QQ, WDYT - massagent.com 6 Dwelling Policy and personal injury Personal injury coverage HO 24 82 under any of the ISO HO editions EXCLUDES “business” conducted or engaged in by

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QQ, WDYT (Quick Question, What Do You Think)Miscellaneous Personal Lines

10/27/2014

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QQ WDYT

Miscellaneous personal lines

withIrene Morrill, CPCU, CIC, ARM, CRM, LIA, CRIS, CPIW

Vice President of Technical AffairsMassachusetts Association of Insurance Agents

Dwelling Policy and contents

Question on DP3 coverage –

a couple of my companies tell me that the policy comes with 10% of coverage A for contents (landlord furnishing like stove, refrigerator, etc.) and some companies say it comes with nothing.

If they all use an ISO form how is this possible?

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There is NO free “contents” coverage …

I’m not sure EITHER statement is correct

Coverage A under the DP policy states:


The dwelling fire policy doesn’t state it as WELL as the CP/BOP policy definition of building …but the belief has been that stoves/refrigerators/building maintenance equipment is part of Coverage A … that unless the insured rents out furnished apartments … the Coverage A dwelling limit should be sufficient.

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Perhaps there was “confusion” regarding IF contents was purchasedONLY 10% is providedOff premises under the “other coverage” sectionOf the policy

Dwelling Policy and personal injury

If an insured has a homeowner policy with personal injuryand also owns a rented dwelling fire with it's own liability

(liability is not extended from the homeowner policy)do they need to add personal injury to the dwelling fire policy?

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ABSOLUTELY YES ... If the HO 24 70 Additional Residence Rented To Others(extending liability to the rental property) was on the HO policyand the HO 24 82 personal injury endorsement was also on the HO ..then all is well ...

otherwise the HO 24 82 does NOT apply to the dwelling policy


Is personal injury coverage NECESSARY on a rental risk …Absolutely yes …

BI is defined as:

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Personal injury is defined as under HO-2000/2011:


Personal injury is defined as under HO-91:

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Personal injury coverage HO 24 82 under any of the ISO HO editions EXCLUDES “business” conducted or engaged in by an insured unless on an “insured location”

Adding the HO 24 70 Additional Residence Rented to Others makes the rental property an “insured location”


If liability coverage for the rental property is NOT achieved through the HO 24 70 …but by adding liability coverage TO the Dwelling policy then one must ALSO add Personal Injury coverage TO the Dwelling policy with DL 24 82

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Could a tenant being evicted sue for “wrongful eviction”

Sure …good to have FREE defense

Could the tenant sue for wrongful entry or evasion of privacy if landlord entered rented premises or sent repairman into premises without express permission of tenant?

Sure …good to have free defense

A lender is asking me for the specific statute that prevents them for forcing Coverage A amount higher than replacement cost. Two questions:

1. Does that MA state law apply to a non-owner occupied investment property?

2. Do you know what that specific statute is? I sent them info from a MA Consumer site on home buying but they didn't accept it.

Dwelling Policy limit v. lender requirement

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Dwelling Policy limit v. lender requirement

Yes …statute law applies to “buildings” …period

Dwelling Policy and tenant relocation

We have an insured who rented a house and there was a fire.

It was a single family home and the owner of the house had a DP3 policy with USAA.

I just got off the phone with their adjuster as our insured had been calling them about Tenant relocation coverage.

The adjuster at USAA said that their insured doesn't have it and that it is not required anymore by state law in Massachusetts. Is this so?

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MGL 175 Section 99

Fifteenth A, Every policy which insures multi-unit residential property against loss or damage by fire shall provide additional benefits, by endorsement attached to the policy, up to a limit of seven hundred and fifty dollars, without deductible, for each rental unit to cover the actual costs of relocation of any tenant or lawful occupant displaced by fire or by damage resulting from fire.


The actual costs of relocation shall include, but not be limited to, hotel room rental, a security deposit and first month’s rent for a new rental unit if the security deposit or last month’s rent is not already due and owing from the landlord to the tenant, clothing replacement, furniture replacement and other reasonable costs and living expenses as a result of being displaced or damaged by fire. Benefits under this clause shall be paid by the insurer to the tenant or lawful occupant after taking into account benefits available under any other policy.

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Dwelling Policy and liability coverage

Could you give us your opinion on this Irene?

Our insured has a rental property covered by a DP3 that includes liability coverage under Form DL 24 01 12 02.

The house has a small boat powered by a motor under 25HP which the insured will allow the tenant to use.

Nothing in the rental agreement speaks to the use of the boat, but the question is whether Exclusion B 1 b on the attached eliminates coverage since the “rental” is implied.


DL 24 01 12 02 is an 8 page “comprehensive personal liability coverage”.

It is VERY similar to Section II of the ISO HO-2000. (The older 1988 version of dwelling coverage was similar to the HO-91 program)

It is worldwide coverage …gives watercraft liability coverage for owned outboards 25 hsp or less …like the HO

The definition of insured is almost identical to the HO definition …..

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HOWEVER… if this is a rental property and NOT owner occupied … then all that worldwide stuff … is removed byDL 24 11 12 02


This endorsement restricts coverage to the described premises

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I asked ISO why it was done this way …why not a completely separate endorsement ….

because the DL 24 01 has all the “definitions”….

Dwelling Policy and loss of rents coverage

We’re confused! Mass Property has informed us that the 12/2002 edition allows for up to 20% of the dwelling limit for fair rental value as additional insurance (which I’ve confirmed reading the policy)

They also told us that if we increase that limit and pay an additional premium for it, the only coverage that applies is that showing on the dec page.

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So, if we have a dwelling limit of $100,000 there is automatically up to $20,000 provided by the policy Andif the insured needs $30,000 we are to purchase $30,000 and the insured pays for the entire $30,000.

Is this correct? We’ve assumed that the $20,000 would still apply and we would only need to purchase an additional $10,000.

Could you shed some light on this for us?


See below ... I think some training is necessary at MPIUA...

The DP-2 and 3 give 20% rental coverage for "free" - in addition to dwelling limit on dec page.

If that is NOT enough ...then an additional amount is purchased and shown on dec page ...that does NOT negate the FREE coverage in the policy.

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It can’t get much clearer than THAT …

One only shows a limit on the DP dec page if they want MORE than what is “free” …(additional)

The DP-1 … is NOT additional to the Coverage A limit …DP-2 and DP-3 IS


The ISO DP manual rule verifies this …and MPIUA is “straight” ISO

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Dwelling Policy and the condo

I have a customer who owns a condo, but rents to his mom.

It is my understanding that he needs his own HO 6 to cover the “building” and his contents, and his mom needs an HO 4 for her contents there.

MPIUA is saying I simply need a DP 3.

Does that sound right?


If he is NOT going to live there then he should NOT have a HO-6.

Fairplan is WRONG with the DP-3 because the definition of building won't work. He DOES need a DP policy

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One needs either the DP-1 or DP-2 to start …the DP-3 is NOT an option…it would “confuse” the issue …

DP-2 to start (and add contents coverage if he needs any there)

thenDP 17 66 Unitowners building coverage


DP 17 66 gives the opportunity to ADD building coverage …

Reads like the HO-6

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DP 04 65 to make these unitownersbuilding items covered "special"


thenDP 04 63 Lossassessmentproperty as DP gives NONE free

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Dwelling liability is necessary ...but you can't get it from Fairplan ... (DL 24 01 and DL 24 11) …your client will have to extend liability from his HO policy

and Liability loss assessment ...which you can't get from fairplan


If have voluntarycarrier for DP then this as well as the liabilityendorsementscould be added to DP property form

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Also …what about Loss of rental income …

Would have to add to policy under Coverage D …consider12-16 months of rent MINIMUM …


If added HO 24 70 Additional Residence Rented to Others to his HO policy to extend liability coverage to rented premises … could use the HO 04 35 to provide property and liability loss assessment to the rented condo

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Comparison of DP forms

Quick question for you regarding DP1, 2 and 3’s……

I’m training some new employees and I’m trying to locate a chart that shows the differences between the forms.

Is that something you happen to have?

Comparisonof DP forms

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Comparisonof DP forms

DP v. BOP

We have an insured that we write on a BusinessownersPolicy for four different rental policies.

She is comparing her property (she’s a realtor) at one location that is the same place as another realtor purchased for rental property that is on a DP3.

He is paying half the premium she is.

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DP v. BOP

Other than no theft coverage on a DP3, what else is a difference between the two forms as a selling piece?

She does have $1million liability limit where he has $500,000, but there has to be more differences than this for us to keep it on a BOP.

DP v. BOP

Originally the BOP was designed for those risks NOT eligible for the DP … and then I was “hearing” that some agents were selling BOPS … maybe they used to be cheaper.

For my money … the DP with a Personal umbrella over it …is better

From a “perils” standpoint …special form DP is BETTER than special form BOP (no electrical arcing exclusion)

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DP v. BOP

DP liability is better as no aggregate … and with personal umbrella might end up with as high limits

BOP …could be better with loss of rents …actual loss sustained …but only 1 year …DP …just have to ask what is needed and sell it …then no 12 month limitation (just heard two stories of 15-18 months to rebuild….)

BOP has personal injury coverage …but that can be added now to the DP

DP v. BOP

If companies are willing to sell DPs … special form with liability and increased Loss of Use if needed and personal injury coverage …

and the person’s personal umbrella sits over …

I think it is better … unless there is a significant cost savings with the BOP

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Flood insurance and 2014 MA law

Regarding MGL 183 Section 66 -When does it take effect?

Can we endorse flood policies mid term - or do we have to wait for renewal?

Will carriers require a letter from the lender ?

The reason I bring this up is because clients are asking and the flood carriers are clueless for the moment.


Bank can’t ask for

1) more than the outstandingmortgage

2) contents coverage

3) deductible lower than $5000

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Law effective November 20, 2014

Creditor/bank must state that they are ONLY requiring coverage on outstanding mortgage that it may NOT be sufficient for mortgagor


As agents … we have to make client aware …that purchasing less than 80% of home R/C or the NFIP maximum of $250,000 can affect claim payment

Flood policy ONLY pays replacement cost on building if1) single family home2) primary residence (defined as living in 80% of year)3) carry 80% R/C or NFIP max – whichever greater

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Can insured ask for reduction in coverage MID-TERM?

Can’t be done during policy term UNLESS part of building was removed…

Or contents sold

it would have to be at renewal

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Can insured ask for removal of coverage MIDTERM?

No … stuff must be GONE …if one removes It …one gets NO R/P

Ordinance or law and flood policy

I have a client who is asking if there is coverage on an NFIP Commercial Flood policy for ordinance/law.

If a flood damages the bottom 12" of their goods (used in the food industry), but the Health Dept makes him destroy the goods that were in that 'section' in fear of mold, would that becovered?

I said "no" and that the property policy (special form) wouldn't either as the cause of loss (flood) is excluded. Am I correct, or not? Thank you!

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NFIP flood doesNOT cover"ordinance or law" ...

the only similar type of coverage is the Increased Cost of Compliance ...but that is ONLY for flood proofing ...and only when qualify per NFIP flood adjuster.


Now … if a covered HO claim … ACTIVATES a flood ordinance …will HO policy pay this …

YES!!!!

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Now … if a covered HO claim … ACTIVATES a flood ordinance …will HO policy pay this …

YES!!!! HO-2000/2011 include some ordinance or law coverage …HO-91 …SHOULD be added by HO 01 20 amendatory endorsement


Peril insured against caused damage …

Or peril insured against caused remodeling of UNDAMAGED property

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Since ordinance was activated by HO claim …

HO 04 77 Ordinance or law increase …would have provided $$


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Just what IS a flood

An insured living next to a large water tank is concerned about what would happen if the tank let go.

Would their homeowners policy pay for the water damage orwould a flood insurance policy pick it up?


Forget the HO policy!

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Flood policy WOULD pay

Buildings covered under flood policy

I understand that on a flood policy a detached garage gets up to 10% of the building coverage.

Is that coverage in addition to the building coverage?

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Buildings covered under flood policy

Coverage is part of not on addition to.

HFIAA and your client

Some June 2014 NFIP manual/procedural changes

The flood policy is rewritten with a much larger font.

The dwelling flood policy was 19 pages long now it will be 47 pages .

This larger policy with 18 point font must be provided to all new clients and all renewal clients as of 6/1/2014.

Who gets to pay the postage?

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Proof of “primary residence” required

New policies …must sign affidavit if not have when issuing …but must prove on renewal

Renewal policies …to be treated as primary residence – must provide proof


Letter sign when start first policy for “primary residence”

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Acceptable documentation

On renewals …will be sent 90 days in advance to get information


Renewal letter regardingdocumentationfor “primary residence”rating status

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For RATING … primary residence can mean living in it 50% of year …but remember … replacement cost can ONLY be paid for

single family homelive in 80% of yearcarry 80% RC or NFIP max – whichever greater


Pre-Firm subsidies returned for:

The 2014 law restores subsidies ONLY for policies mentioned in Section 3 of the HFIAA:\

1) Pre-FIRM properties that were not insured when BW-12 enacted

2) Pre-FIRM properties sold AFTER BW enacted

3) Policies for Pre-FIRM properties that were rated full-risk under BW due to lapse in coverage

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Pre-Firm subsidies returned for:

The 2014 law restores subsidies ONLY for policies mentioned in Section 3 of the HFIAA:\

1) Pre-FIRM properties that were not insured when BW-12 enacted

2) Pre-FIRM properties sold AFTER BW enacted

3) Policies for Pre-FIRM properties that were rated full-risk under BW due to lapse in coverage


These 3 classification of PRIMARY residences …will receive a refund on prior policy premium between 10/1 to 12/31 –for rates in excess of 2013 Pre-FIRM subsidized rates.

HFIAA requires the use of October 1, 2013 Pre-FIRM subsidized rates when these rates are more favorable than full-risk rates.

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Per FEMA bulletin W-14026 issued on May 29, 2014,

these policyholders will not be required to suffer the expense of purchasing an elevation certificate

as BW-12 had originally required/intended when attempting to make these risks “actuarially sound”.


Refunds do NOT apply toPolicyholders paying the 25% annual rate increases as required by BW-12 for a

1) Pre-FIRM subsidized NON-PRIMARY residence,2) business,3) severe repetitive loss property, or 4) building that was substantially damaged/improved.

5) Policyholders whose full-risk premium is less than the Pre-FIRM subsidized premium or

6) who were not overcharged according to any retroactive revisions to the Pre-FIRM subsidized rates required by the new law.

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New rates under HFIAA

The 2014 law requires “gradual” rate increases to properties now receiving subsidized rates

The law states that no one “class” of risks that are enjoying subsidized rates can be increased more than 15% -HOWEVERAn individual risk CAN be increased to a maximum of 18%


New rates under HFIAA

The following types of policies will STILL receive the 25% annual increase required by BW-12 until they reach their full-risk rate

1) Older non-primary residences insured with subsidized rates

2) Older businesses insured with subsidized rates3) Severe repetitive loss properties insured with

subsidized rates4) Buildings that have been substantially damaged or

improved

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Mandatory surcharge as of 4/15/15 new or renewal policies


Grandfathering…

has been restored by the HFIAA. Grandfather status of subsidized rates can be transferred to a new owner should property be sold. The seller can transfer his/her flood policy at time of sale just like “the old days”.

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If I damage the car the I am renting …will either my auto or personal umbrella liability pay for the damage to the rented vehicle?

PUP and c/c/c

Part 4 of MAP will NOT pay for damage TO the rented vehicle per Exclusion 6

We will not pay for property damage which occurs:…6. To an auto or other property owned by you or the legally responsible person. Similarly, we will not pay for damage to an auto or other property, except for a private residence or garage, which you or the legally responsible person rents or has in his or her care.

PUP and c/c/c

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The Personal umbrella …may or may not … you MUST look at the exclusion ….

RLI …will NOT … as it excludes:

Property damage to:a. property owned, rented to, occupied by

you or a Relative

b. property in the care, custody or controlof you or a Relative

PUP and c/c/c

The Personal umbrella …may or may not … you MUST look at the exclusion ….

A company that uses language like the ISO personal umbrella …WOULD PAY

17. "Property damage" to property rented to,occupied or used by, or in the care, custody orcontrol of, the "insured" to the extent that the"insured" is obligated by contract to provideinsurance for such property. However, this

Exclusion (A.16.) does not apply to "propertydamage" caused by fire, smoke or explosion;

PUP and c/c/c

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My question is……..why is this being asked and how does the umbrella respond to this question if it is yes.

10. Any non-owned property exceeding $1,000 in value inyour custody?

PUP and c/c/c

I am not really sure …but look at the PUP policy and look at the Property damage exclusion to see if it could possibly still provide coverage … the ISO PUP policy excludes

PUP and c/c/c

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I mention this when I teach PUP …that if I rent a car … my PUP COULD provide coverage …if I damage it …based on this wording … a rental contract makes me return the stuff in same condition …but it doesn’t necessarily make me PROVIDE INSURANCE on it …

SO …if a client rents furniture or something and consistently has rented property in c/c/c …the umbrella might be on hook more than it wants to be … possibly there is a charge for the “affirmative” answer here …

You really should ask umbrella underwriter ….

PUP and c/c/c

PUP and business

I am quoting Home and umbrella for a well-to-do client who owns his own business. The business is an LLC. He and his wife are members of the LLC.

If you read below the current agent recommended that the vehicles owned by the business be listed as part of underlying policies on his personal umbrella.

Do you agree?

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PUP and business

I drive a company car and my husband drives a company pickup truck.

We own two cars.

I have listed the two regularly used (and removed regular use exclusion from my PAP) under my umbrella as it covers both business and personal use of cars, pickups and vans ... so I am paying for the umbrella to sit over my regular business use issue.

PUP and business

ISO PUP …has a business exclusion but then says it does NOT apply to

Use of “auto” other than auto business

Then look at definition of auto …

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PUP and UM/UIM

At a recent Commercial Auto VS Personal Auto class you mentioned everyone having an umbrella (of course) but you also mentioned … I think..

“Umbrella with the uninsured/underinsured”

I wasn’t thinking fast enough to ask about it then but since the umbrella is really “3rd” part coverage how or where would the umbrella come into play?

PUP and UM/UIM

I know RLI ... and I have "heard" www.personalumbrella.com

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PUP and UM/UIM

If I buy an umbrella for excess BI coverage for YOU should I cause an accident …and I want YOU taken care of …

And I do NOT want my life disrupted …because of an unplanned accident where I am at fault …Don’t I want the same for me?

Documents

QQ, WDYT - massagent.com 6 Dwelling Policy and personal injury Personal injury coverage HO 24 82 under any of the ISO HO editions EXCLUDES “business” conducted or engaged in by