5.2 - Coverages Flashcards
Coverage Clause Section
Framed by the opening clauses (a Guide to the Policy and the Definitions), and the subsequent clauses that extend, apply and limit it, the coverages clause lies at the heart of the property policy
-the coverages sections of the homeowners forms begin with an introductory statement confirming that the amounts of insurance for the coverages that follow are shown on the coverage summary page
-outlines and defines the property insured in the contract
Coverage A - Dwelling Building
-applies to the dwelling itself and other property on the premises
-includes structures attached to the house, such as carports, solariums, conservatories, patio covers, and decks; outdoor swimming pools and their attached equipment (the form does not distinguish between above and in-ground types); and permanently installed outdoor equipment (fences, gates, gas barbeques connected to the natural gas pipeline, and garden lighting, as well as swings, children slides, or other similar property that remains fixed in the yard or garden) on the premises
-also applies to materials and supplies on or adjacent to the premises, intended for use in construction, alteration , or repair of the dwelling or private structures on the premises. Thus the coverage accommodates such materials delivered by truck and unloaded beyond the boundaries of the premises but adjacent to them. Theft is covered only when the work on the dwelling has been completed and the dwelling is ready to be occupied
-at insured’s option, up to 10% of the amount of insurance on Coverage A may be applied to building fixtures and fittings temporarily removed from the premises for repair or seasonal storage (ex. Awning used in the summer but not winter), subject to the same perils and subject to same terms as when it is on premises
-a 2nd option under Coverage A permits the insured to apply up to 5% of the amount of insurance on the insured dwelling to trees, plants, and shrubs on the premises but outside the dwelling building. Sublimit is applied for any one tree, plant, or shrub, including debris and removal expenses. Loss under this option is limited to fire, lightning, explosion, impact by aircraft or land vehicles, riot, and vandalism or malicious acts - vulnerable to weather-related damage.
-no coverage for lawns or items grown for commercial purposes
Coverage B - Detached Private Structures
-must be separated from the dwelling building by a clear space or be connected to the building only by a fence, utility line, or other similar connection
-structures must be private and not used for business purposes
-examples of common DPS are detached garages, garden sheds, greenhouses, pergolas, free-standing sundecks, or other similar structures
Coverage C - Personal Property
-definitions clause does not define personal property, the term includes all movable or temporary property - furniture, clothing, even stocks or bonds.
-it is the opposite of “real property”, which means fixed property such as land or buildings
-Coverage C is broken down into 3 parts:
>Part 1 - Contents of dwelling and personal property owned, worn, or used on the premises
>Part 2 - Property away from the premises
>Part 3 - Property of a student
Property Covered Under Coverage C - Basic, Broad, and Comp forms
- Contents of Dwelling and personal property usual to ownership or maintenance of dwelling
>Ba, Br, Comp - Personal Property of Others
>Ba, Br, Comp - Property away from the premises
>Ba, Br, Comp - Property Temporarily removed to a storage warehouse - theft coverage only
>Ba, Br - Property Temporarily removed to a storage warehouse for up to 30 days - all perils normally insured
>Comp - Property temporarily removed to a storage warehouse longer than 30 days - theft only
>Comp - Property of others and in the custody of the insured
>Ba, Br, Comp - Personal Property of residence employee travelling on behalf of the insured
>Ba, Br, Comp - Property of Students
>Ba, Br, Comp
Part 1 of Coverage C - Contents of Dwelling and Personal Property Owned, Worn or used on the Premises
-include the personal property usual to the ownership or maintenance of the dwelling and all furnishings, clothing, sundries, and any other item not fastened to the building unless it is intended to be, such as loose building materials
-principle of insurable interest requires the insured to have a financial interest in insured property. IBC Homeowners forms and many other habitational forms will allow the insured to include the uninsured personal property of others while on the part of the premises occupied by the insured
-if a visitor does not have coverage of their own for their personal property, they may sue the insured for their property damage if done on the insured’s premises. In practice the insurer is likely to settle the claim directly with the owners of the damaged property
-property of roomers or boarders who are related to an insured person is included in this option, but property of unrelated roomers or boarders is not
Part 2 of Coverage C - Property Away from the Premises
-insured’s personal property temporarily away from the premises, anywhere in the world - whether removed for a few days, or a few months
-also extends to property in the insured’s possession owned by someone else, such as an item lent to the insured for a trip. Indemnity for non-owned property is not automatic, it must be specifically requested by the insured. This coverage also permits the insured to recover the cost of replacing or repairing personal property belonging to a residence employee travelling within the scope of their duties for the insured
-personal property that is normally kept at any location the insured owns other than the principal residence is not covered. The objective is to limit the coverage to property that is genuinely in transit or is off premises for a limited period and then returned to the principal residence
-in the homeowners comp form coverage for personal property stored in a warehouse is not restricted to loss by theft, but is limited to 30 days for any peril other than theft. Insured can request an extension of that 30 day period, insurer will assess the additional risk involved and it it grants permission to extend coverage, it may charge additional premium
-in the homeowners basic and broad forms, personal property stored in a warehouse is insured only against theft
Part 3 of Coverage C - Property of a Student
-covers the personal property of any child who, as a dependent student insured by the policy, is temporarily living away from home to attend school
-definition of insured imposes no special restriction on coverage for a student who lives at home, thus Part 3 of Coverage C responds mainly to exposure away from the principal residence
-explicitly insuring the property of an insured student temporarily away from home avoids disputes over property loss other than at the principal residence
-coverage will continue throughout the policy period
Exclusions under Coverage C
-too many items of personal property to list each item with its own amount of insurance so a single amount of insurance is provided under Coverage C - blanket limit
-this can cause insurer to be exposed to some kinds of property to which they prefer to limit their exposure and other kinds that insurers will not cover at all in the homeowners forms
-Coverage C has its own exclusions and limitations to establish the nature and extent of coverage for personal property
3 types of property excluded under Coverage C:
1. Motorized vehicle or their equipment (except for watercraft, electric golf caddies, lawnmowers, other gardening equipment, snow blowers, wheelchairs, or medical scooters with more than two wheels and specifically designed to carry a person who has a physical disability, electric bicycles and electric scooted with a max speed of 32 km/h or less on level ground, and electric vehicles intended for children with a max speed of 10km/h or less on level ground
>Motorized vehicles or their equipment are more appropriately insured under an Auto policy
- Camper units, truck caps, trailers, or their equipment
>truck caps may be appropriately insured as attached equipment on an auto policy. But Camper units, trailers and other recreational vehicles are suited for vacation-trailer policies - Aircraft or their equipment
>aviation insurance is a very specialized class of insurance not offered at all in a personal property policy
Special Limits of Insurance
-technically a part of personal property coverage, used to limit the insurer’s exposure to certain types of personal property that would otherwise be covered under the blanket limit for personal property
-in the IBC homeowners forms, 15 special limits are described in 2 groups. One of the groups comprises special limits that apply to loss caused by any insured peril (except conversing watercraft). Other special limits apply only to loss caused by theft
Coverage D - Additional Living Expense
-agreement between insurer and insured does not refer to direct loss, indemnity calculation, or insured perils, because the homeowners forms cover not only direct loss but also certain kinds of consequential loss - that is, indirect loss that arises from physical LoD to described property
-losses covered under Coverage D are consequential losses that arise when certain circumstances force temporary unoccupancy in all or part of the insured dwelling
Coverage D combines 3 coverages:
1. Additional Living Expense
2. Fair Rental Value
3. Prohibited access
*none of these coverages insures the cancellation of a lease or agreement
Coverage D - Additional Living Expenses - Coverage 1. Additional living expense
-loss caused by an insured peril may render the insured dwelling unfit for occupancy or force the insured to move out while repairs are being made
-insurer pays for any necessary increase in living expenses, including moving expenses incurred by the insured, so that the insured’s household can maintain its normal standard of living
-in some cases, additional living expenses may be somewhat offset by reductions in other expenses
-the indemnity period is not limited by the expiry date of the policy. Even if the policy is not renewed during the restoration period or the estimated restoration period, the additional expenses incurred continue to be covered, up to the limit of Coverage D or until the dwelling is fit for occupancy, whichever comes first
Calculation formula:
>Incurred Expenses After the loss - Normal Expenses Before the Loss = Eligible Additional living expense claim
*don’t forget utilities NOT paid
Coverage D - Additional Living Expenses - Coverage 2. Fair Rental Value
-insured is permitted to rent a part of the dwelling or detached private structures to a tenant or hold it available for rent, even if the insured has not informed the insurer, as long as the insured still personally occupies the premises
-if an insured peril renders the building unfit for occupancy, not only will the insured be displaced, but the insured may also lose the rental income paid by a tenant
-even if the part of the dwelling normally held for rent is empty when the loss occurs, if the insured can show that - but for the loss - it would have been rented, the insured may be entitled to claim fair rental value, proof may include rental agreements, advertising, or other similar evidence
-if the insured elects not to repair the damage at all, the insured may still be entitled to indemnity, but only for the time that would have been required to complete the repairs had the insured proceed with due diligence
Coverage D - Additional Living Expenses - Coverage 3. Prohibited Access
-indemnifies for indirect loss
-unlike coverage for additional living expense and fair rental value, it does not require that LoD have occurred to the insured dwelling
-instead coverage under prohibited access applied when a civil authority, such as the policy or other authorized emergency personnel, government representatives, or military representatives, order the insured dwelling occupants to move out for one of two reasons:
1. A neighbouring premises has sustained damage that poses danger to the insured premises
>prohibited access coverage applies if the damage to the neighbouring premises was caused by a peril that would have been covered under the insured’s homeowners form it if had occurred to the insured dwelling
>if a civil authority prohibits access to the insured’s dwelling because of damage to neighbouring premises, the resulting additional living expense or loss or fair rental value to the insured is covered but only up to 2 weeks. That would usually be enough time for the danger to be removed
2. Mass Evacuation - required as a direct result of a sudden and accidental event within Canada or the US
>mass evacuation is not an insured peril but a civic emergency
>the provincial or territorial Government intervenes and orders Canadians to evacuate until the fire is under control and no longer a threat. Residents move to the closest major city, where they remain for 10 days, when allowed to return, they discover that most homes escaped damage. Despite being no physical damage to the insured’s home, the insured is eligible for reimbursement for ALE incurred during the evacuation
-Prohibited access coverage does not require that an insured peril caused the mass evacuation, still the coverage does exclude six causes of evacuation:
>Flood
>EQ
>War Risks
>Terrorism
>Nuclear incident
>Radioactive contamination
