Cpcu 555 Ch.6

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HO Section II Coverage E - Personal Liability

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Coverage E provides coverage if a claim is made or a suit is brought against an insured. Liability coverage applies to bodily injury (physical injury to a person, including sickness, disease and death) and property damage (physical injury to, destruction of or loss of use of tangible property) arising from the insureds activities or premises.

Section II provides third-party coverage, based on occurrence (an event, an accident including continuous or repeated exposures to substantially the same general harmful event). Section I provides first-party coverage, based on peril.

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Examples of an insured

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E.x. of an insured: resident of the household who is under the age of 21 and in the care of he named insured is included as an insured (NI's 20yr old son living at home while attending college), 17yr old exchange student who temporarily lives with and is under the care of the named insured, 80yr old grandmother that lives with the insured, any person legally responsible for animals that are covered by the policy and owned by an insured is an insured for liability coverage (neighbor who is caring for the insured's cats if one of the cats causes injury while in he neighbor's care, someone hired by the insured to walk their dogs).

E.x. of person's not considered an insured: NI's admin assistant who works out of an office in the insured's garage, friend of insured's daughter who often spends the night and NI's 27 yr old best friend who comes to stay with the insured for a 3wk visit. Separated spouses that don't reside in the insured's home.

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Coverage E pt.2

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Coverage E provides the following coverages:

Damages for which an insured is legally liable, typically up to $100,000.

Defense costs, even if a suit is groundless, false or fraudulent (someone pretends to fall in your house and sues you). Defense costs are supplemental to the liability limit (defense costs don't count against $100k limit).

Insurer's obligation to defend ends only upon payment of judgement or settlement (insurer has to stand by insured until there is resolution, can't just pay the money and be done).

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Coverage F Medical payments to others

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Coverage F - medical payments to others covers medical payments incurred by others, not insured or regular household residents. Includes reasonable charges incurred within three years of injury. Stipulates that if an insurer pays a claim under Coverage F the payment is not an admission of either the insurer's or insured's liability. Limit is generally $1,000 per person, per accident.

Coverage may be considered to overlap with bodily injury liability coverage (coverage F is no fault coverage). Liability coverage applies only when an insured is legally responsible for damages. E.x. someone falls in insured's home and has small amount of damages the insurance company will pay from F as it is easier than E, claimant won't need to prove fault under F, E would be used if claimant was suing insured.

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Coverage F pt.2

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Coverage F applies to:

Injuries to a person having permission to be at the insured location (burglar would not be covered).

Injuries to a person away from the insured location, arising out of a condition at the insured location (insured has pool they are draining and water is flowing into street and neighbor walking on street slips in water).

Injuries to a person away from the insured location caused by an activity performed by an insured (insured is playing football at the park and accidentally breaks friend's nose).

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Section II - additional coverages

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Additional coverage provides coverage for:

Claim Expenses - includes premiums on bonds and postjudegement interest.

First aid expenses.

Loss assessment - pays up to $1000 for an insured's share of a loss assessment (insured owns condo and condo assoc has board of directors that fail to get appropriate insurance, if there's damage and not enough insurance the condo owner's may be assessed a pro-rata share).

Damage to property of others (voluntary property damage) - pays up to $1000 for damage to property of others caused by an insured regardless of fault or legal liability. E.x. Insured goes to a neighbor's house and the neighbor's dog gets excited knocking over a lamp, the insurer would pay up to $1000 for the lamp, or, insured borrows lawnmower from a neighbor runs it without any oil then returns it to the neighbor who notices it's damaged beyond repair, the insurer would pay up to $1000 for the lawnmower.

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Section II pt.2

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Damage to property of others excludes:

Intentional damage caused by an insured who is age 13 or older. If insured that is under 13 damages property intentionally that is still covered.

Property owned by an insured.

Property owned by or rented to a tenant of an insured.

Damage caused by the insured's business.

Damage caused by ownership or use of any motor vehicle, watercraft or aircraft.

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Section II Exclusions

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Exclusions for coverage under E and F:

Motor vehicles - coverage not provided if vehicle designed for use on public roads (vehicles in dead storage on an insured's property, designed as a toy for use by children under age 7, used solely to service a residence, designed for assisting people who are handicapped, designed for recreational use off public roads, motorized golf carts, trailers not towed by, hitched to or carried on a motor vehicle).

Watercraft - generally not covered (small, low-power watercraft are covered, such as sailboats under 26ft or over 26ft and not owned by or rented to insured). E.x. insured owns 17ft catamaran is covered, 35 ft sailboat insured lets a friend borrow would be covered.

Aircraft - model planes or toy planes that do not transport people or cargo are covered.

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Section II exclusions pt.2

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Exclusions for coverages E and F:

Intentional injury - injury caused by an intentional act is excluded. (insured notices their septic leaking into someone's well but fails to fix it for a long time would be considered intentional and not an accident).

Business - injury caused by insured's business activity is excluded. Renting property qualifies as a business, unless rental on an occasional basis (insured rents home to someone for a week if they're in town for special event). Certain part-time business activities are covered: volunteer activities, home daycare services not involving compensation, home daycare services provided for a relative, activities in which the insured received $2000 or less during the year preceding the policy period.

Professional services - insured's rendering of or failure to render services is excluded (architect provides improper drawings to a client).

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Section II exclusions pt.3

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Exclusions for coverages E and F:

Insured's premises not an insured location - excludes coverage for damage arising out of any premises that is owned by or rented to an insured, but is not an insured location. E.x. someone slips in insured's vacation home that is not covered under policy.

War - bodily injury or property damage that results from war is excluded.

Communicable disease - losses arising from the transmission of a communicable disease is not covered.

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Section II exclusions pt.4

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Exclusions for coverage E and F:

Sexual molestation, corporal punishment or physical or mental abuse - losses arising out of these events are not covered.

Controlled substance - losses resulting from the possession of controlled substances are not covered.

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Exclusions from coverage E

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Exclusions applicable only to coverage E:

Loss assessment and contractual liability - coverage not provided for liability arising from any loss assessment charged.

Damage to the insured's property - damage to insured's own property not covered.

Damage to property in the insured's care - property rented to, occupied by or in the care of an insured is not covered (covered if damage caused by fire or smoke).

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Exclusions from coverage E pt.2

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Exclusions applicable to only coverage E:

Bodily injury to persons eligible for workers compensation benefits.

Nuclear liability - losses normally covered under a nuclear energy liability policy are excluded from coverage.

Bodily injury to an insured - coverage does not apply to the name insured's own bodily injury.

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Exclusions from coverage F

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Exclusions applicable only to coverage F:

Residence employs off premises - injuries occurring off insured's location and not arising out of the employee's work (if employee is working but away from residence it would be covered). E.x. insured has a nanny that is at the store for herself, not insured, and nanny gets injured.

Bodily injury eligible for workers compensation benefits.

Nuclear reaction - bodily injury from any nuclear reaction, regardless of the cause.

Injury to residents - bodily injury to anyone who regularly resides in the insured location.

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Section II Conditions

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Conditions applicable to section II:

Limit of liability - describes maximum limitations of and conditions for payment under E and F coverage. Stipulates that the limit appearing on the Dec page id the total limit of coverage for any one occurrence and that all bodily injury and property damage that results from continuous or repeated exposures to the same harmful conditions are considered to be one occurrence.

Severability of insurance - each insured seeking protection is treated as if he or she has separate coverage under the policy. Insurer's liability is not increased, regardless of number of insureds involved. E.x. one insured under the policy can sue another person insured under policy, policy will only pay to the limit of liability regardless of how many insureds there are.

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Section II conditions pt.2

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Conditions applicable to section II:

Duties after an occurrence - insured must:

Give written notice as soon as practical.

Cooperate with the insurer's investigation.

Forward legal documents promptly.

Provide claims assistance to the insurer.

Submit evidence for damage to property of others.

Not make voluntary payment.

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Section II conditions pt.3

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Conditions applicablt to section II:

Duties of an injured person - Coverage F:

Give written proof as soon as possible.

Authorize the insurer to obtain copies of medical reports ad records.

Submit (injured person) to a physical exam by a doctor chosen by the insurer.

Suit against Us - insurer cannot be sued under the homeowners policy until certain previsions and terms have been met.

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Section II conditions pt.4

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Conditions applicable to Section II:

Bankruptcy of an insured - if the insured becomes bankrupt, insurer is not released from responsibility under the policy.

Other insurance - stipulates coverage E limits will be paid as excess over other insurance unless other insurance is written specifically to provide excess coverage.

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Section II Conditions pt.5

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Conditions applicable to section II:

Policy period - stipulates coverage applies only to bodily injury and property damage that occurs during the policy period.

Concealment of fraud - excludes coverage only for the insured involved in the concealment of fraud.

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Section I and II conditions

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Conditions applicable to both section I and II:

Liberalization clause - stipulates that when an insurer broadens coverage on new or renewal policies, current policies (all in-force policies) of the insurer also receive the broader coverage. E.x. in order to attract new customers an insurer adds endorsement to HO policies, this clause makes it so that the endorsement will be added to all existing HO policies as well.

Waiver or change of policy provision - a waiver of a right or change of policy provision is valid only if the insurer makes it in writing.

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Sections I and II conditions pt.2

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Conditions applicable to both sections I and II:

Cancellation - specifies requirements for a valid termination of the policy by either party (insurer can cancel the policy only for certain stated reasons, insured can usually cancel at any time).

Nonrenewal - requires insurer to provide at least 30 days written notice to the insured if it does not plan to renew the policy.

Assignment - any assignment of the policy without insurer's written consent is invalid.

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Sections I and II conditions

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Conditions applicable to both sections I and II:

Subrogation - insurer's right to recover its claim payment from the responsible party (under this condition, insured can waive all rights to recovery, provided the waiver is in writing and is made before a loss).

Death - if insured or spouse should die, the insurer agrees to cover the decedent's legal representative (executor) as an insured.

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HO-2 compared with HO-3

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HO-2: designed for owner-occupant of a house. Slightly lower premium than HO-3. Covers same property for the same limits (HO-2 has slightly lower premium than HO-3 while covering the same property). Provides named perils coverage for coverages A, B and C.

HO-3 also designed for homeowners. Provides open perils coverage for coverages A and B and named perils coverage for coverage C.

Personal property is covered to ACV in all HO policies.

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HO-2 compared with HO-3 pt.2

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In addition to insuring against more causes of loss than named perils coverage, open perils coverage has another advantage which involves the burden of proof:

With named perils coverage (HO-2), burden of proof is on the insured.

With open perils coverage (HO-3), to deny coverage the insurer must prove the loss was caused by an excluded cause of loss.

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HO-4 compared with HO-3

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HO-4 designed specifically for people who live in rented houses or apartments. Coverage C written at a limit insured selects as adequate to cover personal property.

The Coverage C limit in the HO-3 is typically 50% of the Coverage A limit. Coverage C in the HO-4 is written at a limit the insured selects. HO-4 does not include coverage for furnishings provided by the landlord because the occupant-insured does not have an insurable interest in the property.

Coverage D provided automatically at 30% of the coverage C limit (rather than 30% of A on HO-3).

Provides an additional coverage for building additions and alterations, with a limit equal to 10% of the coverage C limit.

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HO-5 compared with HO-3

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HO-5 is essentially an HO-3 modified to provide open perils coverage for coverage C.

In addition HO-5 covers: Water damage, including flood, for persona property away from a location owned, rented, occupied or controlled. Personal property damaged by rain, even if the building itself is not damaged. Lost or misplaced jewelry, furs, firearms and silverware.

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HO-6 compared with HO-3

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HO-6 is very similar to HO-4.

HO-6 compared to HO-3: HO-6 covers exposures faced by unit owners in a condominium or a cooperative corporation, defines residence premises as the unit where the insured resides, not 1-4 family dwelling like HO-3. Coverage A provides a basic limit of $5000 which can be increased if needed. Coverage B is eliminated from the HO-6 since coverage A includes other structures owned. Coverage C is subject to a limit the insured selects. Coverage D is 50% of the coverage C limit.

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HO-6 compated with HO-3 pt.2

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HO-6 additional characteristics: Provides named perils coverage for coverages A and C. Loss assessments coverage is identical in the HO-3 and the HO-6. Trees, shrubs and other plants are covered for up to 10% of coverage C limit. Does not include coverage for landlord's furnishings.

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Ho-8 compared with HO-3

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HO-8 is designed for use when the replacement costs of a dwelling significantly exceeds FMV (historic home). Covers only 10 named perils. Provides limited coverage for property not on the insured premises. Smoke from a fireplace is an exclusion in the HO-8 that is not found in HO-3. Theft peril provides off-premises coverage limited to property in banks and storage facilities.