5.1 - Opening Sections of the Homeowners Form

Question 1

First section of Policy - Opening Statements

Answer 1

2 statements required by law:
1. advising the insured that the policy contains a clause that may limit the amount payable under the policy.
2. Various provisions limit the policy’s coverage and that the insured should read the policy carefully. Such limitations of liability include deductibles, coinsurance, and the special limits of insurance

-deductibles and special limits common in personal property policies, coinsurance is rare, used more in commercial property policies

-concludes with reminder to insured that insurance cannot be a source of profit but only a source of indemnity for actual losses incurred or for which the insured is liable.

Question 2

Second section of Policy - A Guide to the Policy

Answer 2

Habitational policy insure private individuals, so the Homeowners forms begin with this page
-guide begins with 2 explanatory statements and ends with the agreement between the insurer and insured

Question 3

A Guide to the Policy - First Explanatory Statement

Answer 3

Property Coverages:
-describes the insurance under Section I as consisting of property coverages including coverage of the insured’s dwelling; detached private structures; personal property; and, in certain circumstances, additional living expenses

Question 4

A Guide to the Policy - Second Explanatory Statement

Answer 4

Liability Coverage:
-describes the insurance under Section II as consisting of liability coverage, including coverage for the insured’s legal liability for unintentional bodily injury to others or damage to their property arising out of the insured’s personal actions.
-Section II includes voluntary medical payment, voluntary payments for damage to property, and voluntary compensation for “residence employees” if they are injured while working for the insured

Question 5

A Guide to the Policy - Agreement Between the Insurer and the Insured

Answer 5

-is simpler than its counterparts in the basic fire policy or in commercial property policies. It does not refer to direct loss, indemnity calculation, or insure perils
-says simply that the insurer provides the insurance described in the policy in return for payment of the premium and subject to the specified terms
-all monetary amounts are expressed in Canadian currency

Question 6

Definitions

Answer 6

-first step to review a policy is to review the definitions
-alphabetic order and may apply anywhere in the policy
-definitions of significant terms simplify policy preparation and ensure clarity and uniformity in the use of certain words in the form
-widespread use of same definitions provides protection for insureds and their brokers and agents - leads to fewer misunderstandings
-most often policy language comes from the insurer and so will be interpreted in favour of the insured if terms are unclear or their meaning is uncertain - contra proferentem

Question 7

IBC Homeowners forms - the definitions in the comprehensive form and the broad form comprise

Answer 7

-the terms defined in the basic form;
-three terms (data problem, fungi, and spores) not defined in the basic form but defined in the comprehensive and broad forms to exclude the exposures to loss they represent;
-one term (vacant) defined slightly differently from the basic form

Question 8

Definition - Business

Answer 8

-habitational policy are not meant for business activities that form the primary source of income for the insured
-some insurers may cover small, non-complex business activity in a habitational policy for no additional premium, but such activity must be specified on the coverage summary page
-more commonly, insurers prefer to offer a home-based business endorsement at an additional premium
-activities permitted depend on the nature of business being conducted on premises
-a recognized trade, profession, or occupation, or any pursuit undertaken for financial gain, is regarded as a business pursuit if it is continuous or regular

Question 9

Definition - Cash Cards

Answer 9

also known as gift cards, store a cash value by electronic means for use as a mode of payment, without a personal identification number and without access to a bank or other account

Question 10

Definition - Civil Authority

Answer 10

includes any person acting under the authority of federal, provincial, territorial, or municipal legislation to protect persons and property in the event of an emergency
-this term becomes relevant under the prohibited access coverage of Coverage D - Additional Living Expense

Question 11

Definition - Collection

Answer 11

an accumulation of similar objects gathered for novelty, personal interest, rarity, or value, among other possibilities

Question 12

Definition - Data

Answer 12

means representation of information or concepts, in any form
-as simple as an email message, or as complicated as a scientific research paper
-data may be stored in various ways - on paper, or electronically, in a computer’s hard drive or in flash drives, or on CDs, among other possibilities
-prudent insureds regularly back up data to reduce the risk of losing it
-unwisely, however, many store the backup date in the same location as their primary storage device

Question 13

Definition - Data Problem

Answer 13

-erasure, destruction, corruption, misappropriation, misinterpretation of data;
-error in creating, amending, entering, deleting, or using data; or
-inability to receive transmit, or use data

-data not necessarily electronic, though the term “data problem” very often applies to the use operation of a computer, the definition applied to problems with data of any kind
-“data problem” is defined in the comprehensive and broad forms because they are all-risks policies and so must define the term in order to exclude the exposure it represents. It is not defined in the basic form because the exposure it represents is not named in that named-perils form and so need not be excluded

Question 14

Definition - Domestic Water Container

Answer 14

-hot-water heating tanks and their piping and radiators
-hot-water storage tanks and associated piping
-water reservoirs and dispensers, whether contained in an appliance or not
-bathtubs, sinks, or toilets
-aquarium or waterbeds
Definition also includes
-outdoor private swimming pools or wading pools
-ornamental pools or fish ponds
-hot tubs

Question 15

Definition - Dwelling

Answer 15

used to distinguish the residence building from outbuildings or other structures that may be on the premises. This is important because coverage for the residence building is separate from coverage for detached private structures

Question 16

Definition - Flood

Answer 16

-often loosely used to describe carious kinds of water damage
-IBC homeowners forms formally define the term to include - but not limited to - waves, tides, tidal waves, tsunami, dam breaks, seiche, or the rising of, the breaking out, or the overflow of any body of water or watercourse, whether natural or human-made

Question 17

Definition - Fungi

Answer 17

-includes but is not limited to any form or type of mould, yeast, mushroom, or mildew, whether or not allergenic, pathogenic, or toxigenic, and any substance, vapour, or gas produced by, emitted from, or arising out of any fungi or spores or resultant mycotoxins, allergens or pathogens
-fungi is defined in Comprehensive and broad form because they are all-risks policies and must define the term in order to exclude the exposure it represents, it is not defined in the basic form because that is named-perils and so does not need to be excluded

Question 18

Definition - Ground Water

Answer 18

-water found in the cracks and spaces in soil, sand, and rock beneath the ground surface
-it may constitute the water table or water from heavy or prolonged rain or melting snow, hail, or ice that is percolating to the water table

Question 19

Definition - Insured

Answer 19

Includes people other than the named insured, though these others are not named anywhere in the policy
-while living in the same household:
>the insured’s spouse
>the relatives of either the insured or the insured’s spouse; and
>any person under 21 in their care

-also includes a dependent child who is temporarily living away from the principal residence while attending school or university. This extension ensures that the student is still a member of the household, protects their interest during temporary absence, but the student must be dependent on the named insured (or spouse) for support and maintenance. Student may still earn money toward living expenses or school costs, but if student is self-supporting, the extension does not apply

-only the insured named in the coverage summary may take legal action to enforce the contract

Question 20

Definition - Premises

Answer 20

does not include municipal property adjacent to the insured premises, including boulevards, sidewalks, or roadways

Question 21

Definition - Residence Employee

Answer 21

-works for the insured, part-time or full-time, in connection with the maintenance or use of the premises but not with the insured’s business
-includes babysitter or someone who takes care of yard duties, cutting grass, snow removal, and other occasional household tasks, working under the insured’s direction
-does not include anyone who works as a contractor, such as someone who determines when an how such work is done.
-the term is relevant to the description of property insured under Coverage C

Question 22

Definition - Specified Perils

Answer 22

In the IBC all-risks habitational forms, some of the exclusions that limit coverage are qualified by exception to those exclusions in the form of the specified perils
-they are similar, though not identical, to the perils insured against in the IBC named-perils forms

Question 23

Definition - Spores

Answer 23

-part of fungi or mould and can form as quickly as 24 hours after a loss
-in the IBC homeowners comprehensive and broad forms the term “spores” includes but is not limited to one or more reproductive particles or microscopic fragments produced by, emitted from, or arising out of any fungi
-defined in the comprehensive and broad forms because they are all-risks policies so must define the term in order to exclude the exposure it represents, does not need to be defined in basic form because the exposure it represents is not named in this named-perils form and does not need to be excluded

Question 24

Definition - Spouse

Answer 24

-in accordance with the Canadian Charter of Rights and Freedoms, the homeowners forms define spouse to include not only legally married partners but also heterosexual and same-sex partners who live together in a conjugal relationship outside of marriage and have continuously done so for at least 3 years; if the partners are the natural or adoptive parents of a child, the period is reduced to one year

Question 25

Definition - Surface Waters

Answer 25

-refers to water on the surface of the ground taht is not usually there
-it could be due to a heavy downpour of rain or a rapid melting of snow or ice that cannot dissipate quickly enough
-it may also include the escape of water from any source which travels over the surface of the ground
-the term “surface water” complements the related term ground water and is mentioned in the water damage peril

Question 26

Definition - Terrorism

Answer 26

-defined in all three homeowners forms so as to exclude the peril it represents
-ideologically motivated unlawful act or acts, including but not limited to the use of violence or force or threat of violence or force, committed by or on behalf or any group(s), organization(s), or government(s) for the purpose of influencing any government and/or instilling fear in the public or a section of the public
-does not embrace legal protests, demonstrations, or self-expression
-it does not apply to individuals not acting on behalf of a group or to malicious acts or vandalism that may occur during a lawful demonstration

Question 27

Definition - Vacant

Answer 27

-refers to the circumstance where, regardless of the presence of furnishings, all occupants have moved out with no intention of returning and no new occupant has taken up residence; or in the case of a newly constructed house, no occupant has yet taken up residence
-not the same as “unoccupancy”, which applies to a building with no people in it but to which people intend to return. Unoccupancy is not unusual - people leave the home for daily outings or longer term vacations
-distinction in the definition concerns the intention of the occupants - if they intend to return, even longer than 30 days, the policy coverage is not interrupted
-vacancy provides a greater risk for vandalism, fire and burglary in particular, other losses may go undiscovered for an extended period of time, which may increase their severity

> insured moved and left their current home = vacant
insured on a vacation for 2 weeks = unoccupied

Question 27

Definition - Watermain

Answer 27

-a pipe in a water distribution system conveying consumable water but not waste water
-watermains sometime inundate streets and even home, especially in winter
-term is found in the description of water damage
-watermain may be owned by a municipality or privately, may be located inside or outside the exterior perimeter of the insured building

Question 28

Definition - We, Us, or Or

Answer 28

refers to the company providing the insurance - that is, to the insurer

Question 29

Definition - You or Your

Answer 29

refers to the insured