This next section of the physical damage conditions describes the appraisal process in event the insured and insurer cannot agree on the amount of the loss settlement. The appraisal process is used to determine value, not coverage. If the loss is determined not to be covered, the insurer is not required to pay, even if the value of the loss is agreed upon.

The dissenting party must demand the appraisal within 30 days, at which time the parties are to each select appraisers and notify the other party of the selected appraiser. The appraisers then select an umpire, but if they cannot agree on such an umpire within 15 days, then either party may petition the court judge to select an umpire. It will be up to the appraisers to reach agreement on the disputed item value; if they cannot agree within a reasonable time it will be up to the umpire to decide. The settlement will be signed and agreed upon by any two of the three persons, such as the umpire and one of the appraisers. Each appraiser will be paid by the party who selected them; but other expenses of the appraisal process will be split between the insurer and the insured. If the insurer agrees to appraisal, they still retain the right to deny the claim. For example, if during the appraisal process the insurer learns that the insured materially misrepresented the claim, the insurer may alter or deny coverage.

D.  Our Liability and Satisfaction of Your Loss

If the maximum liability payable by us on a loss, as determined in this policy, does not fully satisfy your loss, than you must either seek insurance that may be provided by others for the difference or otherwise absorb the unsatisfied portion of the loss yourself.

E.   Our Options in Settling Losses

1. We may pay for the loss in money.
2. We may repair or replace all or any part of the damaged or stolen property as provided for in this policy, or take all or any part of such property at a mutually agreed, or appraised, value.
3. If any stolen property is recovered, we may return the stolen property, at our expense. We will also pay for any damage that results to the stolen property from the theft.
4. We may settle the claim with you, any loss payee named in this policy, or others legally entitled to receive payment. If the claim applies to property of others, we have the right to adjust the loss with the owners of the property. Satisfaction of their claim is also satisfaction of your claim as to such property.

Analysis:

Paragraph D of the specific physical damage conditions sets forth the insurer's obligations when, after payment of the loss under the terms of the policy, the insured is left with paying part of the loss. In this case, the insured has two options: First, to go after someone else's insurance; or second, to absorb the remainder of the loss. This can happen for example when an insured is involved in an at-fault accident with a Ferrari and the insured does not carry a high enough physical damage limit to cover the other party's damaged Ferrari. 

Paragraph E lists the manner in which the insurer may pay losses, the first of which is money. When property is damaged or stolen, the insurer may opt to repair or replace the property or take it at its agreed or appraised value. If stolen property is recovered, the insurer may return the property to the insured without cost to the insured, plus if there is any damage from the theft the insurer will pay for such damage. 

Lastly, if the insurer settles the claim with the insured but there are any loss payees or others legally entitled to payment, the insurer has the right to settle the loss directly with the property owner. If settled with the owner, this will serve to satisfy the insured's claim to that property. 

3. LOSS PAYABLE

1. We will pay you and the loss payee named in this policy, to the extent of their interest, for loss to a covered auto. However if loss results from conversion, embezzlement, or secretion on your part, this insurance will not cover the interest of the loss payee.
2. If we cancel this policy, such cancellation ends this agreement with respect to the loss payee's interest. We will mail or send to the loss payee the same advance notice of cancellation we send to the first named insured.
3. If we make any payments to the loss payee, we will obtain such loss payee's right of recovery against any other party.

4. NO BENEFIT TO BAILEE

This insurance does not apply to the benefit of any others having custody of covered property. Any assignment to such persons or organizations has no standing under this policy.

Analysis:

The final two specific physical damage conditions address loss payables and others having custody of covered property. Loss payables are paid directly to the extent of their interest in the covered auto, unless the loss results from the insured's conversion, embezzlement or secretion, in which case the policy will not pay the loss payee's interest in the auto. Payments made to the loss payee grants the insurer that loss payee's right of recovery against any other party. If the insurer cancels the policy, the loss payee will be mailed or sent the same advance notice of cancellation as is sent to the insured.

There can be no assignment of benefits under the policy. Just because someone may have custody of covered property doesn't mean they have any rights to benefits under the policy; the policy is an agreement between the insurer and the insured only.