It is differences like this that make comparison-shopping between homeowners policies of various companies difficult unless you have taken the time and trouble to have educated yourself. For example, if a direct writer’s policy’s contents coverage is named perils coverage, that insurer’s agent, who only represents a single insurance company, would be unlikely to point out the differences between the coverage of the policies offered by the company he or she represents and one offered by a company whose homeowners policies include all-risk coverage on contents. Unless you know the difference and can assess that difference in terms of a potential noncovered loss exposure, you cannot make an informed decision.
Whether you have a named perils or all-risk homeowners policy, you are protecting your dwelling, other structures, and personal property from the following covered named perils.
· Fire and lightning.
· Windstorm or hail. There are some important limitations to this covered peril. Coverage exists for the interior of buildings or the contents within a building caused by rain, snow, sleet, sand, or dust, unless the direct force of wind or hail first damages the building, causing an opening in the roof or wall through which entry of the rain, snow, sleet, sand, or dust enters. This restriction has tended to preclude coverage for rain, snow, sleet, sand, or dust damage that is the result of poor maintenance or that is caused by leaving doors or windows open.
· Explosion.
· Riot or civil commotion.
· Aircraft (including self-propelled missiles and spacecraft). This is actually a more common cause of loss than you might imagine. Think of how many news reports you have seen in your lifetime about a private airplane that has crashed and damaged or destroyed one or more homes.
· Vehicles. There is an exception to this peril. No coverage exists to fences, driveways, or walkways caused by a vehicle that is owned or operated by a resident of the residence premises. Note that this exception applies only to these three limited categories of property. If you or another resident of your household has an accident and causes vehicle damage to your dwelling or garage, that damage will be covered.
· Smoke. Here again, there is some qualifying and limiting language. Smoke means the sudden and accidental damage from smoke, including the emission or puff back of smoke, soot, fumes, or vapors from a boiler, furnace, or related equipment, but does not include loss caused by smoke from agricultural smudging or industrial operations. If you experience a fire loss, or if a neighbor experiences a fire loss and you suffer resulting smoke damage to your house or contents, that smoke damage will be covered.
· Vandalism and malicious mischief. These two terms are essentially duplicative. Under the law of most states, if a word or phrase used in an insurance policy is not specifically defined, its meaning is determined by reference to dictionaries of ordinary usage. Therefore, if you see a word or a phrase in a policy and the policy does not define that word, check the dictionary. The vandalism and malicious mischief coverage does not apply if the dwelling has been vacant for more than sixty consecutive days immediately before the date of loss. This vacant property limitation does not apply to dwellings that are in the course of construction.
· Theft. The theft coverage is subject to several qualifications.
· First, the peril of theft includes attempted theft. This recognizes that an unsuccessful attempt to steal an item of property nonetheless can result in damage to or destruction of property. For example, you scare off a burglar who is trying to steal your television and the burglar drops the television, destroying it. Theft also includes loss of property from a known place when it is likely that the property has been stolen. In other words, no one witnessed the disappearance of an item of property, but theft is the most likely explanation. For example, you discover that your lawnmower is missing from your unlocked garden/tool shed where you normally keep it between uses.
However, in homeowners insurance the peril of theft does not include loss caused by theft:
· committed by an insured;
· in or to a dwelling under construction or of materials or supplies used in construction until after the construction is complete and the dwelling is occupied; or,
· from that part of residence premises that is rented by an insured to a person who does not qualify as an insured. (This is yet another provision that reinforces the notion that a tenant’s personal property is not something that the named insured under a homeowners policy has an additional interest in. It also reinforces that if you have a tenant, the tenant must procure his or her own insurance for his or her personal possessions in order to protect them from the risk of loss.)
· Falling Objects. You might think for a moment, that sounds like arather odd peril. What might a loss caused by a falling object entail?
· They are actually more common than you might expect. For example, if you live below a hillside with rocky soil, under the influence of heavy rains, a large rock might dislodge from the hillside and roll downhill, striking your residence. The damage resulting from that descent is clearly fortuitous and would be covered.
· Weight of Ice, Snow, or Sleet. This peril does not include damage to buildings or contents other than from the weight of ice, snow, or sleet itself. For example, damage to the dwelling or contents caused by a roof failure due to the weight of accumulated snow would be covered by your homeowners insurance policy. Resulting water damage to the interior or contents caused by the melting of snow subsequent to the roof failure may not be covered. Nor does this peril apply to loss to awnings, fences, patios, pavements, swimming pools, foundations, retaining walls, bulkheads, piers, wharves, or docks.
· Accidental Discharge or Overflow of Water or Steam. This is a pretty complicated covered peril. The manner in which this peril is stated in the current ISO HO 2 and HO 3 policy forms has been substantially clarified as compared with previous versions, particularly with respect to a topic that has received a lot of publicity in recent years—the subject of coverage for claims of mold damage and mold contamination.
This peril is defined as accidental discharge of water or steam from within a plumbing, heating, air conditioning, or fire protective sprinkler system or from within a household appliance. This peril expressly provides that the terms plumbing system or household appliances does not include a sump pump or related equipment or a roof drain, gutter, downspout, or similar fixtures or equipment. What is not made clear is what a plumbing system does or does not comprise.
Whether a plumbing system includes both pressurized supply lines and fixtures, and nonpressurized drain and toilet lines is ambiguous. This peril also includes as covered the cost to tear out and replace any part of the dwelling or other structure when it is necessary to do so in order to repair the system or appliance from which the water or steam has escaped. This tear-out-andreplacement coverage only applies to other structures if the water or steam causes actual damage to a building on the residence premises.
The accidental water or steam discharge coverage does not apply if the dwelling has been vacant for more than sixty consecutive days prior to the loss. Company specific proprietary policies may vary in terms of the length of this time period.
Nor does the accidental water or steam discharge peril include the cost of repair of the system or appliance from which the water or steam escaped. This peril also does not cover loss caused by or resulting from freezing, except as is provided for in the separate enumerated peril of freezing. Nor does it cover loss on the residence premises that is caused by an accidental discharge or overflow that occurs off the residence premises.
Finally, the current ISO HO 2 and HO 3 policy forms state that the accidental water or steam discharge peril does not include loss caused by mold, fungus or wet rot unless hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure. The intent of this provision is to limit coverage for loss caused by mold to circumstances in which the mold growth or damage is not reasonably apparent to the insured. If an accidental water discharge occurs, the elimination of coverage for loss caused by mold or fungus provides an incentive for the insured to take prompt action to remove the escaped water and to repair water damage so as to prevent the growth of mold in the first place.
Mold can only grow in an environment where there is a constant source of water—for example, where there is a repeated or continuous leak or seepage from a plumbing line or drain, such as beneath a kitchen sink. In effect, the manner in which this provision is now
drafted strikes a reasonable balance for an insured’s expectations of coverage between a covered accidental water discharge loss and an uncovered loss that is the result of long-term neglect or failure to maintain the premises on the part of the insured. Many of the mold growth and contamination cases that have received attention in the news media have arisen from neglect or failure to maintain situations, rather than from accidental discharge of water or steam situations.
· Sudden and Accidental Tearing Apart, Cracking, Burning, or Bulging. This peril affords coverage for direct physical loss caused by the sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, air conditioning system, an automatic fire protective sprinkler system, or an appliance for heating water. Again, this peril contains an exception for loss caused by freezing, except as provided for in the separate peril of freezing.
· Freezing. This peril affords coverage for loss caused by freezingof plumbing, air conditioning, fire protective sprinkler systems,or household appliances only if the insured has used reasonable care to maintain heat in the buildings or shut off the water supplyto all such systems and appliances. Again, this peril provides that plumbing systems do not include sump pumps, rift drains, gutters, or downspouts.
· Sudden and Accidental Damage from Artificially Generated Electrical Current. This peril is defined more in terms of what it does not include than what it does include. It states that it does not include loss to tubes, transistors, electronic components, or circuitry that are a part of appliances, fixtures, computers, home entertainment units, or other types of electrical apparatus. In short, this peril covers direct physical loss to the dwelling or contents (other than electronic devices) that results from power surges or arcs, such as, for example, fire, explosion, or smoke damage.
· Volcanic Eruption. This peril is fairly self-explanatory. It does contain an express limitation excluding loss from earthquakes, land shock waves, or tremors. Earthquake is a commonly excluded peril from standard property policies, both personal lines and commercial lines policies. In areas that are subject to earthquake, earthquake insurance can be purchased, usually in the form of an endorsement to a policy or as a separate earthquake damage policy.
In addition, from a practical standpoint in the world of homeowners insurance, geographic areas that are at risk of a volcanic eruption loss are seismically active, and therefore also are reasonably susceptible to earthquake losses. It can be imagined that in the right confluence of circumstances, a volcanic eruption loss might present some loss adjustment challenges if the volcanic eruption was accompanied by sufficiently strong earthquakes that may have caused or contributed to the damage.
