TECH TALK. I was reading my homeowners renewal policy... Or trying to...

Transcription

1 TECH TALK I was reading my homeowners renewal policy... Or trying to... August 2012 By Irene Morrill, CPCU, CIC, ARM, CRM, CRIS, LIA CPIW Vice President of Technical Affairs I received my renewal package policy. I live in New Hampshire so my homeowners, personal auto and personal umbrella are all together. One of my requirements is that I have an ISO company for auto and home. This has been self-serving so that I would know what I bought. My previous insurance carrier was purchased and I am currently with a company that writes its own. I think it VERY interesting that I am a preferred client that has a homeowners section that discusses ultra and enhanced and there are some VERY substantial and horrific policy exclusions. I have to say that the homeowners section of the package policy was the most miserable piece of work that I have EVER tried to read. I guess the company has multiple layers of coverage. It uses a 10 page endorsement to talk about all the changes in all the variations. I wonder if it WANTS the consumer to understand. There are also other endorsements to modify or enhance(?) the coverage. And, of course there is the state amendatory endorsement. Thank heaven for the New Hampshire state amendatory endorsement. Some Good News... As a preferred customer I would have wanted the automatic enhancements such as earthquake coverage, open perils contents, replacement cost contents, water backup/sump overflow and personal injury coverage. Most companies seem to add the refrigerated property/spoilage and Identity Theft/recovery coverages. This company does also. Of course the special limits are increased beyond the norm and there are some other small interesting little additional coverages in Section I such as criminal conviction reward and arson reward. I don t really care about the foolish little ditty property enhancements they are NOT why I buy a policy. I want to make sure that the meat of the policy will be there for me. This form appears to be a morphed HO-91/2000/2011 Some Section I Bad News... For those people with pools...there is an additional issue to consider with this policy that one does NOT have to consider with a straight ISO form. Massachusetts Association of Insurance Agents 91 Cedar Street - Milford, MA TECH Hotline * * * (FAX)

2 2 Coverage A exclusion for freezing and thawing... This exclusion has been in the ISO policy for a long time and it is essentially for things IN the ground (2) Freezing, thawing, pressure or weight of water or ice, whether driven by wind or not, to a: (a) Fence, pavement, patio or swimming pool; (b) Footing, foundation, bulkhead, wall, or any other structure or device that supports all or part of a building, or other structure; (c) Retaining wall or bulkhead that does not support all or part of a building or other structure; or (d) Pier, wharf or dock; This removes coverage for things that are going to happen or there is such a potential for occurrence that the company doesn t stand a chance to NOT pay a loss. Hydrostatic pressure of water in the ground can damage pools, pavements, etc. However, damage to these items IS covered for damage by weight of snow... as that is NOT excluded. My HO policy exclusion is MUCH worse. 2. freezing, thawing, pressure or weight of water, ice or snow whether driven by wind or not, to a swimming pool, hot tub or spa, including their filtration and circulation systems, fence, landscape sprinkler system, pavement, patio, foundation, retaining wall, decorative or privacy wall, bulkhead, pier, wharf or dock. So... for those of you selling preferred homeowners policies to high end clientele that have underground sprinkler systems (not me)...just how preferred IS the policy that you are selling?? Settling and Cracking Exclusion Also... the exclusion for settling, cracking, shrinking, bulging or expansion -- applies to pavements, patios, foundations, walls, floors, roofs, ceilings, swimming pools, hot tubs, spas or chimneys. The NORMAL ISO policy exclusion does NOT apply to swimming pools, hot tubs, spas or CHIMNEYS! How wonderful to have an ultra preferred policy! Damage by Domestic Animals ISO Coverage A/B exclusion ONLY applies to animals owned or kept by an insured. This exclusion applies... period... whether I am caring for them, own them or the neighborhood mutt managed to sneak in my house with his muddy paws and bad chewing habit. Pressure from or Presence of Plant Roots Is NOT an exclusion under the ISO Coverage A and B but is an exclusion in this preferred policy. Coverage D - Loss of Use With the ISO policy coverage lasts until limit gone as long as you are not delaying the loss. Payment will be for the shortest time required to repair or replace the damage or, if you permanently relocate, the shortest time required for your household to settle elsewhere.

3 3 My policy says... Payment shall be for the shortest time required, not exceeding 24 months, to repair or replace the damage or to permanently relocate. This restriction applies to BOTH additional living expense AND loss of rents. So...from the tornado in western Massachusetts...is everything rebuilt yet? There are numerous other reductions in coverage that this preferred homeowner suffers that she would have if she were a NORMAL ISO homeowner... but I ve had enough of Section I. Section II HORRIFIC News I could live with the variations in Section I, but it is the new and NOT improved Section II exclusion that sent me over the deep end. But...I have to say...thank YOU... to the New Hampshire Insurance Department which appears to read individual company filings AND seems to have a LIST of items that are NOT allowed in a personal lines policy in the Live Free or Die state. Let s look at the policy exclusions... which some of YOUR Massachusetts clients have. No, I am NOT going to tell you who my company is... but... if you look at what you are selling some of your clients... you ll know. Exclusions Applicable to Coverage E BI/PD and Coverage F MP to Others This policy has the following exclusion: liability which results from violation of criminal law committed by, or with the knowledge or consent of ANY insured. This exclusion applies whether or not any insured is charged for convicted of criminal law, or local or municipal ordinance. You think... criminal acts should not be covered if they result in BI and PD to others. I agree... for the perpetrator. What if the perp is a teenager and the innocent parent gets sued, too. AH, I have your interest now. The word any is dangerous. If it said the, it wouldn t bother me too much. I d visit Bud, my husband, in jail. In interests of time, I will not delve into the minutia of variations between this company and ISO. I will now address the bigger issues. Exclusions Under Coverage E... that I have not seen in a pure ISO policy This policy has an exclusion for liability arising out of any written or oral agreement for the sale or transfer of real property, including but not limited to liability for:

4 4 a) known or unknown property or structural defects; b) known or hidden defects in the plumbing, heating, air conditioning or electrical systems; c) known or unknown soil conditions or drainage problems; or d) concealment or misrepresentation of any known defects. A few years ago I was buddies with an agent who had sold a house and was being sued for water damage problems that occurred after the property sold. She contended that they were unknown to her. Her company said it wasn t property damage and it wasn t an occurrence and therefore not covered. I disagreed. She needed a lawyer. Evidently... there is some credence to there being coverage under property damage liability otherwise, why have the exclusion. Full disclosure of known defects is required on the seller s statement of facts. I don t think lying about problems that will result in property damage should be covered. But, certainly unknown defects should at least be defended until the insured s legal responsibility is determined. The New Hampshire Insurance Department did not make the company delete the exclusion entirely... but they did require the exclusion be reworded removing the exclusion for hidden or unknown problems. Coverage E Personal Liability Pollution Exclusion This one FLOORED me. There is no pollution exclusion in Section II of the ISO HO policy. I personally don t care if an oil exclusion is added because I have gas heat. However, this exclusion goes beyond oil. bodily injury or property damage arising, in whole or part, out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, escape, emission, transmission, absorption, ingestion or inhalation of pollutants or contaminates at any time. This includes any loss, cost or expense arising out of any: 1) request, demand or order that any insured or others test for... 2) claim or suit by or on behalf of a governmental authority... This exclusion does not apply to bodily injury sustained within a building on the residence premises and caused by smoke, fumes, including carbon monoxide, vapor or soot from equipment used to heat that building. This exclusion is MORE restrictive than the ISO CGL or BOP! The pollution definition : pollutants or contaminants means any of the following: 1) liquid fuels 2)lead or any materials containing lead: 3) asbestos or any materials containing asbestos: 4) radon; 5) Formaldehyde or any materials containing formaldehyde; 6) electric fields, magnetic fields, electromagnetic fields,...

5 5 8) pathogenic or poisonous biological materials; 9) acids, alkalis or chemicals; 10) radioactive substances; or 11) any other irritant or contaminate, including waste, vapor, fumes or odors. So... tell me... with this exclusion... I have an in ground pool. If I don t have the chemicals just right and you are a guest in my pool and get sick and sue me... am I covered? I am compulsive ( I think you all know this). When I have guests I do MAJOR house cleaning. (Not that I ever let it get filthy, but I grew up in the white glove testing home.) You are a guest and are somewhat overcome by the very clean chemical smell. You get sick and sue me. Do I have coverage? My house or garage catches on fire. My neighbors inhale the smoke and get sick and sue me. Do I have coverage? I own and live in a two family home and my tenants get sick due to my cleaning chemicals and sue me. Do I have coverage. I don t know my house has radon. My tenants get sick and sue me. Do I have coverage? I wear too much perfume and my guests get sick and sue me. Do I have coverage? If I m lucky the company will NOT be so restrictive in its interpretation...but how big was the suit? Or, when I sue them for coverage... the court will find on my behalf... years down the line :) I do not believe that such an exclusion belongs in a personal lines policy. I understand the lead paint issue, and I understand the oil remediation issue. Even if I bought back the oil remediation endorsement, I STILL have major pollution issues excluded. Again, THANK YOU and HATS OFF to the New Hampshire Department of Insurance who made the company remove this exclusion from the HO policy. Not all Departments of Insurance require this. Bodily Injury and Property Damage Caused by Animals The policy also has a rather lengthy liability exclusion for BI/PD arising out of dangerous animals... not just dogs. It is WAY lengthier than any company specific endorsement that I have seen. It is certainly over the top compared to the 2011 ISO endorsement. The exclusion begins: liability arising out of any animal that any insured acquires, owns or keeps that: 1) is of a breed or kind named by or controlled by ANY local, state, or federal ordinance or law because of public safety concerns (there are 10 other caveats)

6 6 Actually, I can live with this exclusion because I work in insurance and understand the exposure. Not all personal lines clients understand loss ratios. They only understand good dog. So... when you are selling the PREFERRED homeowner policy with all the bells and whistles... what kinds of PITFALLS, GAPS and EXPOSURES are you also selling. Increasing my credit card coverage to $3,000 and REMOVING $500,000 of pollution liability coverage is NOT a good deal in MY book. Give me ISO and Massachusetts Property Underwriting Association. Good luck. If I can be of service to you, please call me, Irene Morrill, Vice President of Technical Affairs, at or me at imorrill@massagent.com. This article has been developed expressly for the members of MAIA. Reprint by other than members without the express permissions of the author is not permitted. Just like Christmas... Irene s Personal Lines Training class only comes around once a year! Insurance Training for Personal Lines is a multiple-day, entry-level, in-depth training and application certificate course of new agency employees. This year, the class will be held on 16 different dates during September and October. Your new employee will spend an average of two days a week in class and will be back in your office to apply his/her new skills the rest of the week. The program was developed to train a newly hired employee or cross-train an employee to be insurance literate, functional, confident and service-oriented! This is MORE than just a lecture. This multiple-day seminar is designed to provide hands-on practical application. Coverage will be discussed and practiced in an account-rounding, exposure analysis method. Each participant will work on his or her own, instilling individual growth, and work in a group to learn how to foster a team environment and attitude. Customer service will be addressed throughout the course in regards to appropriate attitude as well as insurance expertise. This class employs teaching methods that will fit everyone s learning style -- Some Lecture -- Some Q&A -- Individual Practice -- Group Practice -- all spread over a six-week period. Click here for more information.