2011 Changes in the ISO Homeowners Program

Transcription

1 2011 Changes in the ISO Homeowners Program Presented by Ted A. Kinney, CIC CPCU ARM AU AAM AAI AINS CPIA CRIS Kinney Training & Consulting, LLC Columbus, OH 1

2 Ted A. Kinney, CIC CPCU ARM AU AAM AAI AINS CPIA CRIS Kinney Training & Consulting, LLC Columbus, OH Ted Kinney is the owner/president of Kinney Training and Consulting, LLC, which specializes in providing quality insurance training programs to agencies and companies throughout the United States. Ted also serves as the Director of Education and Technical Affairs for the Alabama Independent Insurance Agents in Birmingham, Alabama. In this position he is responsible for developing agent education programs and providing technical assistance to association members. He is also an independent contractor for the Professional Independent Insurance Agents of Ohio. As with AIIA, he assists with the development of the association s education programs and provides technical assistance to association members. Ted has been in the insurance business since his graduation from the Ohio State University in During his career, he has worked as an underwriter, field sales manager, department supervisor, marketing specialist and trainer. From 1994 to 2003, Ted was the Director of Curriculum and Faculty Development for PIA of Ohio & Indiana. During that time he developed over 150 training courses covering all aspects of the insurance industry. He has obtained several insurance designations including Certified Insurance Counselor (CIC), Chartered Property Casualty Underwriter (CPCU), Associate in Risk Management (ARM), Associate in Underwriting (AU), Associate in Automation Management (AAM), Accredited Advisor in Insurance (AAI), Associate in General Insurance (AINS), Certified Professional Insurance Agent (CPIA) and Construction Risk and Insurance Specialist (CRIS). He is a member of the national faculty of the Society of Certified Insurance Counselors, the American Insurance Marketing Society (CPIA) and the Independent Insurance Agents and Brokers of America s ask the expert service. In addition, Ted is a member of the Society of Certified Insurance Counselors, the National Academy of Producer Insurance Studies and the Society of Insurance Trainers and Educators. 2

3 2011 Changes in the ISO Homeowners Program I. Introduction: A. The last major revision of the ISO Homeowners program was made in October of ISO is making a new filing that will take effect in B. The suggested effective date in most states is May 1, C. The new filing includes changes which both broaden and reduce coverage. Some of the revisions are major and some are just minor editorial changes. D. This class will deal with 27 major changes in the ISO program. Particular attention should be paid to reductions in coverage as this creates an E&O exposure for agents. II. Changes in the 2011 Filing A. Definition of Insured 1. The definition of insured uses the term any person named above in item 5. a. (2) referring to other persons under the age of 21. The item currently reads (2) other persons under the age of 21 and in the care of any person named above. 2. One court determined that the phrase any person named above could be interpreted in two different ways and did not reference unnamed relatives and only referenced the named insureds because they are the only persons named in the policy. 3. To clarify the intent of the definition, item (2) will now read other persons under 21 and in your care or the care of a resident of your household who is your relative. 3

4 4. There is no change in coverage B. Deductible Provision 1. In the 2000 edition, a deductible provision was introduced in the policy and the sample declaration page removed the words concerning the application of the deductible. 2. Several carriers reported it is common, when multiple deductibles apply to a loss, for only the higher deductible to apply. 3. The deductible provision is being revised to more explicitly express that the deductible applies on a per loss basis and to introduce a sentence to state that when multiple deductibles apply to a loss, only the higher deductible will apply. 4. The statement regarding multiple deductibles is a broadening of coverage. There may be a reduction in coverage for certain endorsements: 5. May be a reduction in coverage due to an increase in the deductible from $250 to $500 in the following forms: a. HO Loss Assessment Coverage for Earthquake b. HO Earthquake c. HO Identity Fraud Expense Coverage d. HO Assisted Living Care Coverage will be a broadening of coverage as the result of the removal of the deductible e. HO Limited Water Back-Up and Sump Pump Discharge or Overflow Coverage may result in a broadening or reduction of coverage due to the policy deductible applying to the coverage 4

5 f. HO Owned Motorized Golf Cart Physical Damage Loss Coverage may be a reduction of coverage due to the elimination of the deductible applying separately to each golf cart C. Personal Property Located In Self-Storage Facilities 1. The current homeowners program provides worldwide coverage for personal property. There is a 10% limit of liability for Coverage C personal property (or $1,000 whichever is higher) for personal property usually located at an insured s residence other than the residence premises. The policy does not address personal property in a self-storage facility. 2. Section I is being revised to limit personal property located in self-storage facilities to 10% of the Coverage C limit (or $1,000 whichever is higher). 3. In the HO 00 08, the heading in paragragh C.2. under Section I is being revised to read Limit For Property At Other Locations instead of Other Residences. 4. In the HO and HO 04 30, Theft Coverage Increase is being revised to specify that personal property in a self-storage facility will be considered on the residence premises for purposes of theft coverage under Section I Perils Insured Against in Paragraph 9.c. in HO (9.a. in HO 00 04) 5. An optional buy-back endorsement, HO Increased Amount of Insurance For Personal Property Located at Self-Storage Facilities, is being introduced to provide for an increase in coverage. 6. HO Personal Property At Other Residences Increased Limits is being revised for consistency with the new HO endorsement 7. This is a reduction in coverage. 5

6 D. Electronic Equipment Limits 1. The homeowners policy provides coverage for electronic apparatus and accessories located anywhere in the world subject to certain conditions and exceptions. 2. Electronic apparatus and accessories designed to be operated solely by power from the electrical system of a motor vehicle while the property is in or on the vehicle is listed as property not covered. Accessories include antennas, tapes, wires, records, discs or other media that can be used with electronic apparatus. 3. Concerns have been expressed that there may be a gap in coverage between the homeowners policy and the Personal Auto Policy for tapes, CD s, records, etc. that are in or on a motor vehicle at the time of loss. 4. To address the concerns, the following changes are being made: a. Under Section I, Coverage C, 3. Special Limits of Liability, a $250 sublimit is being introduced for antennas, tapes, wires, records, discs or other media that are in or on a motor vehicle and are used with electronic equipment that reproduces, receives or transmits audio, visual or data signals. (In the current edition, provision j. provides a sublimit for antennas, tapes, etc. in or upon a motor vehicle but only if those items are used with electronic apparatus equipped to be operated by the power from the motor vehicle s electrical system while still being capable of being operated by other power sources. ) b. Provision j. is being revised to reference portable electronic equipment rather than electronic apparatus and accessories with the respect to the $1,500 sublimit. c. Provision i. is being removed. The provision applied a $1,500 sublimit to electronic apparatus and accessories used primarily for business while away from the residence premises and not in or upon a motor vehicle. 6

7 d. The $500 sublimit for business personal property away from the residence premises is being increased to $1,500. e. Under Section I, Coverage C.4. Property Not Covered, the motor vehicle preclusion is being revised to specify that portable electronic equipment that reproduces, receives or transmits audio, visual or data signals and is designed so that it may be operated from a power source other than the motor vehicle s electrical system is covered. f. HO Increased Limits on Business Property is being revised to reflect the change in the off premises business property sublimit. Since the sublimit is being tripled (from $500 to $1,500), the percentage shown in the endorsement is being changed from 20% to 60%. g. The introduction of the sublimit for antennas, tapes, wires, discs and other media that are in or on a motor vehicle and are used with electronic equipment that reproduces, receives or transmits audio, visual or data signals is a reduction of coverage. h. The increase of the limit for business property away from the premises is a broadening of coverage. E. Collapse Coverage 1. In the current policy, Section I Perils Insured Against excludes loss involving collapse under Coverages A and B. 2. The Additional Coverage of Collapse provides that coverage applies only with respect to the abrupt falling down or caving in of a building or any part of a building. Coverage does not apply to a building or any part of a building in danger of falling down or caving in. 7

8 3. In the case of 401 Fourth Street, Inc. v. Investors Insurance Group, the Pennsylvania Supreme Court stated: We conclude that the policy language (risk of direct physical loss involving a collapse of a building or part of a building) provides coverage that extends beyond the situation in which an insured s building falls to the ground, even in light of the traditional interpretation of the term collapse. It covers not only loss for a collapse, but also the risk of loss involving a collapse. To interpret this broad policy language to be limited to only the falling down of the building, even under existing case law, would be to give too narrow an interpretation to the broad language drafted by the insurer. 4. In response to issues raised in this and other recent court decisions which have found coverage where none was intended, Section I Perils Insured Against and Section I Additional Coverages Collapse are being revised 5. In the current program, the policy covers risk of direct physical loss, but states, We do not insure, however, for loss involving collapse. 6. The collapse exclusion now reads, We do not insure, however, for loss: involving collapse, including any of the following conditions of property or any part of the property: (1) an abrupt falling down or caving in; (2) loss of structural integrity, including separation of parts of the property or property in danger of falling down or caving in; or (3) any cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion as such condition relates to (1) or (2) above. 7. There is an exception for coverage provided in section E.8. Additional Coverage - Collapse. 8. In section E. Additional Coverages, the collapse coverage has been reworded. It specifically states that The coverage provided under this Additional Coverage Collapse applies only to an abrupt collapse. 9. It further clarifies that, For the purpose of this Additional Coverage Collapse, abrupt collapse means an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose. 8

9 10. It also clarifies that, This Additional Coverage Collapse does not apply to (1) a building or any part of a building that is in danger of falling down or caving in; (2) a part of a building that is standing, even if it has separated from another part of the building; or (3) a building or any part of a building that is standing, even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion. 11. Additional words are being added to the hidden decay and insect or vermin damage perils to reinforce that coverage applies to decay or insect or vermin damage to the covered property itself. The decay peril reads, Decay, of a building or any part of a building. The insect peril reads, Insect or vermin damage, to a building or any part of a building. 12. There is no change in coverage. F. Section I Perils Insured Against 1. Prior to the 1984 edition of form HO 00 03, the perils insured against section included the term all risks. (We insure for all risks of physical loss ). The word all was deleted in the 1984 revision to correct the misconception that the term all risks meant that the coverage applied with out regard to the policy exclusions. At that time, the wording was changed to, We insure against risk of direct loss to property described in Coverages A and B only if that loss is a physical loss to property. 2. In the 2000 edition, the wording was changed to read, We insure against risk of direct physical loss to property described in Coverages A and B. 3. As was previously mentioned, the Pennsylvania Supreme Court in the 401 Fourth Street, Inc. v. Investors Insurance Group case felt that the term risks of direct physical loss should be interpreted broadly. In the case to determine the meaning of collapse as used in the policy, the court stated, It covers not only loss for a collapse, but also the risk of loss involving a collapse. To interpret this broad policy language to be limited to only the falling down of the building, even under existing case law, would be to give too narrow an interpretation to the broad language drafted by the insurer. 9

10 4. While the exact policy language reviewed in this case does not appear in the ISO homeowners policy language, it is analogous to the homeowners language and ISO felt a revision was necessary to reinforce the policy language. Therefore, the term risk is being deleted from the provisions related to Perils Insured Against in various forms and endorsements. 5. There is no change in coverage. G. Vermin Preclusion 1. In the current policy, loss caused by birds, vermin, rodents, insects and animals owned or kept by the insured is excluded. 2. Several insurers and agents suggested the term vermin be removed and carriers suggested the section be revised to include reference to nesting, infestation and discharge or release of waste products or secretions by any animal similar to the wording in the ISO Commercial Property forms. 3. In Section I, Perils Insured Against exclusions, the word vermin is being deleted and wording addressing nesting, infestation and discharge or release of waste products by any animals is being added. 4. The deletion of the word vermin is a broadening of coverage. 5. The addition of the provision related to nesting, infestation, or discharge or release of waste products or secretions which applies to any animals (not just animals owned or kept by the insured) is a reduction of coverage. H. Theft Peril 1. In the current policy, the peril of theft provides coverage for personal property of a student while at a residence the student occupies as long as the student has been at the residence during the 60 days immediately prior to the loss. 10

11 2. Since the typical summer break lasts closer to 90 days than 60 days, the current 60 day requirement does not meet the need of most students. 3. The number of days in the preclusion of coverage in the theft peril is being increased from 60 to 90 days. 4. This is a broadening of coverage. I. Earth Movement Exclusion 1. In 2008, considering the issues raised after Hurricane Katrina related litigation, ISO introduced endorsements to replace the Water Damage Exclusion in the homeowners forms. 2. Change number 10 of the new policy revisions incorporates the endorsement wording into the policy forms. 3. The Earth Movement exclusion is being revised for consistency with the Water Damage Exclusion. 4. The new language reinforces the scope of the Earth Movement Exclusion by stating that the exclusion applies regardless of the cause (whether caused by nature or otherwise caused). 5. The new wording states, This exclusion A.2. applies regardless of whether any of the above, in A.2.a. through A.2.d. (earthquake, including land shock waves or tremors before, during or after a volcanic eruption; landslide, mudslide or mudflow; subsidence or sinkhole; or any other earth movement including earth sinking, rising or shifting) is caused by an act of nature or otherwise caused. However, direct loss by fire, explosion or theft resulting from any of the above in A.2.a through A.2.d. is covered. 6. There is no change in coverage. 11

12 J. Water Exclusion 1. In 2008, endorsements HO and HO Water Damage Exclusions replaced the basic water damage exclusion in the homeowners forms in response to litigation related to Hurricane Katrina. 2. It was stated at that time that the endorsement language would be incorporated into the next program revision. 3. To refresh our memories regarding the wording added by the Water Damage Exclusion endorsement: 4. The flood exclusion wording includes tidal wave and tsunami, tides and tidal water 5. Waterborne material carried or otherwise moved by any water referred to is excluded 6. The exclusion applies regardless of whether the water damage is caused by an act of nature or is otherwise caused 7. The exclusion applies to but is not limited to escape, overflow or discharge, for any reason, of water or waterborne material from a dam, levee, seawall or any other boundary or containment system 8. The HO Water Damage Exclusion inadvertently omitted the revised language as it applied to the HO form. This is being corrected. 9. The Water Damage Exclusions (HO and HO 16 10) are being withdrawn 10. In addition to the policy forms, several endorsements are being revised to reflect the revisions to the exclusion: a. HO Special Computer Coverage 12

13 b. HO Loss Assessment Coverage for Earthquake c. HO Earthquake d. HO Limited Water Back-Up and Sump Discharge or Overflow Coverage e. HO Special Personal Property Coverage f. HO Special Coverage Spoilage of Perishable Stock g. HO Unit-Owners Coverage C Special Coverage h. HO Unit-Owners Coverage A Special Coverage 11. There is no change in coverage relative to the intended design of the water damage exclusion endorsements. K. Motor Vehicle Exclusion 1. The 2000 program introduced the word solely to the policy language in Section I Property Coverage and Section II Liability Coverage. 2. Section I excludes property loss to motor vehicles except those used solely to service an insured s residence. Section II excludes motor vehicle liability unless the motor vehicle is used solely to service an insured s residence. 3. Many agents expressed concern that the phrase used solely may prevent recovery of an otherwise covered claim for a vehicle used to service an insured s residence because the vehicle was used at one time in the past to service a neighbor s residence. 13

14 4. Similar concerns were raised regarding an insured renting or borrowing a riding mower from a neighbor to cut his or her own grass. 5. The policy language in both Section I Property Coverage and Section II Liability Coverage is being revised to delete the reference to an insured s residence. The new wording says, used solely to service a residence. 6. This is a broadening of coverage. L. Toy Vehicles Provision 1. The current exceptions to the motor vehicle liability exclusion do not address toy vehicles, including those designed for use by small children. 2. Agents have expressed concern that small vehicles of this type have no coverage off the insured location unless the HO Incidental Low Power Recreational Motor Vehicle Liability Coverage endorsement is attached to the policy. 3. The motor vehicle liability exclusion is being revised to address this concern. An exception is being introduced with respect to owned battery-operated, low-speed toy vehicles used off the insured location. 4. The vehicle must be designed as a toy for use by children under age seven, powered by one or more batteries and not built or modified to exceed a speed of five miles per hour on level ground. 5. The HO Farm Personal Liability endorsement is also being revised to include the exception with respect to owned battery-operated, low-speed toy vehicles used off the insured location. 6. This is a broadening of coverage. 14

15 M. Expected or Intended Injury Exclusion 1. In the current program, bodily injury or property damage expected or intended by an insured is excluded. 2. There is an exception for bodily injury resulting from the use of reasonable force to protect persons or property. 3. Some insurance regulators have suggested the exception be extended to include property damage. 4. They felt that some insured s would expect property damage to be covered along with bodily injury. 5. The exception to the Section II Liability Expected or Intended Injury exclusion is being revised to include property damage resulting from the use of reasonable force to protect persons or property. 6. This is a broadening of coverage. N. Controlled Substance Exclusion 1. Many states allow dentists, nurse practitioners and other health care professionals, who are not licensed physicians, to prescribe drugs. 2. Currently, there is an exception to the Section II Liability Controlled Substance exclusion stating that the exclusion does not apply to the legitimate use of prescription drugs by a person following the lawful orders of a licensed physician. 3. The wording is being revised to replace the words licensed physician with the words health care professional. 4. This is a broadening of coverage. 15

16 O. Unit-Owners Modified Other Insurance and Service Agreement Condition 1. In the current HO form, the Other Insurance and Service Agreement Condition states that If, at the time of loss, there is other insurance or a service agreement in the name of a corporation or association of property owners covering the same property covered by this policy, this insurance will be excess over the amount recoverable under such other insurance or service agreement. 2. The 2000 filing stated that unit-owner is only covered for the amount of loss that exceeds the amount recovered by the association under its policy. If the association does not recover because of a high deductible, the unit-owner does not recover. 3. HO Unit-Owners Modified Other Insurance and Service Agreement Condition endorsement was introduced at the request of agents and insurers. 4. When attached, the policy condition is replaced with revised wording. The revised wordings states, If, at the time of loss, there is other insurance or a service agreement in the name of a corporation or association of property owners covering the same property covered by this policy, we will pay only for the amount of the loss in excess of the amount due from that other insurance or service agreement, whether they can collect on it or not. 5. ISO has received inquiries regarding the provisions in both the policy and the endorsement with respect to the amount of loss covered both by the unit-owners Form and an other insurance or service agreement that falls under the other insurance or service agreement s deductible. 6. In the 2011 filing, the HO is being withdrawn and the Other Insurance and Service Agreement provision of the HO is being modified to address the deductible in an other insurance or service agreement in the name of the corporation or property owner s association covering the same property as the unit-owners policy. 16

17 7. The new wording clarifies that with respect to any amount of loss covered by the unit-owners policy and not covered under the corporation or property owner s association other insurance or service agreement because of the application of the deductible, the unit-owners policy is primary. 8. This is a broadening of coverage except in situations where an individual company may already be treating the unit-owners policy as primary with respect to any amount of loss not covered under the corporation or property owner s association other insurance or service agreement because of the application of a deductible. P. Transition Endorsements 1. The transition endorsements include the changes that were developed for the policy forms in the new revision. 2. Insurers can attach the appropriate endorsement to the edition of the corresponding policy form. 3. Attaching the appropriate transition form to the edition of the corresponding policy implements the revisions to that form including any broadenings or reductions of coverage. Q. Loss Assessment Coverage Endorsement 1. The HO Loss Assessment Coverage Endorsement currently provides additional amounts of loss assessment coverage but has a special $1,000 limit for loss assessments due to a deductible in the corporation s or property owners association s policy. 2. Insurers have indicated that higher deductibles are common on policies purchased by corporations or property owner s associations. As a result, unit-owners might have an exposure greater than $1, In the revision of the endorsement, the $1,000 special limit is being eliminated. 17

18 4. The title of the endorsement is being changed to Supplemental Loss Assessment coverage. 5. Paragraph 2. Additional Locations is being revised to specify that the provision applies to assessments arising out of the unit or the premises listed in B. in the schedule. Paragraph B. is being revised to reference the location of unit or premises. 6. This is a broadening of coverage. R. Replacement Cost Loss Settlement for Certain Non-Building Structures on the Residence Premises Endorsement 1. Endorsement HO was introduced in the 2000 revision of the program. It provides replacement cost coverage for certain non-building structures, but does not include in-ground or semi-in-ground swimming pools, which along with hot tubs and therapeutic baths are subject to an Actual Cash Value settlement basis. 2. Various agents requested that ISO develop an optional endorsement which would provide replacement cost coverage for in-ground swimming pools. 3. HO has been revised to provide replacement cost coverage for swimming pools, hot tubs and therapeutic baths that are in-ground or semi-in-ground, with wall and floors made of reinforced masonry, cement, metal or fiberglass. 4. This is a broadening of coverage with respect to this optional coverage. S. Limited Water Back-up and Sump Pump Discharge or Overflow Endorsement 1. The Water Back-up and Sump Pump Discharge of Overflow endorsement has been available in most states since

19 2. The endorsement was designed to provide a limited amount of coverage for water that flows from within the dwelling via sewer or drain lines but backs up because the drain is clogged or broken or the sewer lines or drains are broken or at capacity. 3. The endorsement was later revised to provide coverage for overflow of water from a sump, sump pump or related equipment. 4. Agents have expressed concerns because the endorsement does not expressly say that the water or waterborne material has to originate from within the dwelling. 5. Several changes are being made to address the concerns and reinforce the related aspects of the endorsement: a. The title is being revised to Limited Water Back-up and Sump Discharge or Overflow Coverage. b. The endorsement is being revised to clarify that the water or waterborne material must originate from within the dwelling where the insured resides. c. The reference to the Special Deductible is being deleted. The endorsement adds the coverage as an Additional Coverage under Section I. Therefore the Section I deductible will apply. d. The stated limit of $5,000 is being removed and options are being made available to provide flexibility with respect to the limit. (The basic limit is $5,000 with options of $10,000, $15,000, $20,000 or $25,000) e. This is a broadening of coverage if increased limits are provided. f. This is a restatement of coverage intent with respect to the other revisions. 19

20 T. Home Day Care Notice Endorsement Withdrawn 1. The HO No Section II Liability Coverages for Home Day Care Business/Limited Section I Property Coverages for Home Day Care Business endorsement was introduced in the early 1980 s along with a corresponding rule that the endorsement be attached to all homeowners policies. 2. It does not alter coverage, it just describes certain exclusions and restrictions with respect to a home day care exposure. 3. If an insured operates a home day care business, coverage is available as an option for an additional premium. 4. The HO endorsement is being withdrawn and is being replaced by a new policy-writing support form HO P 004 which contains information similar to the endorsement with some variances, including those to reflect other revisions in the homeowners filing. It will be available to insurers for their optional use. 5. There is no change in coverage. U. Trust Endorsement 1. The current homeowners policy addresses personal trusts with the HO Residence Held In Trust endorsement. The policy would be issued in the name of the trust and its trustee(s). 2. As the result of insurer input and further research, ISO found that in most cases the person who sets up the trust (grantor or settlor): a. Is the person who formerly owned the property that is now held in trust and is the person requesting the policy b. Continues to reside on the property, and 20

21 c. Is designated as the trustee 3. In these instances, the policy could be issued in the name of the grantor (name insured) rather than the trust. 4. As a result, ISO has developed the HO Trust Endorsement. 5. The HO sets forth the following: a. A schedule is included that provides for the entry of: The name and address of the trust for informational purposes The name(s) and address(es) of the trustee(s) to identify their status as an insured under the policy and the name of the trust, if designated as an insured b. Paragraph 5. of the definition of insured is revised to include the trust or the trustee but only for the following coverages: Coverage A Dwelling and Coverage B Other Structures Coverage E Personal Liability and Coverage F Medical Payments to Others only with respect to BI or PD arising out of the ownership, maintenance or use of an insured location as defined in the policy c. In some states, a trust is not recognized as an insured. Therefore, the endorsement specifies that the trust is an insured only if: The trust is recognized in the state as a legal entity with the ability to sue and be sued, and Named as an insured in the Schedule 21

22 6. An alternate endorsement will be filed in states where trusts are not recognized as a legal entity. (The endorsement will not allow insurers to list the trust as an insured. The endorsement will be part of the state supplement for that state.) 7. The trustee is only an insured with respect to the duties as a trustee of the trust named in the schedule. 8. An exception to the business definition will provide that the activities of a trustee in administering the trust will not be considered a business for coverage purposes 9. The definition of insured location is revised to provide that the definition includes certain real property described in the definition if the trust holds the legal title to the property named in the HO schedule 10. Exclusion F.6. of Coverage E Personal Liability incorporates the trustee by means of a reference to Definition 5.e. of HO Section I and II Conditions are revised to provide notice of cancellation or nonrenewal to the Trustee named in the schedule 12. The following provisions are added: a. The insurer must be provided with trust documents as often as it reasonably requests b. A Changes and Notification Requirement provision provides that the insurer must be promptly notified of the following changes to the trust that occur during the policy period: 22

23 Changes in the name of the trust, changes in the trustee, changes in the trust or trustee s mailing address Termination of the trust Death or disability of a trustee If the grantor discontinues residing at the residence premises 13. If the Personal Injury endorsement is attached to the policy, Exclusion 1.i. incorporates the trustee by means of a reference to Definition 5.e. of the HO endorsement 14. Endorsement HO Residence Held in Trust is being withdrawn 15. The HO Trust Endorsement more specifically describes the types of trusts typically covered under the homeowners policy. V. Rating Information for Property Remediation For Escaped Liquid Fuel and Limited Lead and Escaped Liquid Fuel Liability Endorsement Withdrawn 1. The HO Rating Information for Property Remediation For Escaped Liquid Fuel and Limited Lead and Escaped Liquid Fuel Liability endorsement does not amend any coverage of the policy to which it is attached, but simply conveys to the insured the classification numbers with respect to additional premium related to endorsements HO 05 80, HO and HO Property Remediation For Escaped Liquid Fuel and Limited Lead and Escaped Liquid Fuel Liability Coverages. 2. Policy- writing support forms, including various policyholder advisory notices, will now be made available. As a result, HO is being withdrawn and substantially the same information will be made available through policy-writing support form HO P 005. Insurers may use the support form on an optional basis. 3. There is no change in coverage. 23

24 W. Limited Coverage for Theft of Personal Property Located in a Dwelling Under Construction Endorsement 1. Agents groups have raised concerns because the peril of theft precludes coverage for theft of personal property in or to a dwelling under construction, or theft of materials or supplies for use in construction, until the dwelling is finished and occupied. 2. To provide insurers with flexibility, ISO is introducing an optional endorsement, HO Limited Coverage for Theft of Personal Property Located in a Dwelling Under Construction, which will provide theft coverage for personal property in a dwelling under construction beginning on the date selected and ending the earliest of the termination date on the schedule or the date the dwelling is finished and occupied. 3. The endorsement broadens coverage. X. Incidental Low Power Recreational Motor Vehicle Liability Coverage Endorsement 1. Paragraph A.2.d. of the Section II Motor Vehicle Liability exclusion, provides that if exclusion A.1. does not apply, there is still no coverage for motor vehicle liability unless the vehicle is designed for use off public roads and (1) not owned by an insured or (2) owned by an insured and used on an insured location. 2. The HO Incidental Low Power Recreational Motor Vehicle Liability Coverage endorsement expands coverage to include certain owned motor vehicles while used off an insured location. 3. The endorsement does not apply to motorized bicycles, mopeds or golf carts. 4. The endorsement, which was introduced in the mid-80 s, does not specifically address motor scooters. 5. The capabilities of motor scooters have advanced greatly since the endorsement was introduced and are now technologically similar to motorized bicycles, mopeds and golf carts. 24

25 6. The endorsement is being revised to exclude motorized scooters with respect to an occurrence that occurs off the insured location. 7. Also, the title of the endorsement is being changed to clarify that the endorsement is a liability coverage endorsement. 8. With respect to this endorsement, this is a reduction of coverage. Y. Canine Liability Exclusion Endorsement 1. Liability coverage exists for damage or injury caused by animals owned by or in the care, custody or control of an insured. 2. Insurers have been reluctant to issue policies to owners of dogs that are considered overly aggressive or dangerous or have caused injury or damage in the past. This impacts the availability of homeowners insurance for some dog owners. 3. To support the availability of insurance, while also addressing the concerns of insurers, ISO has developed an endorsement, HO Canine Liability Exclusion endorsement, to exclude coverage for a specifically described dog. 4. The endorsement will exclude, under Coverage E Liability and Coverage F Medical Payments to Others, bodily injury or property damage arising out of direct physical contact with a dog named and described in the schedule that is owned by or in the care, custody or control of an insured. 5. Under the new filing, Rule 617 specifies that the exclusion only applies if acknowledged by the named insured in writing. 6. This is a reduction of coverage with respect to this endorsement. 25

26 Z. Personal Injury Coverage 1. The internet has created a new means of communication and it is important to consider s and websites and their impact on personal injury offenses that might arise from such communications. 2. Publication is a term used in particular personal injury offenses, and therefore, slander and libel and invasion of privacy exposures might include some internet and electronic publications. 3. The increase in home computers and weblogs has created a much greater exposure than traditional oral or written forms of publication. 4. The current per offense approach to addressing personal injury, especially related to internet liability, presents a significant exposure and some insurers might be reluctant to provide coverage in the homeowners policy. 5. To address this underwriting concern, ISO is introducing a new aggregate limits option. 6. ISO is revising the definition of personal injury in the HO Personal Injury Coverage endorsement to include all forms of publication with respect libel, slander and invasion of privacy by adding the words oral or written publication in any manner. 7. A similar change is being made to the personal and advertising injury definition in the HO Home Business Insurance Coverage endorsement. 8. The title of the HO endorsement is being revised to include the word coverage and some minor editorial changes are being made to the endorsement. 9. With the introduction of the new HO Personal Injury Coverage (Aggregate Limit of Liability) endorsement, insurers now have the option to provide personal injury coverage on an aggregate limits basis. 26

27 10. The aggregate limit will apply to all personal injury offenses in any one policy period regardless of the number of insureds, offenses, claims made or suits brought. 11. There is no change in coverage as the result of the change in the definitions of personal injury or personal and advertising injury. 12. If the new HO endorsement is used, the change from a per offense limit to an aggregate limit may result in a reduction in coverage. AA. Other Revisions 1. ISO is making other revisions to several forms and endorsements to make miscellaneous changes. 2. The current Loss Settlement condition providing replacement cost coverage on buildings allows the insured to disregard the replacement cost loss settlement provisions and make a claim on an actual cash value bases. 3. The insured then has 180 days after the loss to make a claim for additional coverage as long as he or she notifies the insurer of their intent to do so ( your intent to do so ). 4. Regulators have made some comments and asked some questions about the phrase your intent to do so. 5. In response to these inquiries, the loss settlement condition is being revised to read: You may then make claim for any additional liability according to the provisions of this Condition D., Loss Settlement, provided you notify us, within 180 days after the date of the loss, of your intent to repair or replace the damaged building. (the wording previously said provided you notify us of your intent to do so within 180 days after the loss. ) 27

28 6. The above change does not apply to form HO Since Ordinance or Law Coverage is not available in this form under the ISO program, the following revision is being made to the HO Loss Settlement provision: In this provision, the terms repair and replace do not include the increased costs incurred to comply with the enforcement of any ordinance or law. (previous wording added except to the extent that coverage for these increased costs is added to this policy. ) 7. Other changes: a. Governmental Action Exclusion The HO currently contains a Governmental Action exclusion in Section I applicable to Coverages A, B and C. It also has an exception in Section I Perils Insured Against for coverage applicable to Coverage C Personal Property for certain government actions. ISO is deleting the exception since these provisions relate to similar situations. b. Endorsement Subtitles Referring to Other Specific Forms Several endorsements are being revised to delete subtitles that specify which forms the endorsement may be used with. This information will be contained in corresponding rules. 8. HO Special Coverages Spoilage of Perishable Stock This endorsement currently has a schedule and includes an entry for Limit of Liability. The endorsement is being revised to state with respect to Additional Coverage g. Perishable Stock that we will pay up to the Limit of Liability shown in the schedule. 28

29 9. Other Changes a. Some minor editorial changes are being made to: HO Scheduled Personal Property Endorsement HO Home Day Care Coverage Endorsement HO Additional Insured Student Living Away from the Residence Premises Endorsement b. Except as noted, there is no impact on coverage. 10. Regarding the deletion of Paragraph C.5. of Section I Perils Insured Against in HO 00 05, this may be a broadening of coverage with respect those situations that are subject to the exception in the Governmental Action exclusion concerning acts ordered by any governmental or public authority taken at the time of fire to prevent its spread, if the fire loss would be covered by the policy. III. Conclusion A. ISO will make this filing for all participating insurers. B. Individual insurers have the right to file deviations to the filing or use their own forms and endorsements. C. This filing does not apply to all states. Hawaii, Virginia, Washington and North Carolina are under the jurisdiction of independent bureaus. D. The filing is not being made in Virginia at this time. E. A Spanish version of the filing will be submitted to the Puerto Rico Insurance Department. 29

30 F. Agents should inquire how their individual insurers are going to respond to the filing. G. Also, agents need to be especially aware of the reductions in coverage that might create E&O exposures for them. 30