Section I Exclusions

Section I Conditions

Section II Liability Coverages

Section II Exclusions

Section II Additional Coverages

Section II Conditions, Sections I and II 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, the highest deductible amount will apply.

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

The first two conditions reinforce some policy basics; first that if there is more than one person with an insurable interest in the property, that the insurer is not liable to an "insured" for more than that person's actual interest in the property and that the insurer likewise is not responsible for more than the limit of liability. If two people both have an interest in the property, then they will share any loss settlement payout. For example, if the property is insured for $300,000 and two people share the insurable interest in the property, what would be paid out in a total loss is the $300,000 for the insureds to split between them. Each person does not get the total of $300,000 for a total payout by the insurer of $600,000. Each person is only entitled to his interest in the property, and no more than the limit is what is paid out.

A deductible applies to coverage, and payment is issued only when the loss exceeds the deductible listed in the declarations page. If there are two or more deductibles on the policy, then in event of a loss only the highest deductible is applied to any loss settlement.

The next condition is duties after a loss. After a loss has occurred, there are a number of duties that the insured is required to adhere to in order for payment to be made. If the insured fails to complete the duties and that failure is prejudicial to the insurer, a claim may be denied. The duties help the insurer determine what happened, the extent of damages, and other important information related to the loss. The duties must be performed either by an "insured" or a representative of an "insured". Two duties have been removed with the 2022 update. The first was the duty to notify the credit card or electronic fund transfer company in case of loss. Since this coverage has been removed, there is no longer the need for such notification to be made. Likewise the duty to provide evidence or affidavits of such loss has also been removed.

The first duty is giving prompt notice of the loss to the insurer or the agent. In event of any loss it is important that the insurer be notified immediately – the insurer can help an insured relocate if necessary, provide information on resources to start cleaning up and mitigating damage, assign an adjuster and provide further instructions and assistance. Likewise if the loss is a theft of property is it important for the insured to notify the police. Protecting damaged property from further damage is also important – property may be repairable, and chances of repair are better if the property is protected immediately from further loss. If the floor is wet moving items up off the floor will prevent further damage, for example. The insured is required to make reasonable and necessary repairs to protect the property and keep an accurate record of repair expenses. There is no promise of reimbursement for these repairs, although in practice they are often covered. But the insured should realize it is their duty to protect property from further loss at her expense.

Another important step is preparing an inventory of exactly what property was damaged, along with the quantity, description, actual cash value of the property and amount of the loss. Bills, receipts, and other documents that support this inventory should be included. There are many online apps available that allow insureds to create home inventories of all personal property. Ideally insureds have an inventory made before a loss occurs, but that is seldom the case.

Next, an insured is required to show the damaged property, provide the insurer with records and documents it requests and allow it to make copies, and submit to an examination under oath, while not in the presence of any other "Insured" and sign the same. This is all part of documenting the loss and what caused the loss. Verification of ownership and value of property is important to providing a fair settlement for the insured, and if for some reason fraud or an intentional act is suspected, examinations under oath may be required.

The last duty summarizes some of the required duties and includes other steps to ensure that all the details have been accounted for. Within 60 days of the request of the insurer, the insured is required to provide the following:

Time and cause of loss Interests of "insureds" and others, including any liens on the property Other insurance that could provide coverage Changes in title/occupancy during the policy period Specifications of damage buildings and repair estimates Inventory referenced in step 5 Receipts for additional living expenses and records that support fair rental value loss

This information provides the insurer with what it needs to investigate the cause of loss, the extent of damages, and make a determination and to whether there is coverage and how much money is due to the insured for repairs/replacement of damaged property.

D. Loss Settlement Covered property losses are settled as follows:

1. Personal property and 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. Coverage A – Dwelling:

a. If the damage is repaired or replaced within a reasonable time, at the actual cost to repair or replace; b. If the damage is not repaired or replaced within a reasonable time, at actual cash value but not more than the amount required to repair or replace. In this provision, the terms "repaired" or "replaced" 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 D.9. Ordinance Or Law under Section I – Property Coverages.

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

1. If a loss covered by this Policy is also covered by:

a. Other insurance, except insurance in the name of a corporation or association of property owners, 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 b. A service agreement, except a service agreement in the name of a corporation or association of property owners, this insurance is excess over any amounts payable under any such agreement.

2. Subject to Paragraph G.1., if, at the time of loss, there is other insurance or a service agreement in the name of a corporation or association of property owners covering the same property covered by this Policy, this insurance is:

a. Excess over the amount due under such other insurance or service agreement, whether the corporation or association of property owners has collected that amount or not; and b. Primary with respect to any amount of the loss covered by this Policy and not due under such other insurance or service agreement because of the application of a deductible.

3. As used in this Paragraph G., a 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.

Analysis

The next section of conditions outlines how settlements and appraisals work, as well as how suits are handled and other duties. Because the policy provides coverage for parts of the building as well as personal and some other property, just how property is settled needs to be explained.

Personal property and grave markers, including mausoleums, are covered at actual cash value at the time of loss but no more than the amount required to repair or replace the property. The value of most property varies over time – it may rise or drop depending on market value and the condition of the property itself. The value is determined at the time of loss – an insured may have paid a lot of money for something years ago, but it may have dropped in value and no longer be as valuable as it once was. No more than the amount required to repair or replace the property will be paid.

Insureds always have the option of scheduling particularly valuable items. The HO 04 61 Scheduled Personal Property Coverage endorsement allows an insured to schedule a variety of items. The HO 04 90 Personal Property Replacement Cost Loss Settlement can also be used to change the settlement terms from actual cash value to replacement cost. When the HO 04 90 is added to the policy, the policy will then pay no more than the least of the replacement cost of the property, the full cost of repair, the limit of liability of coverage C, any applicable special limits in the policy or the limit that applies to the item. If the property is valued over $1,000 then no more than ACV is paid until the property is repaired or replaced.

For the dwelling itself, coverage is for the actual cost to repair or replace if the repairs/replacements are completed in a reasonable time; if not, then coverage is actual cash value but no more than the amount required to repair or replace. The form then makes it clear that the cost to repair or replace does not include any increased costs from the enforcement of any ordinance or law unless those costs are covered in the Ordinance or Law Coverage.

Pairs and sets have their own settlement parameters. If damage occurs to a pair or set, then the insurer has the option of either repairing or replacing any part to restore the pair to its preloss condition, or to pay the difference between the actual cash value of the property before and after the loss. The set may not be repairable or replaceable – in such instances then the insured will be paid for the difference in value.

Appraisal is an option if the insured and insurer disagree on the amount of the loss; either party may demand an appraisal. It is important to note that an appraisal only deals with the amount of the loss, and not whether or not coverage applies. If either party asks for an appraisal, then each party selects a competent and impartial appraiser within 20 days of receipt of a written request for an appraisal. The appraisers choose an umpire, and if they cannot agree on an umpire within 15 days, either party can request that the choice be made by a judge in the insured's jurisdiction. Each appraiser then sets the amount of the loss. If the appraisers agree on the amount of the loss that will be considered the final amount. If the appraisers cannot come to an agreement, they submit their assessment to the umpire. A decision by any two will set the amount of the loss. Each party then pays its own appraiser, and the costs of the umpire and other expenses are split equally between the parties.

At times an insured may have more than one insurance policy that could provide coverage. In that case, as long as the insurance isn't in the name of the association or corporation of property owners, then coverage is based on the proportion of loss that the limit of liability applies to the total amount of coverage on the loss. If there is a service agreement, again unless that agreement is in the name of an association or corporation of property owners, then this insurance is excess over that agreement.

In the event there is a service agreement or policy in the name of an association or corporation of property owners, then this policy is excess over that coverage whether or not the association has collected those funds, and this policy is primary for any amount not covered under that other insurance or service agreement because of the application of the deductible. For example, there is a loss to the property and the association has a $10,000 deductible. Since coverage does not apply for that $10,000, this policy would provide coverage for the insured's share of the $10,000 deductible.

Lastly, the policy states that a service agreement means a service plan, property restoration plan, home warranty or similar service warranty agreement, even if that plan is labeled as insurance.

There are times when an insured feels that there is no way to resolve his differences with the insurer other than to file suit. Before an insured files suit he must have complied with all the terms of the policy, and the action must be filed within two years of the date of loss.

The insurer has the option to repair or replace any part of the damaged property with material of like kind and quality. The only caveat is that the insurer must give the insured written notice of this within 30 days of the insurer having received the signed, sworn proof of loss.

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 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. 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

The last section of conditions has no significant coverage changes, just some editorial revisions. The Loss Payment condition explains that all losses will be settled with you, the insured, unless there is another person named in the policy or another person is legally entitled to payment. An insured's policy could cover personal property of a guest, in which case that loss would be settled with the owner of that property. The loss is payable 60 days after the insurer receives the proof of loss and comes to an agreement with the insured, or there is an entry of a final judgment or a filing of an appraisal award with the insurer. While most claims are straightforward and judgments and appraisals aren't necessary, they do happen so the policy acknowledges that.

Occasionally an insured will abandon damaged property by leaving it at the site of damage and not removing it and disposing of it properly. The insurer is not responsible for such property and has no obligation to accept the damaged property. The Abandonment of Property condition makes this perfectly clear.

Many properties have a mortgage, and the mortgagee has certain rights under the policy as well. If there is a mortgage on the policy payment will be made to the insured and the mortgagee as the mortgagee's interests appear. If there is more than one mortgagee, then the order of payment follows the order of precedence of the mortgages.

The mortgagee is protected even if the insured's claim is denied as long as the mortgagee follows certain procedures. In order for the mortgagee to receive coverage, the mortgagee must notify the insurer of any changes in ownership, occupancy, or change in risk of the property, pay any premium due if the insured has not made payments, and submit a signed, sworn proof of loss within 60 days after receiving notice from the insurer of the insured's failure to do so. The appraisal, suit against us, and loss payment conditions also apply to the mortgagee.

Mortgagees are notified of any cancellation or nonrenewal of the policy at least ten days in advance of the cancellation/nonrenewal date. If the mortgagee receives payment for the loss, the insurer is subrogated to the rights of the mortgagee, and the insurer has the option to pay the mortgagee the whole principal on the mortgage and accrued interest. At that point the insurer will receive a full assignment and transfer of the mortgage and all securities held as collateral to the mortgage debt. Lastly, subrogation does not impair the right of the mortgagee to collect the full amount of the mortgagee's claim.

No benefit to bailee makes clear the fact that coverage does not extend to anyone holding, storing or moving the insured's property for a fee. Those providers need their own coverage, and no assignments or grants will be honored.

The nuclear hazard clause explains exactly what the policy considers a "nuclear hazard". It means any nuclear radiation, reaction, or radioactive contamination, whether or not controlled, or however caused, or any consequence of any of the same. The loss caused by nuclear hazard will not be considered fire, explosion or smoke even though those perils are covered under the policy. The only exception is for fire that results from a nuclear hazard; the direct loss by fire that results from a nuclear hazard is covered.

Recovered property applies most often when an insured's property has been stolen. In such cases, the stolen property may be recovered after the insurer has made payment to the insured. The insured has the option of retaining the original property or surrendering it to the insurer, and any loss settlement will be adjusted based on what the insurer paid for the loss. An insured may opt to have the property repaired if it was damaged and returned to him. In that case, the loss settlement will be adjusted.

When a volcano erupts it often evolves multiple eruptions in a short period of time. Therefore the policy defines a volcanic eruption as all eruptions that occur within a 72-hour period of time. This prevents the insured from being charged for multiple deductibles during a volcanic event that should be considered one eruption.

The policy period condition simply states that the policy only applies during the policy period. The policy period is listed on the declarations page. If a loss occurs outside of that policy period, there is no coverage.

Fraud costs the insurance industry billions of dollars annually. The concealment or fraud condition states that there is no coverage if an "insured" intentionally concealed or misrepresented any material facts or situations, engaged in fraudulent conduct or made false statements related to the insurance policy.

The last condition in Section I of the policy is the loss payable clause. This indicates that if a loss payee is listed for some personal property, that the definition of "insured" is expanded to include that loss payee. An insured may have bought an expensive dining room set and been making payments on it over time. If the policy is cancelled or nonrenewed, the loss payee will be notified in writing.

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