451.4-2

HO 0001–AAIS BASIC FORM HOMEOWNERS ANALYSIS

(October, 2007)

Note: This analysis is based on the January 2006 edition of the form. Changes from the previous edition are in bold print.

The homeowners program offered by the American Association of Insurance Services (hereafter referred to as AAIS) is simply and logically structured as it is a form of an easy-to-read  insurance document. Like its peers, the basic form policy begins with a table of contents.

TABLE OF CONTENTS

The table of contents consists of the following:

·         Agreement

·         Definitions

·         Property coverages (including principal/incidental property coverages, covered perils and property exclusions)

·         Liability coverages (including principal/incidental liability coverages, medical payments and liability exclusions

·         Loss or claim provision

·         Loss Settlement Provision

·         Payment Provision

·         Policy conditions

AGREEMENT

The policy's opening language states that the policy is subject to all of its terms and will provide property, liability and other insurance coverages that are described in the policy. These coverages are provided for a specific policy period. In return for this protection the insured must pay a premium as required. Principal coverages apply only if a limit is shown for it on the declarations.

DEFINITIONS

The definitions section appears immediately after the Agreement.

You and  Your

The person(s) who appear on the declarations as insured(s). The named insured’s spouse is also defined as  you, but ONLY if he or she lives in the insured's household.

Note: Where possible, it would be prudent to have both spouses appear on the declarations. If not, a non-resident spouse could be denied coverage under circumstances where coverage should actually apply.

We, Us, And Our

The company providing the homeowner's coverage.

Actual Cash Value (01/06 addition)

The amount it takes to repair or replace property, but that amount includes consideration of depreciation. How depreciation is determined is not established.

Aircraft (01/06 addition)

This term is used only in the Liability section and refers to property made or used for flying. If a model aircraft and model hovercraft is not designed or used to carry people or cargo, it is not considered aircraft. Also, a hovercraft is not considered aircraft.

Bodily injury

Actual or physical harm to a person. Harm includes sickness, disease, or death. Any required care and loss of services also qualifies as bodily injury. In the prior edition of this form, a list of exceptions was provided. This edition eliminates that list and adds a paragraph stating that unless a person has a physical injury first, there is no coverage for harm such as injury or death that comes from an emotional or mental injury. (01/06 change)

Example: her neighbor visits an insured whose home is protected by a basic form HO policy. They are having a friendly chat in the insured’s backyard. The neighbor is leaning against the insured’s wood fence that, unknown to either person, was heavily damaged by dry rot. The fence suddenly collapses and the neighbor flails about wildly but does not fall and is uninjured. However, she is very embarrassed since several other neighbors witness the incident. They make fun of her rest of the summer. She files a lawsuit against the insured. The insured’s policy will not handle any damage claim because no physical harm was involved.

Business

A trade, profession or occupation including farming, even if only occasionally practiced. This term includes the rental of property to others but does not include the occasional rental for residential purposes of the part of the covered location that is normally occupied solely by persons in the named insured’s household

If an insured receives money for an activity, it is considered a business. There are exceptions though. If an insured is caring for a relative, it is not a business even if money is exchanged. When an insured cares for a person, other than a relative, and, in exchange,  receives like services, it is not a business.

Example: Jo Babyboom and Jack Paintur have an agreement. On Tuesdays, Jo watches Jack’s retired father. On Fridays, Jack takes care of Jo’s preschooler, Penny. The weekly arrangement allows both of them to have some time for themselves and to run errands. As long as neither receives any additional benefit from the agreement, the activity should not be considered a business.

Volunteer activities are also not a business even if the insured receives reimbursement for expenses. However, if compensation is provided, the activity no longer qualifies for an exception and the activity is considered a business. Other activities the insured may engage in are not considered business as long as a particular insured’s total compensation does not exceed $2,500 per year.

Note: This replaces the prior definition that made exceptions for miscellaneous business pursuits based on the type of activity rather than a dollar amount. (01/06 change)

Declarations

This term refers to any document that is related to the homeowner policy and which may be called Declarations, Supplemental Declarations, or Schedules.

Described Location (01/06 addition)

A house (up to a four-family structure), townhouse or row house that is used by the insured for residential purposes provided it is described in the policy (schedule/declarations). The term also refers to related structures (such as garages, sheds, etc) and grounds.

Private structures related to row houses and town houses qualify as described locations only if solely residential and used exclusively by the insured’s household.

Example: Gosh I. Ownit lives (and owns) a town home that is insured by a Basic Form Homeowner policy. He also owns a small, unattached garage located behind and to the left of the town homes where he lives. In other words, the garage is NOT on the land directly behind Gosh’s town home. Directly behind Gosh’s town home is a small brick building that’s used to store the town home association’s lawn and maintenance equipment.

One day, a fire destroys the garage. Now, while the private garage does not share the adjacent portion of land as Gosh’s town home, he does use the garage in conjunction with his home, so it would be covered. On the other hand, if the small storage building located directly behind Gosh’s home was damaged in a fire, Gosh’s policy WOULD NOT cover the loss (though it might contribute to repairs via the loss assessment coverage).

Domestic employee

A person employed or leased under contract by an insured, to perform duties that are connected to the use and care of the described location such as a butler, housekeeper or gardener. Included are persons who perform duties of a similar nature elsewhere for an insured provided the duties do not include business related functions.

A person, who is furnished to the insured as a temporary substitute or to meet seasonal or short-term needs is not a domestic employee.

Example: Henrietta works for Household Temps. Household’s owner has a friend, Marcy, who is overwhelmed with getting her home ready for an upcoming wedding. The owner sends Henrietta to Marcy’s home for one week to help with the  cleaning. Henrietta is a not a domestic employee.

Employee (01/06 addition)

Refers to a party who is employed in the business of an insured. The term includes persons who are hired via a labor leasing arrangement. The duties of such persons involve an insured’s business and not the residential or personal-oriented activities performed by a domestic employee.

Fungi (01/06 addition)

Any fungus (including but not limited to mildew and mold) as well as any substances released or created by such matter qualifies as fungi.

Hovercraft (01/06 addition)

This term is used only in the Liability section and refers to machines (including property called flarecraft) that are capable of traveling over the ground or water via the use of a compressed air cushion. The term does not apply to motor vehicles, aircraft, or watercraft. It also does not refer to models of hovercrafts, aircraft or watercraft that are neither designed nor used for moving people or property.

Insured

Insured includes the person or persons named in the declarations (named insured) and that person’s relatives who live in the household. In addition, there are a number of persons who are insured based on conditions and circumstances:

·         Relatives of the named insured who are under the age of 25, enrolled in school fulltime, are still financially dependent on the named insured and lived in the household prior to moving out to attend school

·         Non-relatives of the named insured under the age of 21 who live in the household and are in  that person’s care or in the care of  a relative of a person who also lives in the household. These non-relatives are also covered while away from the household attending school full-time, provided they continue to be under the care of the named insured or a relative resident and had lived in the household prior to moving out to attend school. (01/06 addition)

Insured is further expanded but only for the Liability section of the policy:

·         The named insured’s real estate manager but only within the scope of his or her duties that related to the described location

·         Other parties also qualify as insured, but on a more limited basis. If a loss situation involves certain, qualified incidents such as an eligible craft or vehicle (such as a golf cart) animal (usually a pet), etc, coverage may extend to persons who, with the insured’s knowledge/permission, have some related responsibility for the loss. Therefore, the policy may grant insured status for such parties to the extent that they are liable for injury or harm involving insured property.

Example:  The Carneys are on vacation and they ask their neighbor, Marsha, to feed their pets and to take their dog, Cooger, on daily walks. While going to a nearby dog park, Cooger slips out of his leash and attacks a young man who is eating a steak sandwich. The young man sues the Carneys as well as Marsha. The Carney’s policy, for the purpose of this particular loss, treats Marsha as an insured.

·         persons using or caring for vehicles, watercraft, or animals owned by an  insured

Example: Fred Landlocked takes the advice of George Goodtravel and buys a  ‘fixer-upper’ sailboat. Fred also buys a trailer and the boat is towed over to George’s house. George volunteers to patch up the boat and to help paint it too. The boat is kept in George’s driveway and it has a ladder propped against it. George’s neighbor, Paul, comes over to see what George is up to, but George is in his basement, getting some tools to work on the boat. As Paul attempts to climb onto the sailboat, the ladder gives way and Paul suffers a broken leg and several serious cuts on his arms and face. In this instance, Fred’s HO liability and Med Pay coverage can be extended to deal with nosy Paul.

Insured premises

The described location (as defined above) is an insured premises. In addition, any premises that is listed on the declarations as an insured premises and is used by the named insured as a residence is an insured premises.

A premises acquired during the policy term and that a named insured uses as a residence, is also an insured premises. Finally, if there are premises that are used by the named insured in connection with any of the above-described insured premises, they are also insured premises.

The next grouping of insured premises applies to insureds, not just the named insured.

Cemetery and burial plots of an insured, regardless of location, are insured premises. An insured’s temporary residence that is within a structure not owned by an insured and premises rented occasionally, for non-business reasons, to an insured qualify as insured premises. Finally, vacant land owned or rented to an insured, including land being developed to be an insured’s residence is an insured residence. However, vacant land and farmland is not the same. Farmland is not insured premises.

Note: There have been changes throughout this definition including the coverage part applicability and whose premises are insured. (01/06 changes)

Limit

The policy merely defines this as the amount of insurance. (01/06 change)

Motorized vehicle

Land or amphibious vehicles that are self-propelled are defined as motorized vehicles. Exceptions are hovercrafts, watercraft and model hovercrafts and watercraft. In addition any trailer or semi trailer attached to or carried on a vehicle described earlier is also a motorized vehicles even if it becomes detached. (01/06 change 

Occurrence

There are three specific requirements for an occurrence. First, there must be an accident. This means that the incident(s) cannot have been planned. There can be repeated accidents and still be the same occurrence. Second, bodily injury or property damage must result from the accident(s).  Last, the bodily injury or property damage must happen during the policy period.  

Pollutant

Any solid, liquid, gaseous, thermal, or radioactive irritant or contaminant, including acids, alkalis, chemicals, fumes, smoke, soot, vapor, and waste. Also electrical, magnetic or electromagnetic particles or fields – visible or invisible plus sound. (01/06 change)

Waste includes materials to be recycled, reclaimed, reconditioned as well as  disposed of.

Property damage

Physical injury or destruction of tangible property; or the loss of use of tangible property, whether or not it is physically damaged (in other words, theft qualifies as property damage).

Terms

Refers to any written policy components including exclusions, conditions, defined words, etc.

Vermin (1/06 addition)

Refers to a wide variety of creatures that tend to be ideal candidates as pests that damage property because of their tendency to infiltrate structures as a source for dining or housing. Policy examples include raccoons, possums, skunks, snakes, armadillos (yeah, that surprised us too), bats, etc.

Watercraft (01/06 addition)

This term refers to items that are designed for traveling over water, whether powered by engines, motors, or wind. There’s no reference to manually powered, small craft (such as canoes, rafts or rowboats). The term does not apply to motor vehicles, aircraft, or watercraft. It also does not refer to models of hovercrafts, aircraft or watercraft that are neither designed nor used for moving people or property.

PROPERTY COVERAGES

PRINCIPAL PROPERTY COVERAGES

Coverage A—Residence—What is covered

There is coverage for the residence that is situated on the described premises.  his coverage includes additions, built-in components, fixtures, and building materials and supplies that are located on or next to the described  premises.  However, building materials and supplies are only eligible for coverage when they are to be used in the construction, alteration, or repair of the residence or a structure on the described location that is related to the residence.. (01/06 additions)

Example: Laynie and Peter are neighbors in a new housing sub-division and both own homes that are insured by a Basic Form Homeowners policy. One night, a crew of thieves goes through the area, stealing building supplies from several homes including Laynie’s and Peter’s homes. Laynie’s loss is covered because the material was meant for building a screened-in porch on the back of her home. Peter’s loss is not covered. The loss adjuster questioned Peter carefully and found out that the stolen material should have been delivered to his children’s school as part of its playground equipment.

Coverage A—Residence—What is not covered

There is no coverage for land, including the land on which covered property is located. There is no coverage for underground or surface water. Coverage A also does not apply to damage to grave markers, mausoleums (01 06 change), trees, plants, shrubs, or lawns. Important: limited coverage is available for such property under Incidental Property Coverages.

Example: Larry Cookout is preparing for his annual Oak Street Neighbors’ Barbecue. This year, as a surprise, he’s roasting a pig. It has been a very dry summer and everyone’s lawns are brown and dry (the city has severely restricted water use). A few minutes after getting a large fire started in his prize grill, Larry goes inside to get his cooking gear. While the grill is unattended, a gust of wind knocks it over. Larry’s lawn, brown and tinderbox dry, is ablaze within minutes. Larry and his next door neighbor put the fire out, but not before three-fourths of his back lawn is charred to the earth. Larry plans to repair his lawn with sod, but the cost will be out of his own pocket.

Coverage A – How much is covered

The most that is paid for all Coverage A covered property in a single occurrence is the limit that applies to Coverage A. (01/06 addition)

Coverage B—Related Private Structures—What is covered

There is coverage for related private structures on the described premises  that are not attached to  the residence covered under Coverage A. If structures are connected to the residence by a fence, a utility line, or a similar connection, they are not considered attached. There is coverage for fences, driveways, sidewalks, and other permanently installed outdoor fixtures.

Coverage B—Related Private Structures—What is not covered

There is no coverage for land, including the land on which covered property is located. There is no coverage for underground or surface water. Coverage A also does not apply to damage to grave markers, mausoleums (01 06 change), trees, plants, shrubs, or lawns. Important: limited coverage is available for such property under Incidental Property Coverages.

There is no coverage for structures used for  business  purposes. However, this limitation does not apply to structures that are:

·         rented to a tenant of the Coverage A residence and not used for business

·         used solely for private garage purposes

Example: An insured rents his location’s detached garage to three persons. The renters park their cars in the garage and then walk the two blocks to their jobs at a nearby office building. Losses involving the garage would be eligible for coverage.

·         used to store vehicle or equipment owned by either the insured or a tenant and that equipment (as well as a maximum of five gallons of fuel supply) are used for grounds maintenance such as mowing equipment, snow plowing equipment etc. (01/06 addition)

·         used to store business property that is owned by an insured or tenant, as long as the property does not qualify as a motorized vehicle (01/06 addition)

Coverage B – How much is covered

The most that is paid for all Coverage B covered property in a single occurrence is the limit that applies to Coverage B. (01/06 addition)

Coverage C—Personal Property—What is covered

The coverage terms under this coverage part are a little more complicated than what is found under coverage parts A and B. The AAIS Basic Form policy protects the following:

·         personal property that belongs to or property that, while not owned by an insured, is in the insured’s possession.

·         (optionally) personal property that belongs to guests, domestic workers, or other persons, but only when the property is in the same residence as an insured

Clarification: Coverage for damage to personal property owned by a domestic employee or a guest may be covered at the option of the insured. Why is an insured given the option to allow coverage? One situation that comes to mind is the availability of other insurance and the seriousness of a given loss. If there were a very large loss, the insured may wish to have all available coverage for his or her own property. If there were no option, the loss to a guest or domestic employee could be reimbursed and leave a shortfall in coverage for an insured. Of course, the insured would likely consider whether the guest or employee had their own coverage available before exercising this option.

Limitation On Property At Residential Premises Other Than The Described Location

Under Coverage C, a maximum of 10% of the policy’s Coverage A limit subject to a minimum of $1,000 is available for losses involving an insured’s property that is typically located at a residence that is NOT described on the policy (therefore is not at a described location)

Example: The Grabum family’s home is insured under a Basic Form policy. The Coverage C insurance limit for their residence is $48,000. The Grabums also own a camping cabin on a lot near a state park. The cabin is completely furnished and that property remains in the cabin. If there is no separate policy covering the cabin, the policy that protects the Grabum’s full-time residence can provide up to $4,800 to cover the personal property in the cabin.

Note: There are exceptions. This limitation doesn’t apply to property that is being moved to a newly acquired, primary residence. Neither does it apply to property that is moved to another location (either another residence or into storage) because the described location is, temporarily, unfit for use (usually due to repairs, renovation, etc). The full Coverage C limit applies for 30 days from the date the named insured begins to move. After that, coverage for personal property in a newly acquired principal place of residence is limited to 10%, subject to a $1,000 minimum, of the Coverage C limit.

Coverage C—Personal Property—Limitations

Certain types of property are subject to sub-limits. The special limits  that apply do not increase the Coverage C limit. The indicated limit is the total limit per occurrence for all items in that class.

$250 limitation

·         money

·         bank notes

·         bullion

·         gold other than gold ware and gold-plated items

·         silver other than silverware and silver-plated items

·         platinum other than platinum ware and platinum-plated items

·         stored value cards (including magnetic strip scrip and gift cards) (01/06 addition)

·         numismatic property (coins, currency, medals and similar property)

Example: A small fire destroys some personal property in the Mizers’ home. The Mizers’ Basic policy has a Coverage C insurance limit of $40,000. Their claim to their insurance company includes the following losses:

Money (from mom’s purse)

$195.00

Billy’s coin collection

$215.00

Total

$410.00

Since all of this property involves classes that are subject to the $250 limitation and since the loss under each type was less than $250, the total amount that the Mizers can recover from their policy is (take a guess) $250. Remember, the $250 limit is the total amount available for ALL of the types of property listed.

$1,500 limitation

·         securities

·         stamps

·         letters of credit

·         notes other than bank notes

·         personal records

·         tickets

·         accounts

·         deeds

·         evidence of debt

·         passports

·         manuscripts

Note: This special limit applies regardless of the medium on which these items exist, and includes the cost of research or other expenses necessary to reproduce, replace, or restore the item.

$1,500 limitation

·         electronic devices

·         accessories including films, tapes, wires, discs, records, or other media for use with such devices

·         antennas

Note: This limitation on electronic devices and accessories applies while the devices are in or on a motorized vehicle  or watercraft but only if they can operate from the vehicle or watercraft’s electrical system and also from another source of power (01/06 change)

$1,500 limitation

·         electronic devices

·         accessories including films, tapes, wires, discs, records, or other media for use with such devices

·         antennas

Note: This limitation on electronic devices, accessories and antennas applies only if the items:

1. are used away from the premises;

2. are used mainly for business purposes; and

3. are not in or on a motorized vehicle or watercraft, if the devices can operate from the vehicle or watercraft’s electrical system and also from another source of power 

The two electronic device limitations above were a single  limitation in prior editions. Splitting  the limitation may result in greater clarity and  additional coverage. (01/06 change)

$1,500 limitation

This limitation applies to watercraft, including their trailers, furnishings, equipment, engines or motors and semi-trailers. This limitation does not apply to hovercrafts or to model watercraft as long as the models are not designed to carry cargo or people. (01/06 change)

$1,500 limitation:

Trailers and semi-trailers not mentioned above are subject to this limitation.

$2,500 limitation (WHEN the loss is due to THEFT)

·         jewelry

·         watches

·         precious and semiprecious stones

·         gems

·         furs

$2,500 limitation (WHEN the loss is due to THEFT)

·         silverware

·         gold ware

·         pewter ware

·         items plated with gold or silver

$2,500 limitation (WHEN the loss is due to THEFT):

·         applies to guns

Example: Let’s visit the Mizers again. This time a thief breaks into their home and steals some personal property. The Mizers’ policy still has a Coverage C insurance limit of $40,000. Their claim to their insurance company includes the following losses:

Jewelry

$2,400

Watches

$500

Three Rifles

$2,800

Pewter Tea Service

$1,900

Total

$7,600

Since all of this property is of the type that is subject to the $2,500 theft limit, the total amount that the Mizers can recover from their policy is (take another guess) $2,500? No. Assuming that the Mizers are entitled to the full amounts provided by their policy, they should be able to recover $6,900. How did we get this figure? You must be careful about how the special limits apply. The jewelry and watches are both subject to the same limit, so only $2,500 of the $2,900 loss is covered. The rifles are subject to the gun limit, so only $2,500 is available for that portion of the loss. The tea service is also subject to a special limit, but since its value is less than the special limit, the total $1,900 is covered.

Personal property used primarily for  business  purposes

Since the Basic Form policy is designed to cover personal, rather than business losses, the policy restricts the amount of coverage available to protect business property to the following:

·         $2,500 on property while on the insured premises

·         $500 on property while away from the insured premises. (01/06 change)

However, this special limit  does not apply to items that are subject to the electronic devices described in the electronic devices limitations.

These special limits include the cost of research or other expenses necessary to reproduce, replace, or restore  business data.

Coverage C—Personal Property Not Covered

There is no coverage in this policy for any of the following:

·         property covered by separate, including scheduled, insurance

The bar to coverage is not affected by the amount of such coverage. If other coverage exists, that coverage supplants any obligation for property coverage under the basic form policy. (01/06 change)

·         animals, birds, fish, or insects

·          motorized vehicles, including their parts, equipment, and accessories except for the items subject to the $1,500 limitation explained earlier. Electronic devices, accessories, or antennas that can be operated only from the electrical system of a motorized vehicle, including films, tapes, wires, discs, records, or other media for use with such devices while in or on a  motorized vehicle are also not covered..

Note: There is coverage for motorized vehicles  that are not required to be registered if they are designed and used to assist the handicapped (motorized wheel chair) or used only to service the insured premises or premises of another (riding lawn mower). These vehicles are covered only if not used for business purposes. (01/06 change)

·         aircraft is not a defined term so it includes any type of device that is supposed to fly. Parts and equipment are also not covered even if not attached to the aircraft. There is coverage for model aircraft provided it is not designed or used to carry people or cargo.

·         hovercraft (Note: The hovercraft defined in the Definitions section is limited to liability coverage only so this is not a defined term in this section). In this section, hovercraft refers to machines (including property called flarecraft) that are capable of traveling over the ground or water via the use of a compressed air cushion . Parts and equipment are also not covered, even if not attached to the hovercraft. There is coverage for model hovercraft provided it is not designed or used to carry people or cargo. (01/06 addition)

·         property of roomers, boarders or tenants is not covered but the property of an insured’s relative who is considered a boarder or roomer is covered  (01/06 addition)

Example: The Fairweathers have a nice home that is covered by a Basic Form policy. They live in a beautiful New England town that has a number of old style hotels and bed and breakfast (B&B) locales. In the early fall, there are never enough spaces in those businesses to take care of everyone, but a particular problem is when tourists arrive too early or have to stay later than their registered dates. The Fairweathers make extra money by renting out the upstairs bedrooms to such folks. This option provided by the Fairweathers is well known to the area hotels and B&Bs who often send business to the Fairweathers.

In this situation, the Basic Form policy would not cover property belonging to such boarders since they are not related to an insured..

Example: A leather recliner located in a furnished basement that is rented to a person who repairs laptops and PDAs is destroyed in a fire. The recliner is NOT covered. (01/06 addition)

·         loss involving credit cards, debit cards, and fund transfer cards (such as  ATM cards) except as provided under Incidental Property Coverages

Example: Dottie, an avid volunteer for her children’s school, is held up after leaving a sports booster meeting. The crook took an accordion folder that contained several hundred dollars of Scrip cards. This loss may be eligible since the property involved is store value cards.

·         Quasi-structural property such as grave markers and mausoleums

Note: Limited coverage is available under Incidental Property Coverage (01/06 addition)

·         land, including the land on which covered property is located

·         underground or surface water

·         trees, plants, shrubs, or lawns

Note: Limited coverage is available under Incidental Property Coverage

Coverage D—Additional Living Costs and Loss of Rent

The insurance company is obligated to reimburse increased living costs that are paid by an insured household to maintain its normal standard of living. This situation has to be triggered by the described location becoming unlivable (or, in some instances, inaccessible) because of a covered source of loss (such as fire, windstorm, etc). The increased costs will be paid for the time reasonably required to make the described location fit for use or until the household is permanently relocated, whichever occurs earliest. This period of time is not limited by the policy period.

There are many homeowners who rent out part of their residence to others. The next feature of Coverage D, Loss of Rent, is to help persons whose rental income is affected by a covered cause of loss.

The insurance company will pay for the rent or for the fair rental value that is lost when part of the described location, which generates rental income, can’t be used because of a covered loss. Expenses that do not continue are deducted from the rental value in determining the loss payment.  As it is with Additional Living Costs, the lost rent will be paid for the time reasonably required to make the rented part of the described location fit for use. This period of time is not limited by the policy period.

The policy also pays for increased living expenses and lost rental income for up to two weeks if a civil authority prohibits access to the described location because it is endangered by a loss to a neighboring premises. The damage to the neighboring property must be caused by a source of loss that is covered by the Basic Form policy.

Example: The Karsuns’ home is insured by a Basic Form policy and, today, the tragedy suffered by their neighbors, the Sunnybombs, has become their problem too. Lugnutz Sunnybomb decided to save money by doing his own installation of a new gas furnace in his home. An explosion later destroys the home because Sunnybomb did not properly re-connect the gas lines. All that is left of the Sunnybomb mansion is a single exterior wall that is next to the Karsun homestead. Just before the Karsuns are about to go to bed, the local fire chief tells them that he’s unsure about the safety of the remaining wall and he orders the family to vacate their home.

The Karsuns’ policy would help with some expenses because the Sunnybomb home was damaged by a peril covered by their policy.

There is no coverage under Part D if an insured loses rent because a lease or an agreement has been canceled. Also, the insurance limit  that is shown for Coverage D is the maximum amount that may be recovered under all sections of this coverage.

Example: The Additional Living Costs and Loss of Rent Limit is $20,000. The family incurs $16,000 in covered expenses to maintain their standard of living during the period of loss. The family also loses $6,000 in rental value as the property is repaired for the tenants. The total equals $22,000 but the family receives only the coverage limit of $20,000.

INCIDENTAL PROPERTY COVERAGES

The Basic Form homeowner policy includes a number of coverages that are in addition to the protection described under Coverages A, B, C and D. They are called incidental coverages since they are not part of the primary coverage parts. While the amount of insurance indicated for these incidental coverages is in addition to the limits of insurance shown for Coverages A, B, C and D, there are several instances where the amount of recovery is quite limited.

1. Association Deductible (01/06 addition)

The basic form policy provides up to $1,500 per occurrence (unless increased on the declarations), for an insured’s share of a deductible made by a residential association of homeowners, condominium owners, or similar groups. Coverage applies only when the deductible:

Finally, the Policy Period condition does not apply to this coverage.

Example: Melinda’s home is located in Tres Great Landings. She had a basic form homeowner policy from Big Sky Mutual that expired on October 10. She renewed her coverage with Unspoken Calamity Property and Casualty. On October 7, a storm demolished the gatehouse at the entrance to the development. On November 9, Melinda, along with the rest of the homeowners, received a notice from the Tres Great Landings Homeowners Association, charging her $469 as the portion of the deductible that applies to the gatehouse. Although the deductible charge was made on November 9, Unspoken Calamity Property and Casualty covered the deductible.

2. Credit Card; Electronic Fund Transfer Card or Access Device; Forgery; And Counterfeit Money

This incidental coverage is triggered when an insured

·         is legally required to pay for the unauthorized use of credit or debit cards issued or registered in the name of an  insured

·         has a loss due to the unauthorized use of an electronic fund transfer card or any electronic devices used for withdrawal, deposits or transfers.(01/06 addition)

·         suffers a loss due to forged or altered checks, drafts, notes, or negotiable instruments, or

·         unintentionally accepts counterfeit United States or Canadian paper money.

The limit is $1,500 per occurrence, unless a higher limit is shown on the declarations. An occurrence is not limited to a single event; it includes all acts perpetrated by a single person.

Example: Penny Goodgraces gets a bill from her favorite department store, which shows $1,200 in charges she never made. Penny discovers that her card was stolen and she reports her loss, expecting coverage. However, the insurance company’s claims department explains to her that, since her credit card agreement includes a provision to cover any losses connected with a card theft or unauthorized use; the credit card company must absorb the loss, not the Penny’s insurance company.

Credit Card; Electronic Fund Transfer Card or Access Device; Forgery; And Counterfeit Money – Defense Expense (01/06 addition)

When an insured is sued due to the unauthorized use of credit cards, electronic fund transfer cards or similar devices, this policy will pay the defense expense. The insurance company will decide what investigations and settlements are necessary, without consulting with the insured. Once the insurance company pays the applicable limit, based on a settlement, it is no longer required to provide a defense.

The insurance company may or may not defend an insured or an insured’s bank if a suit is brought because of a refusal to honor a forged check, draft or negotiable instrument. If it decides to defend a suit, any related expense is paid by the insurance company and the insurance company also provides the counsel.

There are some exclusions under this coverage. No payment will be made in the following instances:

·         an  insured  has not complied with the rules under which the credit or debit card was issued

·         the unauthorized person is a resident of the named insured’s household (01/06 addition)

·         the card or device is used with the consent of an insured

·         the loss is caused by the dishonesty of an  insured

·         the loss results from the  business  of an  insured,

Note: Since these are not covered, defense cost is also not covered.

Examples: The following losses are not covered:

·         An insured lets his friend borrow the card to charge a lunch, then the friend purchases a VCR, some clothes and costume jewelry before disappearing

·         An insured is tricked into revealing his credit card account number to a party who makes unauthorized charges; however, the charge card is issued in the name of the insured’s company

·         An insured discovers that his credit cards are missing, but doesn’t report the fact for several weeks. The credit card agreement has a provision that requires immediate notification of missing cards.

3. Debris Removal

There is coverage for the cost to remove the debris of covered property after a loss. The loss must be caused by a peril that applies to the damaged property. The coverage extends to handle the cost of removing volcanic ash, dust, or particulate matter that damages the covered property

The most that the insurance company pays for the combination of debris removal and the physical loss of property is the limit applicable to the particular damaged property. If the limit is not sufficient to cover the debris removal, the insurance company will pay an additional 5% of the limit specifically for the debris removal. (01/06 change)

Example: The Heatermans live in Lavaton, WA and their home was one of many damaged by volcanic dust from the surprising eruption of previously dormant Mt. Gushmore. The Heatermans suffered damage to their home, garage, utility shed and to their furniture. Their homeowner policy’s declarations page showed the following insurance limits:

Coverage A

$200,000

Coverage B

$20,000

Coverage C

$100,000

Policy Total

$320,000

The Heatermans can use each entire limit to cover the ash removal for the specific property covered in ash. But they cannot use the Coverage A limit to pay for Coverage B damage. or vice versa. However, if the debris removal expense exceeds the Coverage limit, an additional 5% is available. This means that $200,000 + $10,000 is available for Coverage A, $20,000 + $1,000 is available for Coverage B and $100,000 + $5,000 is available for Coverage C.

Important: this incidental coverage does not cover any expense associated with the effects of pollutants. This exclusion applies to all of the following:

·         testing

·         monitoring

·         clean up costs

·         removal

·         containment

·         treatment

·         detoxification

·         neutralizing

·         respond to (occurrence involving pollutants) and

·         assessment

Finally, there is limited coverage for the removal of fallen trees. Up to $500 per tree and $1,000 per occurrence is provided to remove trees from the described location under the following circumstances: (01/06 change)

·         the tree has damaged covered property

·         the tree(s) obstructs access to a driveway on the  described location

·         the tree blocks access to a ramp used to make the described location accessible to handicapped persons. (01/06 addition)

HOWEVER, this coverage extension is available only IF the named insured’s tree is felled by windstorm or hail or a neighbor’s tree is felled by any of the perils covered by this policy. (01/06 change).

4. Emergency Removal

There is coverage for direct physical loss to covered property for up to 30 days if the covered property is moved from premises to protect it from a loss by a peril that is covered by the policy. However, this coverage does not extend past the policy’s expiration date.

Note: This coverage does not increase the limits shown for the property being removed. The property coverage exclusions do not apply to this coverage, except regarding intentional acts. No coverage for any insured (even the innocent insured) is provided for any loss caused by any intentional act committed by or at the direction of any insured. 

Example: Buzz Whirly’s home is protected by a Basic Form homeowner policy. Sadly, a fire has started on the upper floor and is spreading to the other parts of the house. With permission of the fire chief, Buzz and some friends remove his piano and furniture from his living and dining rooms. The furnishings are placed in a neighbor’s yard and are saved from fire and smoke damage. As the fire is being fought, there is a sudden rainstorm. While the heavy rain assists the fire fighters, it ruins nearly half of the furniture that was moved out of the house. In this case, the furniture damage is covered.

5. Fire Department Service Charge

This incidental coverage provides a maximum of $500 per occurrence for paying charges under an agreement between the named insured and a fire department. The charges must be related to a fire department responding to the insured location that is endangered by a covered peril. As an option, an insured may purchase a higher limit for this expense.

Note: There is no coverage if the property is located within the operating area of a governmental authority that provides  fire department services. (01/06 addition)

6. Glass or Safety Glazing Material

Another incidental coverage is protection against breakage of glass that is part of a structure (such as a window). It includes any increased cost if the insured is legally required to replace the damaged glass with safety glazing materials. There is also coverage for direct physical loss to covered property damaged by the breakage of glass that was part of a structure.

Example: An insured comes home and a group of kids who were playing baseball near her home suddenly scatters. . As she enters her house, she notices a baseball, a broken bay window and a set of shredded,  custom drapes. The policy’s Glass or Safety Glazing Material coverage would cover the loss to both the window and the drapes.

The earth movement exclusion does not apply to this coverage.(01 06 change)

There is no coverage for property damaged by glass, except as described above. There is also no coverage on the described location if the residence insured under Coverage A has been vacant for more than 60 days in a row. A residence being built is not considered to be vacant. (01/06 change)

Important: The maximum amount of coverage per occurrence is a modest $100 and does not increase the applicable limits.

7. Grave Markers

The insurer will pay up to $2,500 for direct physical loss to grave markers and mausoleums. To be eligible, the loss must be caused by a peril insured against. The grave markers or mausoleums can be on the described location or off. (01 06 change)

Example: The Greevers visit their dearly departed every November 1st. When they arrive for their annual visit, they’re shocked to see remnants of large pumpkins among several broken headstones. This damage would be handled by their HO policy  since vandalism is a covered peril.

8. Increased Cost—Ordinance or Law

Another incidental coverage protects against the increased cost caused by the enforcement of a code, ordinance, or law that regulates the use, construction, repair, or demolition of property following a covered loss. It also covers the cost to remove the  debris that results when the law is enforced.

Example: Daisy Flayme and