A review of electronic apparatus coverage auto and homeowners policies Resource kit 90101

Transcription

1 A review of electronic apparatus coverage A review of electronic apparatus coverage auto and homeowners policies Resource kit By Dan Corbin, CPCU, CIC, LUTC "I have a bunch of electronic stuff," says your personal lines policyholder. "Would you please tell me how it's covered by my insurance?" That sounds like a fairly straightforward question and your policyholder probably would expect a simple answer to it. Surely a customer service screen located on an insurer's Internet Web site could handle this inquiry. There's no need to intercede with a trained professional here right? Or maybe the answer is not quite as simple as it sounds. Is it possible that the services of a professional agent do add to the insurance product discernible value otherwise unavailable to the consumer? Well, let's just see how simple the answer to the "electronic stuff" question really is. The chart, at the end of this resource kit, displays a variety of circumstances that would lead to a determination of coverage for electronic apparatus. Notice that its coverage could vary anywhere from fixed dollar amounts of $250, $500, $1,000 or $2,500 up to an aggregate personal property limit or no limit, subject only to its actual cash value (ACV). Under some conditions there would be coverage for the perils of flood and earthquake, but not under others. Hmmm. This may not be so simple, after all. Location The chart tracks five variables creating 14 different scenarios (the 6th, 7th and 16th columns overlap by directing you to others on the chart). Five scenarios result in personal auto policy (ISO 1998 edition) coverage and eight result in homeowners policy (ISO 1991 edition) coverage, leaving one scenario with neither policy to rely on. The primary factor in identifying the policy most likely to respond with coverage is the location of the electronic apparatus. In order to be covered on the personal auto policy, the apparatus must always be located in or upon an auto. An auto means "your covered auto" or a "nonowned auto," as these terms are defined in the personal auto policy. On the other hand, just because electronic apparatus is in or upon an auto does not necessarily preclude coverage under the homeowners policy. You will observe that columns 8, 10 and 13 create scenarios where electronic apparatus located in or upon an auto would, in fact, be covered by the homeowners policy and not by the personal auto policy (column 6). An auto in the context of columns 11, 12, 13, 14 and 16 pertaining to the homeowners policy is restricted to any motorized land conveyance. Consequently, unlike the definitions of "your covered auto" and "nonowned auto"

2 in the personal auto policy, an auto in the homeowners policy does not include a trailer. This will have implications for each of these homeowner scenarios that refer to an auto. Power source The manner in which electronic apparatus receives its operational power is another major coverage determinant. There are three sources to consider. One is when the apparatus has been configured to operate exclusively by use of the power from an auto's electrical system. The second is when an alternative nonauto power source is needed for its operation (i.e., batteries or a standard outlet). And the third is when the apparatus is capable of operating under either an auto or an alternative source what is referred to in the chart as a "dual" source. For the personal auto policy to respond, the apparatus must be designed to derive its power solely from the auto unless given the circumstances of columns 1 and 3, when a dual or alternative nonauto power source could potentially apply. The homeowners policy will address apparatus powered by dual sources under columns 9, 13, 14 and 15; by an auto source in columns 9, 11, 12 and 15; and by an alternative source under columns 8, 9, 10 and 15. Use Next, we must consider the use of the electronic apparatus will it be business or pleasure? We first observe that it doesn't matter when dealing with the personal auto policy. However, the homeowners policy will channel coverage through the corridors of either business or pleasure use, except when the scenario of column 13 is involved. Appartus The homeowners policy does not define electronic apparatus, thus it is subject to the ordinary contemporaneous usage of these words. Basically, it means any property whose function relies on the principles of electronics. This could be a lamp, television, washing machine, telephone, computer, radio, curling iron you name it. The policy further broadens the meaning of electronic apparatus to include accessories or antennas, tapes, wires, records, discs and other media used with covered electronic apparatus. The personal auto policy is somewhat more specific with regard to the type of electronic "stuff" that is covered. A distinction is made in this policy between electronic apparatus designed for the reproduction of sound (e.g., radios, tape decks and compact disc players; including accessories) and that used to receive and transmit audio, visual or data signals (e.g., citizen-band radios, cellular phones, personal computers and fax machines). Transmitting-type equipment (other than permanently installed telephones), as well as tapes, records, discs or other media can only be insured under the Coverage For Excess Sound Reproducing Equipment, Audio, Visual and Data Electronic Equipment and Tapes, Records, Discs and Other Media (PP 03 13) endorsement. The personal auto policy coverage of columns 1, 2 and 3 apply to sound-type equipment and columns 4 and 5 apply to transmitting-type equipment. In addition, any electronic equipment necessary to the normal operation of the auto or the monitoring of the auto's operating systems would be covered by the personal auto policy as an indivisible part of the auto. Portability The personal auto policy is kind of fussy about how the electronic apparatus is installed in the auto. There are three installations that will obtain the policy's blessing under varying circumstances. First is a "permanent" installation, which is open to interpretation since it is not defined. Second is a "removable" installation, when the apparatus is removable from a housing unit that is permanently installed in the auto. This design allows the owner to easily remove the apparatus for safekeeping in a more secure place while the auto is unattended. And

3 third is a "manufacturer" installation, where the equipment is installed in locations used by the auto manufacturer. In contrast, the homeowners policy is not real concerned with how portable the apparatus happens to be in order to bestow its coverage. The one exception in column 15 involves coverage for electronic apparatus that is an integral part of a trailer. Because it is part of the trailer, it has a $1,000 limit including the value of the entire trailer. If it is used for business purposes, and it is located away from the residence premises, it would have a $250 limit. Coverage Besides the obvious limit differences among the various scenarios shown on the chart, the personal auto policy and the homeowners policy diverge with respect to perils covered. The typical homeowners policy covers personal property on a named "broad form" peril basis, whereas, the personal auto policy protects against collision and/or all other risks of direct physical loss, if not otherwise excluded. Column 17 describes a rare situation when neither policy would respond. It involves electronic apparatus which is meant to be powered by an auto while in or upon the auto, but not installed to be permanent or removable from a permanent housing unit. As complex as all the foregoing might seem, we still have not introduced coverage situations involving watercraft and aircraft; nor have we discussed all the exclusions, conditions and other provisions of the two policies. One example is the effect of deductibles. The personal auto policy is subject to potentially different comprehensive and collision deductibles, with no deductible applicable in the column 4 "scheduled" coverage. The homeowners policy usually has one occurrence deductible, though it could be split for certain perils like theft or windstorm. Also, reflect on the impact of some of the policy exclusions. The homeowners policy does not cover electronic apparatus that is rented to others, while the personal auto policy does not cover equipment used for the detection of radar or laser. All things considered, I think the personal lines insurance consumer still needs a professional agent to guide him safely through the coverage maze. 8/02

4 Personal Lines Electronic Apparatus Coverage Auto (9) Location Power Source Use Apparatus Portability Coverage 1. Auto (1) Any Any Sound (6) Permanent, not (4) $1,000/$500 (11) 2. Auto (1) Auto (1) Any Sound (6) Removable (3) ACV/$500(11) 3. Auto (1) Any Any Sound (6) Manufacturer (4) ACV/$500(11) 4. Auto (1) Auto (1) Any Transmit (5) Permanent/ Removable (3) Schedule (2) 5. Auto (1) Auto (1) Any Phone Permanent ACV/$500 (11) 6. Auto (1) Not Auto (1)/ Dual (7) Any Sound (6) Removable (3)/ Portable See HO 7. Not Auto (1) Any Any Any Any See HO HO (10) Location Power Source Use Apparatus Portability Coverage 8. World Not Auto (12) Pleasure Any Any "C" Limit (8) 9. Residence Any Business Any Any $2,500

5 10. Not Residence Not Auto (12) Business Any Any $ Not Auto (12)/ Not Residence Auto (12) Business Any Any $ Not Auto (12) Auto (12) Pleasure Any Any "C" Limit (8) 13. Auto (12) Dual (7) Any Any Any $1, Not Auto (12)/ Not Residence 15. Not Residence/ Residence Dual (7) Business Any Any $1,000 Any Business/Pleasure Any Trailer $250/$1,000 (13) 16. Auto (12) Auto (12) Any Any Not Portable See Auto Location Power Source Use Apparatus Portability Coverage 17. Auto Auto Any Any Portable None Available 1. Applies to "your covered auto" and "nonowned auto" as defined in the policy, which includes a trailer. 2. Maximum amount, subject to ACV, stated on the Coverage for Excess Sound Reproducing Equipment, Audio, Visual and Data Electronic Equipment and Tapes, Records, Discs and Other Media (PP 03 13) endorsement. 3. Removable from a housing unit that is permanently installed in the auto. 4. Installed in locations used by the auto manufacturer for the installation of such equipment. 5. Electronic equipment that receives or transmits audio, visual or data signals, other than 1) a permanently installed telephone, 2) equipment necessary to the operation of the auto. 6. Electronic equipment designed for the reproduction of sound. 7. Capable of being operated by a power source from an auto while still capable of being operated by other power sources. 8. The Coverage C Personal Property limit of a homeowners policy. 9. The perils of collison and other than collision (open perils). 10. Named "broad form" perils. 11. The maximum amount payable for a nonowned trailer and its equipment is $ A motorized land conveyance, which would not include a trailer. 13. The limit includes the value of the entire trailer; $250 applies to business use away from the residence. PIA your best source of information

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