C12 Insurance On Property Study 6 PDF

C12 Insurance On Property Study 6 Anatomy of a Property Policy: Exclusions Learning Objectives » Explain the need for exclusions in a property policy » Describe how an understanding of the exclusions is needed to extend Step 3 of practices in reading a property p...

C12 Insurance On Property Study 6 Anatomy of a Property Policy: Exclusions Learning Objectives » Explain the need for exclusions in a property policy » Describe how an understanding of the exclusions is needed to extend Step 3 of practices in reading a property policy » Compare the structure and application of exclusions in the Homeowners Basic, Broad and Comprehensive forms » Describe the first group of exclusions in the Homeowners forms, concerning property not insured » Describe the second group of exclusions in the Homeowners forms, concerning loss or damage not insured » Given a scenario, explain how the water damage exclusion is applied to determine coverage for a loss Presentation Title Key Terms Presentation Title Need For Exclusions » The most common policies sold are “all risk” – Comprehensive Forms. » Exclusions never expand coverage – they only restrict it » Remember – the policy giveth, then taketh, then giveth away » There are 3 ‘classifications’ of exclusions: » Exposures that are undesirable to insurers » Exposures where specific coverage can be underwritten and rated for » Losses that are not fortuitous Presentation Title Reading a Policy » An exclusion can be qualified or modified by using the word “except” » Named Perils policies insure for loss or damage caused only by listed perils; the onus is on the Insured to show the loss or damage falls within coverage » If there is coverage, the onus shifts to the Insurer to show that the loss is excluded » If an exclusion applies, the onus falls back on the Insured to show the exception applies Presentation Title Reading a Policy – 3rd Step » 1st step in reading policy – review definitions clause » 2nd step – Review property covered » 3rd step – Review perils insured against & perils that aren’t » Determine whether there’s coverage » Looking at what’s insured & under what circumstances » Onus on insured » If coverage, determine if exclusions apply » Onus on insurer to show coverage excluded » If exclusion applies, determine if there’s exception » Onus back to insured to show there’s exception Presentation Title Exclusions Compared: Homeowners Forms » Exclusions apply to Property & Perils » All exclusions in Comprehensive (All Risk) policies are also excluded in Basic and Broad forms First Group Exclusions: Property not Insured Building Used for Business or Farming Business exposures should be placed under commercial or farm policies Property on Exhibit Property on exhibit face unique exposures. Coverage can be placed under an exhibition floater Insured has no legal entitlement to the property Property Illegally Acquired or Subject to and therefore is not entitled to be indemnified. The Forfeiture insurer must prove the possession is illegal (insured is convicted under the law) Presentation Title  More Excluded Property First Group Exclusions: Property not Insured Other coverage may be placed for such evidence. [Note: In Evidence of Debt or Title many cases ownership of the property may still exist despite the loss of the evidence] Sporting Equipment Not insured for damage occurring during its use Covered only for Specified Perils other than Impact by Aircraft Animals, Birds or Fish or Land Vehicle Policies are not intended to cover property the insured has no legal claim to however coverage is restored if property is Property Lawfully Seized seized and destroyed by a Government Agency to prevent the spread of fire Outdoor Radio & TV Antennae, including These items are vulnerable to weather and are not covered for Satellite receivers loss or damage caused by weather type events or collapse Presentation Title Yet More Exclusions » Cryptocurrency: » Digital asset » Difficult to value, prove ownership/insurable interest » Form of data – excluded under policies » NFT’S (Non-Fungible Tokens) » Difficult to value » Form of data » Fungible asset is interchangeable with something just like it » $5 bill is fungible » Interchangeable with any other $5 bill Presentation Title Second Group Exclusions: Loss or Damage Not Insured Second Group Exclusions: Loss or Damage Not Insured Scratching, Abrasion, Chipping or High risk of damage; only covered for Specified Perils, Breakage accident to a land vehicle, watercraft or aircraft or theft / attempted theft Wear and Tear Not defined as “sudden & accidental”; deterioration is inevitable or inherent of the objects involved Insurance is not intended to provide a warranty for Faulty Materials or Workmanship poor workmanship due to lack of experience, care or both This exclusion is intended for gradual or natural Settling, Expansion, Contraction, Moving, events. If there is a sudden and accidental loss which Bulging, Buckling or Cracking contributes, the intent of the exclusion must be carefully considered ( x ref. Engel Estate v. Aviva) Presentation Title  More Second Group Exclusions Second Group Exclusions: Loss or Damage Not Insured Data is highly vulnerable to loss or damage due to hacking, virus' etc. This exclusion does not apply when damage is Data or Data Problem caused by Fire, Explosion, Smoke or Water Damage. [Even when covered, Data is usually limited to reinstallation from backup and not recreation] Not sudden or accidental; deterioration may be inevitable or Rust or Corrosion, Wet or Dry Rot, inherent of the objects involved or due to long term exposure to Fungi or Spores adverse conditions Loss due to birds, vermin, raccoons, rodents or insects is not covered. If fire ensues (such as rodents eating through wiring and causing a short circuit), the resultant fire damage is Pests covered Damage caused by a process or while an item is being worked upon is not covered. This exclusion aligns with faulty Property Being Worked On workmanship etc. However, if there is resultant damage to property NOT being worked upon, that damage is covered (subject to all other terms of the policy) If an Insured willingly parts with an item even if by trickery or Trickery or Fraud fraud, such losses are difficult to prove [nonetheless subrogate for]. There is no coverage for this risk Presentation Title  More Exclusions Second Group Exclusions: Loss or Damage Not Insured Smudging / Industrial smoke is "friendly" smoke intended to Smudging & Industrial Smoke control pests and is therefore not an "accidental" or fortuitous loss Insurance for this type of damage is highly specialized and Radioactive Contamination requires careful underwriting Terrorism is defined in all property policies. Only if ensuing fire Terrorism or explosion damage occurs is there any coverage This is uninsurable in it's literal form. Riot is not considered a War Risks war risk. This type of contamination is a peril that insurers will not cover unless damage results specifically from fire, lightening or explosion of natural, coal or manufactured gas [ some insurers Nuclear Incident may specifically exclude direct OR indirect losses arising from this peril] Coverage for earth movement can be purchased at an additional Earth Movement cost to the insured and it is underwritten. Rates are affected by the Insured's vulnerability as well as other key factors Older tanks are vulnerable to leaks which are difficult to detect until an escape occurs. Insurers are typically unwilling to Fuel Oil insure loss or damage caused by escape of fuel oil Presentation Title  Still More Excluded Perils Second Group Exclusions: Loss or Damage Not Insured Vacant dwellings are very vulnerable to many perils. Insurers restrict coverage from day 1 of vacancy and eliminate coverage entirely when vacancy occurs for 30 consecutive days or longer. Vacancy Even if a vacancy permit is purchased, coverage is limited and conditions may apply. Vacancy and unoccupancy are distinct terms Theft from Part of a Dwelling Rented to Others The Insurer must have reasonable proof to link the theft to the tenant is required if this exclusion is to be relied on. Vandalism or Malicious Acts or Glass Buildings under construction are at high risk of vandalism and Breakage While Dwelling is Under theft. These losses are so common they are virtually inevitable. Construction Risk Management to avoid is prudent Theft from a Dwelling Under Similar to Vandalism while Dwelling is under construction, Construction these losses are virtually inevitable. Insurers are not prepared to accept the risk of losses by these perils. Presentation Title  Water Perils and Exclusions Second Group Exclusions: Loss or Damage Not Insured Water Damage Covered Excluded Damage caused to the watermain itself from water damage; most losses to watermains are caused by Sudden & Accidental Escape from a mechanical failure, wear/tear, deterioration etc. No Watermain coverage if dwelling is vacant even if permission for vacancy is granted Freezing to parts of the dwelling which are unheated; water escape due to freezing which occurs when occupants are absent for more than 4 consecutive days Sudden & Accidental Escape or steam from during the usual heating season UNLESS: a competent within a plumbing, heating, sprinkler, air person enters the dwelling daily OR the water has been conditioning system or a domestic water shut off and pipes/ domestic water containers have been container located inside the building drained; continuous and repeated leakage and seepage are excluded; escape from a sewer, sump or septic system; No coverage if dwelling is vacant even if permission for vacancy is granted No coverage if the escape is caused by freezing. No Sudden & Accidental Escape from a domestic coverage if dwelling is vacant even if permission for water container located outside the dwelling. vacancy is granted Water enters the dwelling through an aperture (opening) caused suddenly and accidentally Ground water; surface water; shoreline ice buildup and (and concurrently) by a specified peril other water borne ice; No coverage if dwelling is vacant even than water damage if permission for vacancy is granted Presentation Title Case Study (6-19): Water Damage Exclusion Applied Presentation Title Case Study (6-19): Water Damage Exclusion Applied » Facts: » Recent renos » Customers had been vacationing (in May) » Loss caused by failure of a valve » Consider: » Review insured perils » Exclusions » Coverage for resultant damage? Presentation Title Case Study (6-19): Water Damage Exclusion Applied » Insured perils » Comprehensive form insures against all risks of direct physical loss or damage » This loss falls within scope of insured perils Presentation Title Case Study (6-19): Water Damage Exclusion Applied » Exclusions » Faulty valve » Installed incorrectly » Policy excludes cost of making good faulty material/workmanship » Water damage » Not caused by freezing or continuous/repeated leakage » Not caused by sewer backup, septic, etc » Not vacant/under constructions Presentation Title Case Study (6-19): Water Damage Exclusion Applied » Coverage for resultant damage? » Plumbing costs to correct installation of valve not covered » Water damage covered including resultant damage caused by fungi/spores » Insured mitigated damages » Immediately took action Presentation Title Covered…. Or Not??? Scenario 1 »Hail damage to roof, heavy rain results in water damage to interior of house. »Is the water damage covered? Presentation Title Covered…. Or Not??? Scenario 1 »Hail damage to roof, heavy rain results in water damage to interior of house. »Is the water damage covered? » Covered – 4th source of water damage » “Water that enters the dwelling through an opening created suddenly/accidentally by insured peril other than water damage” Presentation Title SCENARIO #2 Neil went on vacation for a week in February, while away his boiler malfunctioned, and 2 pipes froze causing water damage to the bathroom and kitchen. Neil calls his broker. Describe what would be covered, limitations, and exclusions. (10 MARKS) Presentation Title. This falls under water damage so would be coverage for damage to building and/or any contents » However as he was away for more than 4 consecutive days during heating season, might not be coverage due to pipes freezing unless: » Competent person entered dwelling daily » Or if water shut off & pipes drained » Most companies have moved away from this requirement but still highly recommended to have someone come in every day during heating season » Heating season isn’t defined but generally from October to March » As dwelling wasn’t vacant, no issues with vacancy » No coverage if dwelling is vacant even if permission for vacancy granted » Water damage covered for sudden/accidental escape from a watermain » If wear/tear, would not be any coverage » Would have 2 years to report claim Presentation Title Covered or Not??? Scenario 3 »Significant windstorm damages roof, hot tub, satellite dish & car »What is covered? Presentation Title Covered or Not??? Scenario 3 » Significant windstorm damages roof, hot tub, satellite dish & car » What is covered? » Roof would be covered under windstorm (Coverage A) » Hot tub would be covered under Coverage C » Satellite dish would be excluded under “Outdoor Radio and TV Antennae, including Satellite Receivers” » Loss/damage not covered when caused by windstorm or hail; weight of ice, snow, or sleet; or collapse.” » Car would be covered under separate car insurance Presentation Title Covered or Not??? Scenario 4 »Thieves break into home, damage door and steal various items including jewelry, furs, camera and miscellaneous electronics equipment. »Is everything covered? Presentation Title Covered or Not??? Scenario 4 »Thieves break into home, damage door and steal various items including jewelry, furs, camera and miscellaneous electronics equipment. »Is everything covered? » Everything is covered » Dwelling not vacant or under construction » Jewelry, furs, cameras may be under special limits of the policy Presentation Title Covered or Not??? Scenario 5 » A home collapses under the weight of snow » What things must be considered before coverage can be determined? Presentation Title  Covered or Not??? Scenario 5 » A home collapses under the weight of snow » What things must be considered before coverage can be determined? » Collapse not covered under named perils » Resultant damage would be covered if directly caused by named perils » Covered under all-risk form » If building has flat/low-peaked roof, professionals required to shovel off excess snow accumulation Presentation Title Questions? Presentation Title Learning Activities Before Study 7  Read Course Outline  Read Study 6: Anatomy of a Property Policy: Exclusions  Access Online Tutorial  read Summary;  complete Learning Activities;  answer Practice Questions, compare to Answer Keys.  Read Study 7: Endorsements and Floaters  Prepare for: Mid-Term **Studies 1 through 6 (90 minutes)** Open from Saturday November 2/24 @ 9:00 am MST until Sunday November 3/24 @ 11:59 pm MST Presentation Title