Section I Perils Insured Against

Section I Coverage C Personal Property

Section I Exclusions

Section I Conditions

Liability Coverages and Exclusions A-D

Exclusion E Coverages E. F and G

Section II Additional Coverages and Conditions

SECTION I – CONDITIONS

A. 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. To an "insured" for more than the amount of such "insured's" interest at the time of loss; or 2. For more than the applicable limit of liability.

B. Deductible Unless 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 first part of the conditions section is straightforward and discusses insurable interest and application of the deductible. If more than one person has an insurable interest in the covered property, the carrier is not liable in any one loss to any "insured" for more than that person's interest at the time of loss in the property, or for more than the applicable limit of liability. Insurable interest is an insured's risk of financial loss because of damage or destruction of property. If two people buy a house together, with both contributing funds for the purchase of the house, they each have an insurable interest in the property.

Next, the deductible provision is discussed. Only the part of a loss that exceeds the listed deductible will be paid in event of a loss. If two deductibles apply to one loss, then only the highest deductible will be applied. For example, if an insured has a $1,000 deductible and has a loss causing $800 in damage, nothing will be paid as the loss amount does not exceed the deductible.

C. Duties After Loss

In 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, an "insured" seeking coverage or a representative of either:

1. Give prompt notice to us or our agent; 2. Notify the police in case of loss by theft; 3. 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;

4. Cooperate with us in the investigation of a claim; 5. 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; 6. 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 another "insured", and sign the same;

7. 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. The interests of all "insureds" and 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 5. above; and g. Receipts for additional living expenses incurred and records that support the fair rental value loss.

Analysis

An insurance policy is a contract, and in order for an insured to be compensated for a covered loss there are certain duties the insured must perform. Failure to perform these duties releases the insurer of its obligation to make any payment for covered losses if that failure is prejudicial to the insurer. For example, if an insured refuses to provide an inventory of damaged property, refuses to protect damaged property from further damage and is uncooperative to the extent that the insurer cannot substantiate what was damaged or what the value of that damaged property was, the insured's actions have been prejudicial to the insurer and the insurer is released from making payment for the claim.

Notice of loss

The first duty is to make prompt notice of the claim to the insurer or the agent; the sooner the insurer is advised of a loss the sooner the insurer can take steps to prevent further loss and help the insured deal with the damage and any relocation if necessary.

Theft

Naturally, in case of theft, the police should be notified. Recovery of stolen property may be possible and the police must be notified.

Credit card

The previous policy had requirements to notify credit card or electronic fund transfer companies in event of losses as provided in the credit card/electronic fund transfer coverage, but since that coverage has been removed the related duty after a loss has been removed as well.

Protect from damage

When property has been damaged it is reasonable for the insurer to require the insured to protect the property from further damage, and make any reasonable and necessary repairs in order to do so, and to keep an accurate record of such repairs and expenses. The insured may be reimbursed for such repairs as part of the loss. The cost of preventing further loss is likely to be less expensive than leaving property exposed and paying for subsequent damage from the loss. The insurer would rather provide coverage for such repairs, although the policy makes no guarantees that such funds will be reimbursed.

Cooperate

The insured is required to cooperate with the insurer in the investigation of a claim. The insurer will need details as to what happened, when, and what was damaged. If the insured does not provide the insurer with the answers to these and other questions about the loss, it is difficult for the insurer to determine whether or not coverage applies. As mentioned in the beginning of this section, if the insured's failure to comply with the duties is prejudicial to the insurer then the insurer is not obligated to make payment for any claims.

Inventory

In order to reasonably assess the loss the insurer needs to know what was damaged. Therefore an inventory of damaged personal property, including the quantity, description, actual cash value and amount of loss is required. Bills, receipts and other supporting documentation that justifies the figures given in the inventory are also required. Some damaged articles may be available for the insurer's review, but some may be so damaged as to be unrecognizable. This brings us to the next duty, that of showing the insurer the damaged property as often as reasonably required, providing the insurer with records and documents as requested and allowing copies to be made, and submitting to an examination under oath while not in the presence of another "insured" and sign the same. An examination under oath gives the insurer a record of the insured's information about the claim so that the adjuster has a record to refer to and doesn't have to ask the same question more than once. The adjuster can refer to the recorded statement. Also, in case fraud is suspected, the recorded statement provides the insurer with a record of the insured's version of what happened in the loss.

Sworn proof of loss

Along with an inventory of damaged personal property, a signed, sworn proof of loss must be sent to the insurer within 60 days of its request. The proof of loss must contain the time and cause of loss, the interests of all "insureds" and others in the property involved and any liens, other insurance which may provide coverage, changes in title or occupancy of the property, specifications of damaged buildings and detailed repair estimates, the inventory of personal property, receipts for additional living expenses incurred, and supporting documentation for loss of fair rental value. This sworn proof of loss puts together details of the loss as a whole, with documentation of damage to the dwelling and the contents, and any insurable interests that need to be recognized or changes in occupancy or title that may have occurred during the policy period. Information on other insurance that may provide coverage and receipts for certain expenses are required as well.

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.10. 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. Buildings 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, after application of any deductible and 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, after application of any deductible and 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 damaged property is both:

(1) Less than 5% of the amount of insurance in this Policy on the building; and (2) Less than $5,000; 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

Loss settlement

The loss settlement provision explains how claims are settled in event of a loss. Under the HO 00 03, the dwelling is settled at replacement cost and personal property is settled at actual cash value. This section first outlines that the increased costs to repair or replace damaged property because of ordinances or laws is not covered, other than what is provided by that additional coverage in the policy.

Personal property

Personal property, as well as awnings, carpeting, household appliances, outdoor antennas and outdoor equipment, whether or not attached, structures that are not buildings, and grave markers and mausoleums are all covered at actual cash value. So wall-to-wall carpeting, even if it is attached to the building, is covered at actual cash value. Likewise gazebos, swingsets, swimming pools and other similar other structures are all covered at actual cash value.

Buildings and other structures

The buildings covered under the dwelling and other structures coverage, coverages A and B, are covered at replacement cost, but there are some parameters. As long as the property is insured to 80% or more of the replacement cost of the building immediately before the loss, then the loss is settled at no more than the least of the following:

The policy limit

The replacement cost of that part of the building with like kind and quality for like use The necessary amount actually spent to make repairs.

For example, the policy limit is $300,000. The insured has a fire in the kitchen and the cost to replace the kitchen is $50,000. The insured is able to get the replacement done for $45,000 because materials were on sale, so the insurer will pay $45,000, since that is the lesser of the 3 amounts.

If the property is a total loss the insured may decide to rebuild at a different location. In such circumstances, what is paid is what it would have cost for the insured to rebuild at the original location.

Coinsurance

However, the property may not be insured to 80% of the replacement cost right before a loss. An insured may have made extensive improvements and not told his carrier, or local real estate prices may have escalated or other factors may have increased the value of the dwelling above the insured amount. In such cases where the property value is less than 80% of the full replacement cost, the greater of the following amounts is paid:

The actual cash value of the damaged part of the building

That proportion of the cost to repair or replace, after application of the deductible and without any depreciation, of that part of the dwelling damaged to the total amount of insurance on the policy pays to 80% of the replacement cost of the building.

For example, the policy limit is $300,000 but the dwelling is now worth $450,000. The cost to repair the kitchen is $50,000. Eighty percent of $450,000 is $360,000. Therefore the dwelling is under insured. The calculation is $300,000, the insured amount, divided by $360,000, 80% of the $450,000 replacement cost of the building. $300,000 divided by $360,000 equals 83%, Therefore, the amount of loss is multiplied by 83% to show that $41,500 is what will be paid out for the loss to the kitchen.

When determining the amount of insurance required to equal 80% of the replacement cost of the building before the loss, certain items are not included. These items are excavations, footings, foundations, piers, or other structures that support all or part of the building which are below the undersurface of the lowest basement floor, supports that are below the surface of the ground inside the foundation walls if there is no basement, and underground flues, pipes, wiring and drains.

Repairs and payment

Once a loss has occurred, no more than the actual cash value of the damage is paid until the actual repair or replacement is completed. So the insured receives a partial payment and must pay the rest out of pocket. She will be reimbursed for the rest once the repair is complete. If the cost to repair or replace is less than 5% of the amount of insurance on the building and less than $5,000, then the loss will be paid in full before repairs are completed. This has been changed from the last policy; previously payment was made if the cost to repair or replace was less than $2,500, but the 2022 edition has increased that limit to $5,000.

Replacement cost option

The insured has the option to disregard the replacement cost parameters and may settle on an actual cash value basis for the loss. The insured may also change his mind, as long as he advises the carrier within 180 days of the date of the loss that he intends to repair or replace the damaged building.

E. Loss To A Pair Or Set

In 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.

F. Appraisal If 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 "residence premises" 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.

G. Other Insurance And Service Agreement If a loss covered by this Policy is also covered by:

1. Other insurance, we will pay only the proportion of the loss that the limit of liability that applies under this Policy bears to the total amount of insurance covering the loss; or 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.

H. Suit Against Us No action can be brought against us unless there has been full compliance with all of the terms under Section I of this Policy and the action is started within two years after the date of loss.

I. 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.

J. 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.

K. Abandonment Of Property We need not accept any property abandoned by an "insured".

L. 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. Paragraphs F. Appraisal, H. Suit Against Us and J. Loss Payment under Section I – Conditions 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 cancellation or nonrenewal takes effect. 4. If we pay the mortgagee 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.

M. No Benefit To Bailee We 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.

Analysis

Pair or set

Pairs and sets can cause confusion when it comes to loss settlement. If only part of a set or half of a pair of something is damaged, how should that be covered? Does the insured get compensated only for the damaged portion of the loss, does that fairly return the insured to pre-loss condition? This possible concern is why the pair and set clause exists. How this is settled is at the discretion of the insurer to use one of two options. The first is to repair or replace any part to restore the set or pair to its value before the loss. An insured may have a pair of brass candlesticks, and one is damaged in a loss. The insurer can repair the damaged one or replace it, so the insured is returned to having a matching pair of brass candlesticks. The second option is to pay the difference between the actual cash value before the loss and after the loss. The candlestick is unrepairable, and those style candlesticks are no longer made. The value of the pair before the loss was $300. After the loss, the single candlestick is worth only $100. Here the insurer would pay the insured $200, which is the difference in value before and after the loss.

Appraisal

It is not uncommon for the insured and insurer to disagree about the amount of the loss. In such instances, either party may request an appraisal. Once an appraisal is requested each party has twenty days to hire a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree on an umpire within fifteen days, then either party may request one be selected by a judge of a court of record.

The appraisers will then review the claim and each will come up with an amount for the loss. If the amounts agree then that is what is paid. If the amounts do not agree, the appraisers will submit their findings to the umpire; an agreement by two of the three parties will set the amount of the loss. Note that this determines the amount of loss, not whether or not coverage applies. Each party will pay for its own appraiser and other expenses involved will be split between both parties.

Other insurance

It's possible for an insured to have another policy that might provide coverage in event of a loss. In such situations, this policy will only pay the proportion of the loss that this policy's limit applies in proportion to the total amount of insurance covering the loss. For example, this policy's limit is $300,000. The insured has another policy for $175,000. The insured has a loss totaling $100,000. The total amount of insurance on the property is $475,000. This policy provides 63% of the available coverage. Therefore, this policy would pay $63,000 of the loss, and the other insurer would pay the remaining $37,000.

If a service agreement exists, then this policy is excess over any amounts covered by the service agreement. A service agreement includes a service plan, property restoration plan, home warranty or other similar service warranty agreement. Even if that warranty is characterized as insurance, coverage does not apply until those limits have been paid.

The insured has the right to sue the insurer but only after he has complied with all of the conditions of the policy. The suit must be filed within two years of the date of loss. If the insured has not cooperated with the insurer or provided necessary documentation, then the insured cannot bring a suit against the insurer.

Our option

The insurer has the option to repair or replace any part of the damaged property with like kind and quality property. The insurer must first provide the insured with written notice of these intentions within thirty days of receipt of the signed, sworn proof of loss.

Loss payment

Losses are to be adjusted with the insured unless another party is named in the policy or legally entitled to payment. In such case, payment will be made to or include that party. Losses will be paid sixty days after the insurer receives the proof of loss and has either reached an agreement with the insured, an entry of final judgment has occurred, or there is a filing of an appraisal award with the insurer.

Abandonment

An insured cannot abandon property and expect the insurer to take care of it. The policy states that directly, that the insurer does not have to accept any property abandoned by an insured. If the insured has a house fire he cannot simply move out and expect the insurer to dispose of the property.

Mortgagee

Many properties have a mortgage, and therefore a mortgagee is often named in the policy. When a mortgagee is listed any payments for damage to property under coverage A or B will include the mortgagee as shown on the policy. If there are multiple mortgagees, then they will be listed in order of precedence of the mortgages.

Even if the claim is denied to the named insured, the mortgagee can still make a claim and receive payment. The mortgagee has duties after a loss. Those duties are to notify the insurer of any changes in ownership, occupancy, or substantial change in risk that the mortgagee is aware of, pay any premium that the insured had not paid, and submit a signed, sworn proof of loss within sixty days after having been advised that the insured failed to do so. Certain clauses that apply to the insured also apply to mortgagees, and they are the clauses surrounding appraisal, filing suit, and loss payment conditions.

The mortgagee will be notified if the insurer issues a cancellation or nonrenewal notice on the policy. The mortgagee will be given ten days notice before the date of the cancellation or nonrenewal.

N. 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 under Section I to loss caused directly or indirectly by nuclear hazard, except that direct loss by fire resulting from the nuclear hazard is covered.

O. 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.

P. Volcanic Eruption Period One or more volcanic eruptions that occur within a 72-hour period will be considered as one volcanic eruption.

Q. Policy Period This Policy applies only to loss which occurs during the policy period.

R. Concealment Or Fraud We provide coverage to no "insureds" under this Policy if, whether before or after a loss, an "insured" 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.

S. Loss Payable Clause If the Declarations shows a loss payee for certain listed insured personal property, the definition of "insured" is changed to include that loss payee with respect to that property. If we decide to cancel or not renew this Policy, that loss payee will be notified in writing.

Analysis

Nuclear hazard

The nuclear hazard clause actually defines "nuclear hazard" as any nuclear reaction, radiation, or radioactive contamination, whether controlled, uncontrolled, or however caused or any consequence of any of these. The Nuclear Hazard exclusion refers to this clause as the definition of "nuclear hazard". A loss caused by a "nuclear hazard" will not be considered a loss by fire, explosion, or smoke, whether these perils are specifically named or included in the Perils Insured Against. This prevents loss by "nuclear hazard" from being categorized as another, covered peril and forcing the policy to provide coverage for something that is actually excluded.

What is covered is a loss by a fire that results from a "nuclear hazard". An accident at a nuclear plant or the detonation of a nuclear device and the damage that causes is excluded; however, if a fire is started as a result of either the accident or detonation, then damage from that fire is covered.

Recovered property

Recovered property discusses what happens when stolen property has been returned or found after payment has been made to the insured. The insured has the option of keeping the returned property or letting the insurer take possession of it. If the insured decides to keep the property, then the settlement amount will be revised. If the insured has already been paid for the loss, then the insured will have to return a portion of the funds to the insurer.

Volcanic eruption

The volcanic eruption period specifies that any volcanic eruptions that occur within a 72-hour period will be considered one eruption. This prevents the insured from being charged multiple deductibles for the same volcanic event. Volcanoes often have multiple small eruptions in conjunction with a major volcanic event.

Policy period

The policy period clause simply states that the policy only applies during the policy period. The policy period is found on the declarations page of the policy.

Concealment or fraud

Insurance fraud costs the industry billions of dollars a year. The policy states that no coverage will be provided to any "insured" if, either before or after a loss, an "insured" has engaged in fraudulent conduct, intentionally concealed or misrepresented any material fact or circumstance, or made false statements related to this insurance. A material fact is one that Is applicable to the decision to be made. For example, whether an insured's house is red or white is not a material fact when underwriting a policy. Whether the insured's dog has bitten people in the past, however, would be applicable to an underwriting decision. Failure to disclose a history of dog bites, or that the insured has an unfenced swimming pool or other fact that would affect an insurer's decision to accept the application and provide coverage would be considered concealment or fraud.

Loss payable

The loss payable clause states that if a loss payee is listed for certain personal property, that the definition of "insured" is expanded to include that loss payee. The loss payee will be notified in event that the policy is cancelled or nonrenewed.