Part IV – Exclusions

Topics covered in this article:

Exclusions

General Provisions

Exclusions

VIII. Exclusions

No coverage is provided for any loss arising directly or indirectly out of or as a result of the following: 1. Manipulation of the U.S.G.S. data; 2. Any peril or reason other than, not related to, or not arising out of an Earthquake Event as described in this Policy; 3. Any breach or violation of the representations, covenants and consents the Insured provided to the Insurer; 4. Controlled or uncontrolled Nuclear Hazard or any act or condition incidental to any Nuclear Hazard, no matter how such Nuclear Hazard may have been caused; 5. Terrorism or War: Notwithstanding any provision to the contrary within this Policy or any endorsement thereto it is agreed that this insurance excludes loss, damage, cost or expense of whatsoever nature directly or indirectly caused by, resulting from or in connection with any of the following regardless of any other cause or event contributing concurrently or in any other sequence to the loss:

(a) War, invasion, acts of foreign enemies, hostilities or warlike operations (whether war be declared or not), civil war, rebellion, revolution, insurrection, civil commotion assuming the proportions of or amounting to an uprising, military or usurped power; or

(b) Any act of terrorism, including but not limited to the use of force or violence and/or the threat thereof, by an person or group(s) of persons, whether acting alone or on behalf of or in connection with any organisation(s) or government(s), committed for political, religious, ideological or similar purposes including the intention to influence any government and/or to put the public, or any section of the public, in fear.

Also excluded are loss, damage, cost or expense of any nature directly or indirectly caused by, resulting from or in connection with any action taken in controlling, preventing, suppressing or in any way relating to (a) or (b) above. If the Underwriters allege that by reason of this exclusion, any loss, damage, cost or expense is not covered by this insurance the responsibility of proving the contrary shall be upon You. In the event any portion of this provision is found to be invalid or unenforceable, the remainder of this Policy shall remain in full force and effect.

6. This Policy is a named peril policy, with coverage provided as specified herein, and under no circumstances shall the Insurer be liable for any other loss or injury suffered by the Insured, that directly or indirectly arises (in whole or in part) from any other cause. 7. This Policy will not pay for any bodily injury to You or any other individual(s). 8. Sanctions. This Policy does not provide coverage, and the Insurer is not liable to pay any claims or provide any benefit hereunder, to the extent that the provision of such cover, payment of such claim, or provision of such benefit would expose the Insurer to any sanction, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America. 9. This Policy does not provide coverage if the Insured does not have a Legal Interest in the Address at the time of the Earthquake Event. 10. This Policy will not pay if PGV does not reach 30 cm/sec at any point in the Census Block containing Your Address during the Policy Period.

ANALYSIS:

Every insurance policy has a list of risks or hazards the carrier will not cover. Most excluded events are rare or difficult to predict, often both. The exclusions in this policy will be different because this policy is named perils for one specific peril.

If the insured makes a claim using altered U.S.G.S. data, that claim will not be covered. Note, however, that the manipulation does not necessarily have to occur at the hands of the insured, and the claim would not be covered even if the insured had no knowledge of the manipulation. This exclusion would preclude coverage if, for example, a hacker were to get into the U.S.G.S. systems and alter data, somehow triggering an earthquake.

It is also important that insureds know and understand all of the representations, conditions, and covenants given in this policy. If any one of them is broken, whether intentionally or accidentally, the policy will not cover the loss. This stresses the importance of making certain that all information contained in the insured's application for coverage is accurate and complete.

The Nuclear Hazard exclusion is important because it excludes any nuclear hazard, controlled or uncontrolled, or any conditions incidental to a nuclear hazard however caused. Nuclear hazards are considered extremely dangerous, so even accidental nuclear exposure is not covered. Similarly, war, terrorism and related acts are excluded, as are rebellion, revolution, insurrection, civil commotion that amounts to an uprising, military or usurped power. Excluded acts of terrorism include use of force or violence by any group or person for political, religious, ideological or other reasons to put the public or any portion of the public in fear. Steps taken to control or respond to such actions are also excluded. In a similar vein, the exclusion for war and rebellion states that even if a nuclear weapon goes off accidentally, it will be deemed a warlike act that precludes coverage. These are standard exclusions for things that simply cannot be rated for and insured.

Even though the policy has already stated What this Policy Covers, it reiterates that information here, stating that it is a named perils policy and no other perils shall be covered. For example, if a tree falls on the insured's house during an Earthquake Event, that damage would be covered because there is a clear causal connection between the Earthquake Event, the fallen tree, and the damage to the insured's house. On the other hand, if a tree falls on the insured's house two days after an Earthquake Event, and the fall was not triggered by an aftershock of the Event, then that damage would not be covered because there is no causal connection between the Event and the fallen tree that damaged the house.

If for some reason payment of a claim would expose the insurer to sanctions under UN resolutions, trade or economic sanctions, or laws of the European Union, United Kingdom, or United States of America, the insurer is not obligated to make payment. For example, an insured could have dual citizenship in a country where sanctions have been placed on its citizens for taking certain actions.

As always, the insured must have legal interest in the insured property, and there must be an Earthquake Event that fits the required peak ground velocity in order for coverage to apply.

General Provisions

IX. General Provisions

1. Signature Required. This Policy shall not be valid unless signed by the Correspondent on the attached Declaration Page. 2. If You cease having a Legal Interest in the Address during the term of this Policy, You must either (a) revise the Address to an Address in California, Oregon or Washington for which You have a Legal Interest by submitting a request through Your account management on the Jumpstart website (note that Your premium may increase or decrease as a result), or (b) notify Us that You intend to cancel this Policy in accordance with Section VI (any unearned premium will be refunded to You). 3. Coverholder Not Insurer. The Coverholder is not an Insurer hereunder and neither is nor shall be liable for any loss or claim whatsoever. The Insurers hereunder are those Underwriters at Lloyd's, London whose syndicate numbers can be ascertained from the Coverholder. As used in this Policy "Underwriters" shall be deemed to include incorporated as well as unincorporated persons or entities that are Underwriters at Lloyd's, London. 4. Cancellation. If this Policy is cancelled after the effective date, the correct premium must be paid by You for the time the insurance has been in force. 5. Assignment. The terms and conditions of this Policy are binding upon and will inure to the benefit of the successors and assigns of the parties hereto. This Policy and the rights and obligations hereunder are not assignable to a third party by the Insured without the prior written consent of the Insurer, which consent may be withheld or delayed in the Insurer's sole and absolute discretion. 6. Entire Agreement. This Policy, together with the application You completed to purchase it, contains the full and complete understanding and agreement between You and Us with respect to the subject matter hereof and may only be changed by written endorsement, signed by You and Us. 7. Attached Conditions Incorporated. The insurance described in this Policy is subject to all provisions, conditions and warranties set forth herein, attached, or endorsed, all of which are to be considered incorporated herein as further descriptive of the insurance the placement of which is evidenced by this Policy. 8. Several Liability Notice. The subscribing insurers' obligations under contracts of insurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing insurers are not responsible for the subscription of any co-subscribing insurer who for any reason does not satisfy all or part of its obligations. 9. Severability. If any provision of this Policy shall be rendered illegal or unenforceable by the laws, regulations or public policy of any jurisdiction, such provision shall be considered void in such jurisdiction, but this shall not affect the validity or enforceability of any other provision of this Policy or the enforceability of such provision in any other jurisdiction. The Insurer and the Insured shall negotiate in good faith with a view to replacing the void or unenforceable provision with a new provision, valid and enforceable, which preserves the original intention of the parties. 10. Choice of Law. The Policy shall be governed by and construed in accordance with the laws of California. Any disputes involving this Policy shall be resolved in a California Court of competent jurisdiction. 11. Headings. The section headings in this Policy are solely for convenience and form no part of the interpretation or the terms and conditions of coverage. 12. Service of Suit. It is agreed that in the event of the failure of Underwriters to pay any amount claimed to be due hereunder, Underwriters, at the request of the Insured, will submit to the jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this Clause constitutes or should be understood to constitute a waiver of Underwriters' rights to commence an action in any Court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another Court as permitted by the laws of the United States or of any State in the United States. Service of process in such suit may be made upon:

FLWA Service Corp. c/o Foley & Lardner LLP California 555 California Street, Suite 1700 San Francisco, CA 94104-1520

It is further agreed that in any suit instituted against any one of them upon this contract, Underwriters will abide by the final decision of such Court or of any Appellate Court in the event of an appeal.

The above-named are authorized and directed to accept service of process on behalf of Underwriters in any such suit and/or upon request of the Assured to give a written undertaking to the Assured that they will enter a general appearance upon Underwriters' behalf in the event such a suit shall be instituted.

Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, Underwriters hereby designate the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or successors in office, as their true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Assured or any beneficiary hereunder arising out of this contract of insurance, and hereby designate the above-mentioned as the person to whom the said officer is authorized to mail such process or a true copy thereof.

ANALYSIS:

The majority of the general provisions are self-explanatory. The policy is not valid unless signed by the Coverholder. The Coverholder is the carrier issuing the policy; however, the carrier is not the insurer; rather, the policy is covered by the Underwriters at Lloyd's Syndicate. For reference, here is the definition of Coverholder:

"Coverholder" means the entity listed in the Declarations who is authorized by the Underwriter to enter into contracts of insurance underwritten by the Underwriter and authorized as agent of the Underwriter under a binding authority agreement as if it were the Underwriter. We do not act on Your behalf. This policy is underwritten by certain Underwriters at Lloyd's.

The insured must have a legal interest in the property covered by the policy; that legal interest must be located in one of the following states: California, Oregon, or Washington. The insured's address on the policy must be in one of those states. If the insured moves operations or otherwise leaves the state during the policy term, they must submit a request through Your account management on the Jumpstart website for either coverage at the new address, or cancellation of the policy. Any unearned premium will be refunded to the insured, or coverage premium at the new address could exceed that of the original premium paid, thus requiring payment of additional premium.

The terms and conditions of the policy are binding, and may not be assigned to any other third party by the Insured without them first obtaining written consent from the insurer (the Underwriters at Lloyd's). It is in the insurer's sole discretion as to when or if they will approve of the assignment. Insurers generally do not like to accept the assignment of the policy benefits to a third party without having first had the opportunity to review the change in insureds.

The insured's application for coverage becomes part of the policy and may therefore be relied on in a claim or coverage situation. Changes to the policy may be made by written endorsement only.

If any portion of the policy is deemed illegal or invalid by any laws, the rest of the policy is not affected. The Insurer and Insured will work together to replace the unenforceable provisions with provisions that maintain the original intent of the policy. The laws and enforceability of this policy are based upon the state of California, and any disputes must be brought in a California court.

The section headings of the policy are for convenience only and do not confer coverage. This is an unusual clause, but it makes clear where coverage is found in the policy.

The policy contains a service of suit agreement. This clause is necessary because the underwriters are located outside the United States but providing coverage within its boundaries. Any service of suit shall be made to:

Foley & Lardner LLP, 555 California Street, Suite 1700 San Francisco, CA 94104-1520.

Foley & Lardner LLP will act on behalf of the Underwriters at Lloyd's in all legal matters within the United States, which includes appearing in court on their behalf. In the event of an appeal, the Underwriters agree to abide by the final decision of the United States Court or of any Appellate Court presiding over the case. Pursuant to any statute of any state, territory or district of the United States which makes provision therefor, Underwriters designate the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or successors in office, as their true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Assured or any beneficiary hereunder arising out of this contract of insurance, and designates the above-mentioned as the person to whom the said officer is authorized to mail such process or a copy of it. The term Assured is not found anywhere else in the policy; this is an oversight, and the policy language is being corrected to reflect the correct term, insured. PROPERTY CYBER ENDORSEMENT

1 Subject to all the terms, conditions, limitations and exclusions of this Policy or any endorsement thereto, this Policy covers physical loss or physical damage to property insured under this Policy caused by Earthquake which directly results from a Cyber Incident or Cyber Act. 2 In the event any portion of this endorsement is found to be invalid or unenforceable, the remainder shall remain in full force and effect. 3 This endorsement supersedes and, if in conflict with any other wording in the Policy or any endorsement thereto having a bearing on Cyber Loss replaces that wording.

Definitions 4 Cyber Loss means any loss, damage, liability, claim, cost or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of or in connection with any Cyber Act or Cyber Incident including, but not limited to, any action taken in controlling, preventing, suppressing or remediating any Cyber Act or Cyber Incident. 5 Cyber Act means an unauthorised, malicious or criminal act or series of related unauthorised, malicious or criminal acts, regardless of time and place, or the threat or hoax thereof involving access to, processing of, use of or operation of any Computer System. 6 Cyber Incident means:

6.1 any error or omission or series of related errors or omissions involving access to, processing of, use of or operation of any Computer System; or 6.2 any partial or total unavailability or failure or series of related partial or total unavailability or failures to access, process, use or operate any Computer System.

7 Computer System means: any computer, hardware, software, communications system, electronic device (including, but not limited to, smart phone, laptop, tablet, wearable device), server, cloud or microcontroller including any similar system or any configuration of the aforementioned and including any associated input, output, data storage device, networking equipment or back up facility, owned or operated by the Insured or any other party."

ANALYSIS

The policy contains an endorsement for physical loss or damage that results from a Cyber Incident or Cyber Act. These are defined terms. Cyber Loss means any loss, damage, liability, claim of any nature directly or indirectly caused by, contributed to by, resulting from or arising out of a Cyber Act or Cyber Incident. This includes any action in controlling, preventing, suppressing or remediating any Cyber Act or Cyber Incident.

A Cyber Act is an unauthorized, malicious or criminal act, or series of related such acts, regardless to time and place, or the threat or hoax thereof involving access to, processing of use of any Computer System. This would be the actions of a bad actor who has illegitimately gained access to a computer system.

A Cyber Incident isn't necessarily the result of a bad actor; it includes any error, omission, or series of related errors or omissions involving access to, processing of, use of or operation of any Computer System. It is also any partial or total unavailability or failure of, or series of partial or total unavailability of or failures to access, process, or use any Computer System.

The Cyber Act or Incident does not have to occur to or on insured property. The Cyber Act can affect various computer systems that could be located anywhere. In order for coverage to apply, there must be physical damage to the insured property that is caused by an Earthquake that directly results from a Cyber Incident or Act. This does not cover a false reading of seismic equipment indicating there has been an Earthquake when there was none.

This would be computer-controlled equipment for enhanced oil recovery, injection wells, and fracking that could be taken over remotely and cause an increase in injection rate and volume, setting off an earthquake. Earthquakes can occur ten miles or more away from the injection site. Wastewater injection is already the primary cause of induced earthquakes in the United States.

Computer System is defined as any computer, hardware, software, communication system, electronic device, server, cloud or microcontroller including similar systems to configure the computer system and any input, output, data storage device, networking equipment or backup facility, owned by the insured or another party. Electronic devices include but are not limited to smart phones, laptops, tablets, wearable devices and others.

This endorsement will remain in effect even if another portion of the policy is found invalid or unenforceable. It also supersedes any other wording in the policy regarding Cyber Loss.

The policy wraps up with a privacy statement, explaining the collection, use, and disclosure of personal information. It details what information is collected from the insured and from third parties, how the information is used, and to whom the information may be disclosed.

Rights of the insured are also explained. The insured has the right to know certain information about the company's practices, to have certain personal information deleted, and to not be discriminated against based on the exercising of any of the rights. Contact information is provided, as is information on making complaints and who to contact.