The Homeowners Coverage Guide: Interpretation and Analysis Table of Contents Chapter 1: An Overview... 1 Introduction... 1 Forms Overview... 1 Eligibility: Homeowners Forms... 3 Eligibility: Tenant Homeowners... 4 Eligibility: Unit Owners... 5 Eligibility: Seasonal Property... 5 Eligibility: Farm Property... 5 Eligibility: Mobile Homes... 6 Eligibility: Incidental Occupancy... 6 Eligibility: Home-based Business... 7 Limits of Liability... 7 Rating Information... 9 Chapter 2: What s Covered... 11 Introduction... 11 Definitions... 11 Coverage A, Dwelling... 12 Coverage B, Other Structures... 14 Coverage B Limitations... 15 Coverage B Limit of Liability... 17 Coverage C, Personal Property... 18 Personal Property Owned or Used by Insured... 18 Personal Property of Others... 19 Property at Other Locations... 19 Coverage D, Loss of Use... 21 Additional Living Expense... 21 Loss of Rents... 22 Prohibited Use Coverage... 23 Receipts for Additional Living Expense... 25 Coverage D Limit of Liability... 25
Loss Not Covered... 26 Chapter 3: The Additional Coverages... 27 Introduction... 27 Debris Removal... 28 Reasonable Repairs... 31 Trees, Plants, Shrubs, and Lawns... 32 Coverage for Loss to Medical Marijuana?... 33 Fire Department Service Charge... 34 Property Removed... 34 Unauthorized Use of Credit Cards... 35 Loss Assessment... 36 Collapse... 37 Glass or Glazing Material... 39 Landlord s Furnishings... 40 Additions and Alterations... 40 Ordinance or Law... 40 Are Association By-laws Ordinance or Law?... 41 Grave Markers... 42 Association Deductible... 43 Liquid Fuel Remediation... 43 Refrigerated Food Spoilage... 44 Lock and Garage Door Transmitter Coverages... 44 Chapter 4: Limitations; Property Not Covered... 45 Introduction... 45 Definition of Business... 46 Limitations... 47 Money... 47 Securities... 48 Watercraft... 48 Coverage for Fishing Equipment... 49 Trailers... 49 Jewelry, Watches, and Furs... 49 Firearms and Guns... 51 Silverware and Similar Property... 52 Business Property on the Premises... 52 Business Property away from the Premises... 54 Electronic Apparatus in a Vehicle... 54 Electronic Apparatus Not in a Vehicle... 55 How the Deductible Applies to the Special Limits... 56 Property Not Covered... 57 Land... 57 Structures Used for Business... 57 Property Separately Insured... 57 Animals, Birds, Fish, or Insects... 58
Motor Vehicles... 58 Aircraft and Hovercraft... 60 Property of Roomers and Boarders... 61 Property in an Apartment... 61 Property Rented or Held for Rental... 61 Business Data... 61 Credit Cards... 62 Trees, Shrubs, Plants... 62 Water and Steam... 63 Grave Markers... 63 Chapter 5: The Named Perils Coverages... 65 Introduction... 65 Fire or Lightning... 65 Windstorm or Hail... 67 Wind or Falling Object?... 69 Explosion... 69 Riot or Civil Commotion... 71 Aircraft... 72 Vehicles... 72 Smoke... 73 Vandalism and Malicious Mischief... 74 Theft... 76 AAIS Theft Peril... 78 Falling Objects... 79 Weight of Ice, Snow, or Sleet... 79 Accidental Discharge or Overflow of Water... 80 Sudden and Accidental Tearing Apart... 82 Freezing... 83 Sudden and Accidental Damage Artificially Generated Current... 83 Volcanic Eruption... 84 Sinkhole Collapse... 85 Chapter 6: Open Perils Coverage; General Property Exclusions... 87 Introduction... 87 Exclusions Applying to Coverages A and B... 88 Excluded under Section I Exclusions... 88 Collapse... 89 Freezing of Plumbing... 89 Freezing of Structures... 89 Theft to Dwelling under Construction... 90 Vandalism... 90 Mold, Fungus, Wet Rot... 91 Wear and Tear Losses... 92 Animal Losses... 94 Pollution Losses... 96
Coverage for Wind-Driven Oil?... 97 Covered Ensuing Water Losses... 97 Other Covered Ensuing Losses... 98 General Property Exclusions Concurrent Language Precludes Coverage... 99 Ordinance or Law... 100 Earth Movement... 101 Water Damage... 102 Power Failure... 106 Neglect... 106 War... 107 Nuclear Hazard... 107 Intentional Loss... 107 Civil Authority or Governmental Action... 108 Bacteria, Fungi, Wet Rot, or Dry Rot... 109 General Property Exclusions Some Ensuing Losses Are Covered... 109 Weather Conditions... 109 Acts or Decisions... 110 Faulty, Inadequate or Defective Acts... 110 Chapter 7: Conditions Applying to Property Coverages... 113 Introduction... 113 Insurable Interest and Limit of Liability... 113 Deductible... 114 Duties Following a Loss... 115 Loss Settlement Provisions... 120 Line-Item Estimates?... 124 Loss to a Pair, Set, or Parts... 124 Appraisal... 125 Other Insurance and Service Agreement and Government Funds... 126 Personal Articles Separately Insured... 128 Suit Against Us... 128 Our Option... 128 Use of May... 129 Loss Payment... 129 Abandonment of Property... 130 Mortgage Clause... 130 No Benefit to Bailee... 130 Nuclear Hazard Clause... 132 Recovered Property... 132 Volcanic Eruption Period... 132 Policy Period... 133 Concealment of Fraud... 133 Loss Payable Clause... 135 Miscellaneous AAIS Property Conditions... 135 Chapter 8: Liability Coverages and Exclusions, Part I... 137
Introduction... 137 Features... 137 Personal Liability Insuring Agreement... 138 What is an "Occurrence"?... 139 Who is an "Insured"?... 139 What are "Bodily Injury" and "Property Damage"?... 140 What is an "Insured Location"?... 143 What is a "Residence Employee"?... 144 Medical Payments Insuring Agreement... 145 Exclusions Liability and Medical Payments... 148 Motor Vehicle, Watercraft, Aircraft, and Hovercraft Definitions... 148 Motor Vehicle Exclusions... 151 Exceptions to the Motor Vehicle Exclusions... 152 Servicing a Premises... 153 Watercraft Exclusions... 156 Exceptions to the Watercraft Exclusions... 157 Aircraft and Hovercraft Liability... 157 Residence Employee Exception... 158 Expected or Intended Injury... 158 What is a "Business"?... 159 The Business Exclusion... 160 Professional Services Exclusion... 161 Chapter 9: Liability Coverages and Exclusions, Part II... 163 Introduction... 163 Exclusions Liability and Medical Payments... 163 Premises Not an Insured Location... 163 War Exclusion... 165 Transmission of Disease... 165 Sexual Molestation, Corporal Punishment, or Physical or Mental Abuse... 166 Controlled Substance... 166 Exclusion Nine... 167 Exclusions Applicable to Liability Only... 167 Loss Assessment... 168 Contractual Liability... 168 Damage to Owned Property... 169 Care, Custody, or Control Exclusion... 170 Workers Compensation Exclusion... 171 Nuclear Energy Exclusion... 171 Bodily Injury to an Insured Exclusion... 171 Exclusions Applicable to Medical Payments Only... 174 Bodily Injury to a Residence Employee... 174 Workers Compensation Exclusion... 175 Nuclear Energy Exclusion... 175 Resident Exclusion... 175 AAIS Business Exclusion... 175
Section II Additional Coverages... 176 Claim Expenses... 176 First Aid Expenses... 177 Damage to Property of Others... 178 Loss Assessment... 179 Chapter 10: Conditions Applying to Liability Coverages... 181 Introduction... 181 Limit of Liability... 181 Severability of Insurance... 183 Duties After a Loss or Occurrence... 186 Duties of an Injured Person... 189 Payment of Claim under Medical Payments... 189 Suit Against the Insurer... 189 Bankruptcy of an Insured... 190 Other Insurance... 190 Policy Period... 190 Concealment or Fraud... 191 Chapter 11: General Policy Conditions... 193 Introduction... 193 Concealment or Fraud: Voiding a Policy... 193 Liberalization Clause... 195 Waiver or Change of Policy Provisions... 196 Cancellation... 196 Nonrenewal... 198 Assignment... 199 Subrogation... 199 Death... 200 Additional AAIS Conditions... 201 Conformity with Statute... 201 Inspections... 201 Insurance under More than One Coverage... 202 Chapter 12: Other Homeowners Forms... 203 Introduction... 203 Coverage for Tenant Homeowners... 203 ISO HO 00 04 Additional Coverages... 204 AAIS Form 4 Incidental Property Coverages... 204 Coverage D Loss of Use... 205 Amending Coverage for Tenants Personal Property... 205 Coverage for Unit Owners... 206 Coverage A Dwelling... 207 Loss Settlement and Other Insurance... 208 Additional or Incidental Coverages... 208 Coverage C Personal Property... 210
Coverage D Loss of Use... 211 Amending Coverage for Unit Owners... 212 Form HO 0001... 213 Form 8 Limited Coverage... 213 Named Perils Coverage for Dwelling and Contents... 213 Additional or Incidental Property Coverages... 214 Limits on Certain Classes of Property... 214 Loss of Use... 215 Loss Settlement Provisions... 215 Mobile Homeowners... 216 Open Perils Coverage ISO HO 00 05 and AAIS Form 5... 217 Special Limitations to Certain Classes of Property... 217 Incidental Coverages AAIS Form 5... 217 Open Perils Exclusions... 218 Loss Settlement Provisions... 220 Chapter 13: Common Endorsements... 221 Introduction... 221 Modifying the Insured... 221 Insuring a Personal Trust... 221 Nonrelated Residents... 222 Relative in Assisted Living Facility... 223 Student Away at School... 223 Additional Interest or Insured... 224 Modifying Coverage A... 224 Dwelling Under Construction Theft... 224 Earthquake Coverage... 225 Inflation Guard... 226 Ordinance or Law... 226 Unit Owners Special Coverage... 226 Water Back Up and Sump Discharge or Overflow... 226 Modifying Coverage B... 227 Increased Limit Other Structures... 227 Other Structures Away from Premises... 228 Modifying Coverage C... 228 Coverage for Property in a Self-Storage Unit... 228 Computer Coverage... 228 Open Perils Coverage for Personal Property... 229 Scheduling Personal Property... 229 Theft Coverage Rented Unit... 231 Theft Coverage Personal Property in a Dwelling under Construction... 232 Physical Damage Coverage for a Golf Cart... 232 Refrigerated Property Coverage... 232 Modifying Loss Settlement... 232 Actual Cash Value... 233 "Guaranteed" Rebuilding... 233
Functional Replacement... 233 Coverage B Replacement Cost... 234 Personal Property Replacement Cost... 234 Modifying "Business" Coverage... 235 Home-based Business... 235 Home Day Care... 236 Business Not Owned by Insured Liability Coverage... 237 Incidental Business on Premises Liability Coverage... 237 Increased Limits of Business Property... 238 Modifying Liability Coverage... 238 Additional Residence Rented to Others... 238 Farmers Liability... 239 Personal Injury... 239 Recreational Motor Vehicles... 240 Waterbed Liability... 241 Watercraft Liability... 241 Amending the Mobile Homeowners... 242 Miscellaneous Endorsements... 242 Amending Loss Assessment... 242 Pollution... 242 Identity Theft... 243 Chapter 14: "Hot Topics"... 245 Where You Reside... 245 Alcohol, Controlled Substances, and the Homeowners Exclusion... 247 Malicious Prosecution: What is That?... 251 Appendix A: An Agent s Miscellany... 255 Rating a Policy... 256 Personal Liability Checklist... 256 Real Property Checklist... 261 Sample Renewal Letter... 263 Errors & Omissions Prevention Suggestions... 264 Appendix B: Policy Forms... 271 Index... 435