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Insurance Community University

Homeowners Problems and Solutions

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DisclaimerInsurance forms and endorsements vary based on insurance company;

changes in edition dates; regulations; court decisions; and state jurisdiction. This instructional materials provided by Insight is

intended as a general guideline and any interpretations provided by the instructor or the creator(s) of this material do not modify or

revise insurance policy language. In providing these materials, the authors assume neither liability nor responsibility to any person or

business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials

provided. Copyright 2010 – 2013 All Rights Reserved

www.insurancecommunitycenter.com

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Your Instructor Today

Mary A. LaPorte, CPCI, CIC, LIC, CPIALaPorte Consulting, LLC

[email protected] 623-8112

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What This Course Will CoverSituations and Solutions1. Vacant and Occupied Homes2. Who is an insured?3. Loss Assessment and the Homeowner4. 13 year old children and Property

Damage Liability5. Vermin and Secretions—there is a

change

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Vacant and Unoccupied Homes

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Example

Joe and Sally Bergen have lived in their home for 8 years, and you have insured them the entire time. Joe’s employer down-sized and he lost his job six months ago. Both of them have not been able to find work since then. Sally’s brother in Arizona said there are plenty of jobs there, and invited them to stay with him for awhile. They have decided to do this and hope that once they get their finances in order they will return to their home. All of their furniture and contents are staying in their home. They let you know to temporarily change their mailing address.

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Will Joe & Sally’s homeowner’s policy cover their home while

they are gone?16

Polling Question #1


Issues• If the home is located in a cold climate, the

insured will need to maintain heat or drain their water systems.

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Exclusion in the ISO policy

Caused by:(1)Freezing of a plumbing, heating, air conditioning or

automatic fire protective sprinkler system or of a household appliance, or by discharge, leakage or overflow from within the system or appliance caused by freezing. This provision does not apply if you have used reasonable care to: (a) Maintain heat in the building; or(b) Shut off the water supply and drain the system and appliances of water.

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Issues

• Vandalism if the home is vacant• Exclusion in the ISO policy:Caused by:(4) Vandalism and malicious mischief, and any ensuing loss caused

by any intentional and wrongful act committed in the course of the vandalism or malicious mischief, if the dwelling has been vacant for more than 60 consecutive days immediately before the loss.

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Issues

• Breakage of glass if the home is vacant• Glass coverage exception in ISO policy:

We cover: a. The breakage of glass or safety glazing material

which is part of a covered building, storm door or storm window; ………This coverage does not include loss on the "residence premises" if the dwelling has been vacant for more than 30 consecutive days immediately before the loss.

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Is the Home Considered Vacant?

• The homeowners policy is intended to insure owner-occupied homes

• Vacant homes create an “attractive nuisance”

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Underwriting Guidelines

OCCUPANCY REQUIREMENTS• The named insured must occupy the

described premises as his principal residence.

• The building must be occupied by the insured exclusively for residential purposes

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ISO Homeowners Definition8."Residence premises" means:

a. The one family dwelling, other structures, and grounds; or

b. That part of any other building; where you reside and which is shown as the "residence premises" in the Declarations.

Requires residency of Named Insured

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ISO COVERAGE A – Dwelling

We cover: 1. The dwelling on the "residence premises" shown in the Declarations, including structures attached to the dwelling; and

Coverage could be compromised if Named Insured is not in residence

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ISO COVERAGE B – Other Structures

• We cover other structures on the "residence premises" set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection.

Coverage could be compromised if Named Insured is not in residence

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Solution• There is no endorsement that can be used

to assure continuation of coverage.• The best tactic is to notify the carrier of

the situation.• Most carrier’s will continue coverage for a

period of time. They would probably set up for non-renewal after that time.

• Counsel your customer and keep communication open.

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Other Situations Which Could Cause Concern• Home for sale, unoccupied but not vacant• Owner living in Germany for a year• Owner renting out house while in

Germany for a year.• Owner went into assisted living facility,

but plans on returning• Owner in assisted living, but relative living

in the house

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Renting Out the Insured HomeBusiness Exclusion in the ISO policy: 2. "Business"

a. "Bodily injury" or "property damage" arising out of or in connection with a "business" conducted from an "insured location" or engaged in by an "insured", whether or not the "business" is owned or operated by an "insured" or employs an "insured".

This Exclusion E.2. applies but is not limited to an act or omission, regardless of its nature or circumstance, involving a service or duty rendered, promised, owed, or implied to be provided because of the nature of the "business".

b. This Exclusion E.2. does not apply to: (1) The rental or holding for rental of

an "insured location";

(a) On an occasional basis if used only as a residence;

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Homeowners Insurance and Vacancy or Un-Occupancy

• CRUCIAL: If the home is NOT occupied the insurance company must be made aware– Reluctance because company might cancel– Reluctance because policy might cost more– Reluctance because might lose the client– Reluctance because don’t have a market

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Who is an insured?

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Example #1 Steve and Lisa Davis have lived in Texas for three years with their two sons, Bobby who is 8 and Jacob who is 6. Because of financial and employment problems, they have decided to move back to Oregon, their home state. They ask Steve’s parents, Bob & Gina if they can stay with them at their home in Portland OR until they are able to find a place of their own. Bob & Gina are excited to have them moving back to the area, and agree to the arrangement. A short time after moving in, Jacob was playing with matches and started a fire that burned a portion of a neighbor’s home which resulted in the neighbor suing Steve & Lisa for negligence.

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Are Steve and Lisa “insureds” under Bob & Gina’s (Steve’s

parents) homeowner’s policy?32

Polling Question #2


ISO Homeowner’s Policy• Definition of “Insured”:5. “Insured” means:a. You and residents of your household who are:(1) Your relatives; or(2) Other persons under the age of 21 and in your care or

the care of a resident of your household who is your relative;

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Two part test:1.Resident2.Relative


Courts will evaluate a number of criteria when determining residency:• Drivers license• Voter’s registration• Tax records• Location of bank accounts• Location of employment• Location of furnishings/stuff• Length of time there

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Are you sure you want to be an insured?• Circumstances often help you decide.• If 6 yr old Jacob had fallen from grandpa’s

rickety ladder, and wanted Medical payments or Liability coverage under grandpa’s policy, he could not collect if he were an “insured”.

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ISO Homeowner’s Policy• Liability Exclusion6. "Bodily injury" to you or an "insured" as defined under Definition

5.a. or b. This exclusion also applies to any claim made or suit brought against

you or an "insured" to:a. Repay; orb. Share damages with;another person who may be obligated to pay damages because of

"bodily injury" to an "insured".

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No Liability or Medical Coverage for an “Insured”.


Example #3 Peter and Deb Johnson have an 18 year old son, Caleb, who is just entered college. He is attending a university which is over 200 miles from home, and has decided to share an apartment with two other students.

He has taken a lot of stuff from home to furnish the apartment, plus all of his electronics and other personal items.

Peter and Deb contact you and are concerned about all of the personal property as well as liability.

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Is Caleb an “insured” under the homeowner’s policy?

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Polling Question #3


ISO Homeowner’s Policy• Definition of “Insured” (continued):

5. “Insured” means:b. A student enrolled in school full time, as

defined by the school, who was a resident of your household before moving out to attend school, provided the student is under the age of:

(1) 24 and your relative; or(2) 21 and in your care or the care of a

resident of your household who is your relative;

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Full Time Student• If the student drops classes and becomes less

than full time, then they are no longer an “insured”

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CAUTION: Parents may not always be made aware of status changes their student makes!


Under the Age of 24• They are an “insured” up to their 24th birthday (not

24 years old).• When they reach 24 they will no longer be an

“insured” if they are away at school.

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CAUTION: Parents may need to take action before the 24th birthday.


Policy Limitations• A student’s personal property is only covered up to 10% of the

insured’s personal property limit.• There is no coverage for theft of personal property if the student

has not been there for 90 days.– Some carriers may limit the time to 30 or 60 days.

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This “automatic” coverage may not be sufficient for most students at school.


Solutions

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HO 05 27 – Additional Insured – Student Living Away from the Residence Premises

• Added to parent’s homeowner’s policy for an additional premium• Schedules location where student resides• Can cover student age 24 and over• Can cover student who is not enrolled full-time

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Will Charlie's dog bite injury be covered under Nancy's homeowner's policy?

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Polling Question #4


Select Answer:1. No, Charlie needs to make a claim under

his parent’s homeowners policy.2. No, Charlie was in the “business” of dog

walking, and there is no business coverage.

3. Yes, Nancy’s policy will cover him only if he wasn’t getting paid.

4. Nancy’s policy will cover him regardless if he was getting paid or not.

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5. “Insured” means:c. Under Section II:

(1) With respect to animals or watercraft to which this policy applies, any person or organization legally responsible for these animals or watercraft which

are owned by you or any person described in 5. a. or b. “Insured” does not mean a person or organization

using or having custody of these animals or watercraft in the course of any “business” or without consent of the owner.

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Example #5• While walking Buster in the park one day,

Buster pulled the leash out of Charlie’s hands to chase another dog. Charlie caught up with Buster and while attempting to break up the dog fight, was bitten by Buster. His injury required twelve stitches.

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Will Nancy’s homeowners policy also provide liability coverage

for Charlie? 49

Polling Question #5


ISO Homeowner’s Policy• Liability Exclusion6. "Bodily injury" to you or an "insured" as defined under Definition

5.a. or b. This exclusion also applies to any claim made or suit brought against

you or an "insured" to:a. Repay; orb. Share damages with;another person who may be obligated to pay damages because of

"bodily injury" to an "insured".

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Remember this exclusion?



5. “Insured” means:c. Under Section II:

(1) With respect to animals or watercraft to which this policy applies, any person or organization legally responsible for these animals or watercraft which

are owned by you or any person described in 5. a. or b. “Insured” does not mean a person or organization using or having custody of these animals or watercraft

in the course of any “business” or without consent of the owner.

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An “insured” under 5.c. is not excluded for injury (only 5.a. and 5.b.)


Others who may be an insured:• Someone using a covered watercraft• Someone using a motor vehicle on premises

Others you may wish to add as an insured:

• Trusts• Land Contract Holders• Co-owners• Other co-inhabitants

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• Additional Insured – Residence Premises• HO 04 41

Solution

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• Trust Endorsement• HO 06 15

Solution

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• Other Members of Your Household• HO 04 58• Extends liability coverage and

personal property to a co-resident

Solution

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Loss Assessment and the Homeowner

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ExampleTom and Penny have had their homeowner’s insurance coverage written through your agency for six years. They live in a very upscale suburb of the city and you have had an opportunity to do a complete coverage review with them every couple of years.They have just notified you that they are being assessed by their home association. Apparently, a dog owned by another association member has bitten a child. The association was sued for “not enforcing the leash law”. The association carried $1,000,000 liability, but the settlement was for $1,250,000. Your insured’s share is $2,600 and they want to make a claim.

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Will Tom & Penny’s homeowners policy provide any

coverage?58

Polling Question #6


ISO Homeowner’s Policy• Liability Exclusion:

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;

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ISO Homeowner’s PolicyD. Loss Assessment

1. We will pay up to $1,000 for your share of loss assessment charged against you, as owner or tenant of the "residence premises", during the policy period by a corporation or

association of property owners, when the assessment is made as a result of:

a. "Bodily injury" or "property damage" not excluded from coverage under Section II – Exclusions; or

b. Liability for an act of a director, officer or trustee in the capacity as a director, officer or trustee, provided such person: (1) Is elected by the members of a corporation or

association of property owners; and (2) Serves without deriving any income from the

exercise of duties which are solely on behalf of a corporation or association of property owners.

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ISO Homeowner’s PolicyD. Loss Assessment

1. We will pay up to $1,000 for your share of loss assessment charged against you, as owner or tenant of the "residence premises", during the policy period by a corporation or

association of property owners, when the assessment is made as a result of:

a. "Bodily injury" or "property damage" not excluded from coverage under Section II – Exclusions; or

b. Liability for an act of a director, officer or trustee in the capacity as a director, officer or trustee, provided such person:

(1) Is elected by the members of a corporation or association of property owners; and

(2) Serves without deriving any income from the exercise of duties which are solely on behalf of a corporation or association of property owners.

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Important points:• The ISO policy automatically includes $1,000

loss assessment coverage• This includes assessments for property losses

as well as liability losses• The policy must not exclude that type of loss

in order for coverage to apply• The coverage is based on the date of the

assessment, not the date of loss• Other policies may have higher coverage or

even no coverage at all

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Solution• HO 04 35 Supplemental Loss

Assessment Coverage• The $1,000 limit may be increased up to

$50,000• Pays for property or liability assessments

charged by a home association• Coverage is based on the date of the

assessment

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Children under 13 years of age and Property Damage Liability

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ExampleIt was summertime and the neighborhood kids were bored. Kevin French is twelve and the other kids range in age from eight to thirteen.It was one of the other kids who had the idea. They had been watching the construction crew working all week. They waited until the workers had left for the night, then snuck into the construction site and shoveled gravel into all of the fuel tanks of the bulldozers, graders and loaders. When the workers returned in the morning, they realized what had happened when each of the heavy equipment stopped running.One of them remembered Kevin watching them and went to his parents. Kevin was quick to blame the other kids and gave out all of their names.

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Will the homeowner’s policy for Kevin’s parents cover this

damage?66

Polling Question #7


ISO Homeowner’s Policy• Liability Exclusion:

E. Coverages E and F do not apply to the following: 1. Expected Or Intended Injury

"Bodily injury" or "property damage" which is expected or intended by an "insured" even if the resulting "bodily injury" or "property damage":a. Is of a different kind, quality or degree than initially expected or intended; orb. Is sustained by a different person, entity or property than initially expected or intended.

However, this Exclusion E.1. does not apply to "bodily injury" or “property damage” resulting from the use of reasonable force by an "insured" to protect persons or property;

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ISO Homeowner’s Policy• Additional Coverages – Section II

3. C. Damage To Property Of Others1. We will pay, at replacement cost, up to $1,000 per

"occurrence" for "property damage" to property of others caused by an "insured".

2. We will not pay for "property damage": a. To the extent of any amount recoverable under

Section I; b. Caused intentionally by an "insured" who is 13

years or older;

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Conclusion:• Intentional acts are not covered under

liability.• Additional Coverages provides $1,000

coverage • It will not cover intentional damage

unless caused by someone under the age of 13.

• The parents of the 8-12 year old boys would have coverage.

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Vermin and SecretionsThere is a change

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ExampleWhen Kristin Jacobs pulled in her driveway after work, the first thing she noticed was the broken glass on the deck, which she realized was from the French door. She entered the house cautiously, and was overwhelmed by what she saw. It was a disaster! At first she thought it was a burglar in a bad mood, but then she saw the blood. There was blood and urine everywhere, especially at the door. She called 911 and the police were there in minutes. The officers were reassuring, and it was pretty obvious. A deer had broken into her rural home, and caused a lot of damage. Holes in walls, urine and blood on carpeting and furniture, broken TV, dented appliances. What a mess!

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Will Kristin’s homeowner’s policy pay for this damage?

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Polling Question #8


A History Lesson on Vermin• Previous ISO Exclusions:

(g) Birds, vermin, rodents, or insects; or(h) Animals owned or kept by an “insured”

• Exclusions revised in the ISO 2011 edition:(g) Birds, rodents, or insects; (h) Nesting or infestation, or discharge or

release of waste products or secretions, by any animals; or

(i) Animals owned or kept by an "insured".

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In lieu of “vermin”, the policy now excludes nesting, infestation, release of waste products secretions………


Conclusion:• The ISO policy has removed significant

coverage for damage done by release of waste products and secretions by any animals

• Not all carriers have adopted the 2011 version of the ISO homeowner’s policy

• Some carriers may choose not to adopt the new policy language

• Familiarize yourself with the forms being used by your carriers

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