Q&A POTOURRI 10/22/2012. Condo of course

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1 Q&A Potpourri

2 Q&A POTOURRI This program is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. With special thanks to the Insurance Services Office, Inc. for advance information, continued support, and permission to use their forms and information. 1 Condo of course I have a question regarding the new Fannie Mae Certificate of Insurance requirements. They request the wording ALL" In" coverage on the Certificate. If the policy is follow form to the condo docs and the agent has "interpreted" the condo docs to read as requiring "All IN" coverage, can you out the words ALL IN on the certificate or should you state the policy follows form to condo docs attached? 2 1

3 Condo of course What "fannie mae" wants and what it "gets" are TWO different things. Some agents HAVE sent me endorsements that are COMPANY specific that are "all in"... that they cover the building "regardless of ownership"... and do NOT state the ISO wording of... whatever the condominium association agreement states they just cover the building... 3 Condo of course if you have a "normal" policy with "normal" ISO or company wording that tracks with condo documents/bylaws then you CANNOT...or SHOULD NOT state all in on the certificate. 4 2

4 Condo of course This just merely passes the buck to the personal lines agent... The MA DOI has pretty much sent a bulletin reminding us that we cannot state on a cert/binder/evidence what is NOT in the policy. 5 Condo of course MA is a file... APPROVE... and use state... and typing something on the cert that is NOT in the policy... is somewhat...illegal...not that the DOI has pressed this but

5 Condo of course 7 Condo of course 8 4

6 Condo of course The April 2009 CPM (Condo Project Manager Release notes of what commercial agents should say 9 Condo of course I have a client who is refinancing his condo, and the bank is requiring that he increases his personal contents coverage to 20% of the appraised value. Can they do that? 10 5

7 Condo of course OR I have a client purchasing a condo. They are financing through WellsFargo. The bank appraised the property at 860,000(incl. land market value etc.) They are requiring the unit owner to purchase 20% of the appraised value at $174,000. The master policy insures the building at $765,000(3units) on a replacement cost basis with All In coverage. 11 Condo of course OR They want me to state on our policy that he has replacement cost on improvements and betterments but isn t that was is covered on the all in? I did send them the MGL chapter 183 sec.66 as they were not attorneys or familiar with Mass Law as they stated. Is there something I am missing? They want to hold up his closing today unless we provide this for them. Can you give me some insight on what else I can fire at them? 12 6

8 Condo of course Per a fannie mae guideline of April If the commercial agent doesn't state on the certificate that the commercial coverage is 100% Replacement Cost INCLUDING unitowners improvements and betterments then the mortgage broker can ask for an HO-6 binder at a MINIMUM of 20% unit appraisal value. 13 Condo of course The April 2009 CPM (Condo Project Manager Release notes of what commercial agents should say 14 7

9 Condo of course I would hope that NO commercial agent would state something like that on a certificate since I have NEVER seen THAT language in a commercial policy. 15 Condo of course Send the binder for HO-6 at the 20% and attach a copy of the policy showing the definition of "coverage A"... A. Coverage A Dwelling 1. We cover: a. The alterations, appliances, fixtures and improvements which are part of the building contained within the "residence premises"; 16 8

10 Condo of course Please REVIEW THE FOLLOWING NOTE RECEIVED FROM AN ATTORNEY FOR SPECIFIC LANGUAGE A BANK WANTS ON A BINDER HOR AN HO6 POLICY. According to Cambridge Savings Bank, the specific language Fannie Mae requires in all H06 binders is "the insurance coverage is sufficient to cover the borrower in case of a loss or claim." 17 Condo of course This is the new Fannie Mae language that needs to be in all their binders. Walls-in or All-in or 20% of appraised value won't cut it anymore. 18 9

11 Condo of course In a Fannie Mae publication: Why is Fannie Mae requiring the coverage required under the new HO-6 insurance requirements to be determined by the insurer? Can it be determined by some other entity or method? Yes, it can be determined by another entity or method. When an HO-6 policy is required, Fannie Mae requires that the seller/servicer ensure that the policy provides coverage in an amount that is determined from the best known/available information to the seller/servicer, including existing information from the borrower in collaboration with the insurer and the condominium association. 19 Condo of course Dec 2011 Fannie Mae 20 10

12 Homeowners I have an insured who is purchasing a home that is located on the river bank locally in South Hadley Ma. The local Holyoke Gas and Electric has an easement on the property relating to their ownership of a certain portion of the riverbank. The easement includes rental of a two slip dock that extends from the Gas and electric property. The property has a lease agreement which requires $1,000,000 limit of liability and the listing of the Holyoke Gas & Electric as an additional insured. 21 Homeowners Understanding that listing the H G & E as an additional insured would create a claims issue relating to the insured Dwelling, other structures, and property as well as liability. Is the only option to purchase a CGL policy for the easement exposure 22 11

13 Homeowners The following is the HO but HO-91 similar F. Coverage E Personal Liability Coverage E does not apply to: 1. Liability: a. For any loss assessment charged against you as a member of an association, corporation or community of property owners, except as provided in D. Loss Assessment under Section II Additional Coverages; b. Under any contract or agreement entered into by an "insured". However, this exclusion does not apply to written contracts: (1) That directly relate to the ownership, maintenance or use of an "insured location"; or (2) Where the liability of others is assumed by you prior to an "occurrence"; unless excluded in a. above or elsewhere in this policy; So the lease agreement if in writing is honored... but a commercial policy is the only one that will most probably provide additional insured status 23 Homeowners Sorry to bug you but I just want to confirm if a client puts personal items in a storage unit they will only have 10% of coverage C to protect them correct? 24 12

14 Homeowners.or I am totally confused as to how this insured would have coverage under his homeowner s policy, so here is the scenario: The insured has an HO He is selling his home as of 5/31/2012 and will no longer have an insurable interest 100% of his belongings are going in storage indefinitely 25 Homeowners.or He will be on a hiatus for 90 days While he searches for a home in DC He will not be coming back Where in the homeowner s policy does it show that his items would be covered at 100% while in storage vs. 10% for 30 days HOW????? 26 13

15 Homeowners.or HO-91 HO Homeowners.or Coverage C is WORLDWIDE... it is ONLY limited when at an insured's residence... there are special limitations of coverage for CERTAIN items...like money, etc. There are Personal property exclusions...like animals birds fish.. stuff in storage is NOT limited

16 Homeowners.or When one sells the house under the HO-3 there is NO coverage A...as there is no residence premises... no coverage B as no residence premises... he could have some worldwide liability.. 29 Homeowners.or I would have the company issue legal notice of cancellation if he does not willingly submit for cancellation. This is beyond the scope of what we want to do. I'd feel more comfortable if he was in an apartment...had most of his stuff in storage... listing coverage C enough for that 30 15

17 Homeowners.or but he is a vagabond... with no real residence... and that is really MORE exposure than what your agency REALLY wants. Remember...Section II is WORLD WIDE... just what is this individual doing for the next 3 months or so...??? 31 Homeowners.or HO-2011 will be a problem adds to the previously discussed language 32 16

18 Homeowners. A client is moving into a rental at Concord Mews and needs an HO4. The kicker is that Concord Mews wants to be listed as "a person of interest". Now I know add'l insured and I know named insured but somehow have missed person of interest. How do I show this? 33 Homeowners. They are being quite rude telling me that other agents don't have a problem with it. Guess I'm having a senior day but they don't want either named or add'l insured(luckily since they don't have any interest in my clients couch) Concord Mews insists upon person of interest and I haven't a clue how to show it or for that matter what endorsement to order 34 17

19 Homeowners OR. There is an apartment complex that is requiring to be listed as Interested Party on a client s HO4. They are telling the renters that either the complex be listed as Interested Party or the renter must purchase an additional policy from them showing $100,000 liability. Have you ever heard of this? How should it be addressed? Thanks, 35 Homeowners OR. I m hearing this request more and more There must be some sort of "association" for landlords... The HO seems to be acceptable... assuming the company allows it... at least they are NOT an insured... it just lets them know your insured HAS an HO-4... and they get a cancellation notice if policy cancelled

20 Homeowners Not an Insured Get cancel Notice 37 Homeowners We have an insured with an HO3 and DP3. She holds a mortgage in her name only on DP3. She gave her son the house and added him to the deed. He is a Tenant in Common. He is not on the mortgage. This policy is mortgagee billed. MPIUA writes this because it s near the water. They have agreed to rewrite as an HO3 with the son as the named insured and the mother as additional insured

21 Homeowners She has a financial interest, so it makes the most sense. But, since the mortgage is in her name, should she be a named insured? We are a little concerned about it being mortgagee billed and having the payment get to the correct account, especially with MPIUA. What are your thoughts? 39 Homeowners Technically from an ISO standpoint...if the individual does not LIVE in the house they should NOT be on the declarations page...and that is one of the reasons for the additional insured endorsement. The bank shouldn't care as long as it is on the dec page as mortgagee - but given some banks the named insured will just have to make sure that the bill gets paid

22 Homeowners In reviewing the motor vehicle liability exclusion last week I thought you mentioned that there is no coverage for golf carts in a campground. Please advise whether or not there is coverage for golf carts on a campground. 41 Homeowners Regarding OWNED golf carts in a campground... I believe that one can NOT rely on the HO policy... whether it be the ISO HO-91 or HO-2000 or HO-2011 HO-91 Only covered on insured location 0r playing golf 42 21

23 Homeowners HO-2000 Only covered on CERTAIN insured locations Playing golf Or use at private residential community 43 Homeowners HO-2011 same as HO-2000 Only covered on CERTAIN insured locations Playing golf Or use at private residential community 44 22

24 Homeowners Insured location definition all ISO editions HO-91 covers on ALL insured locations HO-2000/HO-2011 only covers on CERTAIN insured locations (a, b, d, e, h) I don t see campground as an insured location 45 Homeowners However, if one asks the insurance company and they say "yes"...great... follow up in writing... I think a large liability claim would be defended at best under a reservation of rights letter... and ultimately...denied. But, I'm not a lawyer. I like to take a strict view of a policy and be "pleasantly surprised"

25 Homeowners I have a situation where an HO-3 is being canceled for underwriting reasons. The Co. was notified by the mortgage co. that said property was vacant. We were notified of this and attempted to contact the insured by phone but the number was disconnected. We sent a letter to them to contact us. Meanwhile, the Co. issued legal notice. The insured contacted when they received the legal notice. 47 Homeowners We explained why they got it. We were told the property is for sale, and that the insured has rented another home in anticipation of the sale. The property still has furniture and things there and the insured stays in both locations. The insured sent a letter to that effect to me and I forwarded it to the underwriter for consideration to rescind the cancellation, but it was denied

26 Homeowners I want to know if the Co. is correct in doing so. Can this policy be cancelled for "Non-owner occupied" reasons? Please advise. 49 Homeowners In MA... if it is within the first 60 days of a policy renewal date or original policy inception date... the company can cancel for ANY reason

27 Our client s commercial vehicle damaged an overhead fiber optic cable. The business Auto insurer s offer is ACV not RC. There is a 10% difference. The overhead fiber optic cable is 6 years old and the new cable when installed will come with a 3 year warranty. Is the insurer s offer of ACV not RC correct? 51 The answer is the same for the BAP as it is for the MAP Both policies pay for damage to someone else s property. The BAP written by ISO defines property damage: 52 26

28 The definition doesn t really tell us ACV or R/C The insuring agreement states: 53 The BAP pays property damage that an insured legally must pay Am I obligated to better you or Put you back to where you were immediately before the accident??? 54 27

29 Replacement cost is really betterment On a first party basis we can buy betterment coverage to be better off after a loss than before it But general concept I am only legally obligated to restore you to where you were before loss 55 We do that in PD claims to other autos Same theory for other types of property 56 28

30 We do that in PD claims to other autos Same theory for other types of property. The "victim" can go to court and TRY for that add'l amount...but... it will take a COURT order to pay more than ACV. That is why first party insurance is so important. I get paid more than my company can recover in subrogation. 57 Our insured had 25 yds of loam delivered to his home. The driver backed over his driveway, turning at the end which caused damage to a portion of his driveway. The driveway is old and would have needed to be replaced in the next couple years however it was not broken up like it is now

31 The trucking company states that they have a signed form releasing them of liability(which has not yet been produced). Of course they also stated that were instructed to drive over the driveway. Our insured denies this. 59 The insured made the decision to file a 3rd party property damage claim on the trucking companies business auto policy. An adjuster came out to view the damage. The insured got 3 estimates ranging from $5700 to $9000 to replace the driveway. Approximately 1/3 of the driveway was damaged. The appraiser wrote up the damages at about $

32 Couple questions: 1)What does the BAP contract state about how this loss is settled? As just discussed legal liability 61 Couple questions: 2)If the insured made a homeowners claim instead of a 3rd party PD claim would the settlement be handled differently? Problem here too 62 31

33 ISO HO policy only pays ACV For structures that are not buildings 63 The ISO HO-2000 and HO-2011 filings have the HO RC loss settlement for certain nonbuilding items endorsement - HO-91 does not 64 32

34 Couple questions: 3)The insurance company told me if they get the signed form (according to our insured this does not exist) releasing them of liability they will deny the claim. It seems to me that this would never hold up Can you comment on this? 65 I am not a lawyer... but if an adult signs something... a contract... it could be used against them... it certainly WILL be by the BAP company. Can the HO company use this to deny paying claim???? NO NO NO 66 33

35 Since this is a motor vehicle claim...your insured can go to small claims court where he/she doesn't need a lawyer and there is no $$ limit... and see what judge says. I cannot believe any judge is going to make the driver's BAP pay for an entirely new driveway. 67 But... judge could make them pay more than $900. Perhaps when bap driver gets court papers and sends to insurance company... insurance company might be willing to pay more without going to court

36 I have a commercial insured who just purchased 5 brand new vehicles from a dealer (no prev. commercial auto policy as new company). The Registry is making up special vanity plates for him and the plates will not be ready until next week. The dealer is telling the insured that he is responsible for insuring them now while they are sitting in the dealer's yard. My underwriter is telling me we can't insure them until they are registered. 69 The titles have been signed over by both parties, but no binders have been issued to the bank, nor the RMV1's stamped. Who is correct in this situation? I'm not sure at what point the insured is actually responsible for insuring these un-registered vehicles 70 35

37 The BAP states: With most probability you have symbol 7 activating ALL the coverages on the BAP... so... a newly ACQUIRED additional auto IS covered for 30 days from the date of acquisition... the issue is...for WHAT 71 The BAP states: symbol 7 states that a newly acquired ADDITIONAL auto ONLY receives the coverage IF ALL CURRENTLY OWNED AUTOS HAVE that coverage. If all currently owned autos have collision.. then a newly acquired one will...same for comprehensive... BI/PD... etc

38 The BAP states: NOWHERE does it say the newly acquired vehicles must be "registered". 73 The BAP states: If any of the 5 are replacement vehicles... it is specifically stated that a replacement vehicle gets the coverage of the vehicle it replaces

39 But my problem here is that this will be a new auto policy. The insured s company is new and we need to write a new symbol 7 auto policy and the underwriter won t issue it until the vehicles are registered. The insured currently does not have a commercial auto policy 75 Then that IS a problem. Technically the second the application is completed (and hopefully down payment made) the policy IS in force. But on the original policy one must conform to company underwriting guidelines. I might want to talk to a supervisor

40 Our belief in MA that a vehicle must be registered to be covered is foolish... and incorrect since nowhere in the policy does it require registration. 77 What we CAN say is that compulsory auto... the whopping 20/40 BI and PIP will not apply until vehicle is registered - great... who cares. In the "rest of the real world"...underwriters don't get involved in registration

41 We have an insured who travels frequently to Europe on business and rent a car. The client has a personal umbrella and Mass auto policy. Since there is no auto coverage in Europe, we advise them to purchase liability coverage to cover the gap up to the umbrella. This runs into money for all their trips. 79 Is there a way or is there a policy out there that can cover this gap on an annual basis without having to buy the coverage on every trip? Maybe surplus lines, etc

42 The BAP could cover this exposure The policy territory of the 2006/2010 BAP Employer s BAP needs proper symbols to grant coverage 81 symbol activating liability must be or or 82 41

43 If vehicle rented in employee s name symbol 9 only covers employer would also need CA Employees as insureds 83 SO A BAP with symbol 1, 8 or 9 would cover the named insured or employee who rents a vehicle without a driver for less than 30 days. Any ISO policy will have the language that settlement must be "agreed" to... or the suit brought in normal policy territory. This is the best that I know of

44 Even if there is no current BAP because no owned commercial auto BAP could be issued for just symbols 8 and 9 And SHOULD be because employees using autos on its behalf can get employer sued. 85 If the individual wants his/her OWN policy Anything is possible in surplus lines... I would ask a surplus lines broker that I normally do business with Or, you can see if either of these websites help or But... you will then have to discuss with PUP carrier...if IT will sit over the policy

45 But... you will then have to discuss with PUP carrier... if IT will sit over the policy (BAP or surplus lines) 87 MAP It s that lovely time again with kids returning to college, and the age old question of excluding drivers is coming up. I want to confirm how it generally works as a coworker and I are in disagreement as to what you lose when you exclude

46 MAP Scenario: Suzy is going away to Richmond VA and mom wants to exclude her. If Suzy drives someone s car down there (Richard) and is in accident down there, Richard s coverage would be primary as she is a permissive user of that car (we can only hope) and would be considered an insured operator for that loss on his policy. Say Suzy is hit by an underinsured operator and wants to go back to her mom s policy (where f 89 MAP Say Suzy is hit by an underinsured operator and wants to go back to her mom s policy (where she s an excluded op) for Underinsured benefits. I say she can; my co-worker says she cannot

47 MAP If Suzie doesn't drive Richard's car "regularly"... she could get back to mom/dad's policy for Parts 4,5,6,7,8,9... as she IS a household member...and the policy applies to her.. 91 MAP 92 46

48 MAP 93 MAP As long as the regular use exclusion does not apply which IS found in Parts 4,5,6,7,8,9 Then the MAP can follow a household member 94 47

49 MAP Does using the operator exclusion endorsement preclude ALL coverage for a named individual? 95 MAP NO not as written by AIB If the excluded individual is driving a car he/she doesn t own and doesn t drive it regularly Can he/she still get back to parents MAP? YES 96 48

50 MAP Endorsement excludes NAMED individual From SPECIFIED Vehicle(s) 97 MAP If when she comes home... mom/dad...call up and add her back... and are doing the "right" thing when she is home... assuming she is driving... then they have given all the information and are not misrepresenting or giving "incomplete" info and policy follows "household members 98 49

51 MAP WITHOUT the exclusionary endorsement...lying to the company or giving incomplete information will allow the company to invoke general provision 18...which allows us to deny ALL optional coverages AND reduce parts 3 and 4 to what we are required to sell 99 MAP Endorsement doesn't really do anything that the policy doesn't already do... General provision 18 Statement in Parts 7 and 8 regarding listing household members who would increase premium when driving family car

52 MAP The operator exclusion endorsement... just makes denying claims for unlisted household member driving family car Easier!