Study 10: Residential Property Claims - Summary

Question 1

Framework of coverage represented in residential policies

Answer 1

While the frameworks of coverage in homeowners, tenants, and condominium unit owners policies have many similarities, the assessment of coverage is the responsibility of the adjuster.
In making that assessment, the adjuster must guide the insured through the coverage and determine the following:

• Whether the loss qualifies for coverage
• Under which section of the policy it qualifies
• What special conditions or limits may apply

Question 2

Summary of residential coverages

Answer 2

• Coverage A: Dwelling Building (main building, attached structures, permanently installed outdoor equipment, swimming pool, etc.)
• Coverage B: Detached private structures (separated from main building by a clear space, such as a shed, greenhouse, gazebo, etc.)
• Coverage C: Personal Property (contents usual to a home, such as furniture, applicances, clothing, etc.)
• Coverage D: Additional Living Expense (extra costs incurred while the property is unfit to occupy due to an insured peril)

Question 3

Typical policy limitations for contents

Answer 3

Question 4

Tenant’s package policy

Answer 4

• Essentially the same basic coverage as the homeowners policy, but it is limited to personal property and additional living expenses
• However, most tenant’s policies cover dwelling improvements and betterments made at insured’s expense

Question 5

Additional coverages under a condominimum policy

Answer 5

1. Unit improvements and betterments
2. Loss assessment (ex. for loss to a common area of the building)
3. Unit additional protection

Question 6

Coverage for fire losses

(Insurance legislation)

Answer 6

• Hostile fire and friendly fire must be distinguished to determine if coverage applies
• When heat is applied to an item in its normal course of operation, the policy excludes damage to the property caused by such application. However, any damage from an ensuing fire to other property would be covered.
• Smoke damage that results from a fire is covered under the fire peril.

Question 7

After a fire loss, once coverage has been assessed, the loss adjuster must act quickly to establish what can be done to minimize damage

Answer 7

• There may be some urgency to board up exposed areas.
• There may be a need to air and deodorize the premises.
• Washing walls should be attempted as soon as possible to determine what painting would be required.
• Protective barriers or fencing may be required to limit any trespassing or further damage.
• In the case of complex or large losses still under investigation, the property may require on-site security to protect the area.

Question 8

Coverage for lightning losses

(Insurance legislation)

Answer 8

• If a bolt of lightning strikes an insured house, the resulting damage is covered
• Electricity from lightning can be conducted through household wiring, pipes, and appliances, making it difficult to determine the extent of lightning damage.
• Adjusters may need experts to determine if an applicance was damaged by lightning, or if it was damaged before a strike.

Question 9

Coverage for explosion losses

(Insurance legislation)

Answer 9

• The peril of explosion in residential applications is commonly associated with natural gas leaks and subsequent explosions
• The results of water hammer (i.e. a pressure shock wave in plumbing when there are changes to the stability of water) is typically excluded, except for all-risks policy forms

Question 10

List of specified perils

Answer 10

• Smoke
• Falling object
• Impact by aircraft or land vehicle
• Riot
• Vandalism or malicious acts
• Water escape
• Windstorm
• Hail
• Glass breakage
• Transportation
• Theft
• Electricity

Question 11

Smoke

(Other perils)

Answer 11

• Smoke losses under this peril must result from something other than a fire, because smoke from a fire loss is already covered under the fire peril (ex. faulty operation of a cooking unit)
• Smoke from a fireplace is typically not covered under basic policy wordings. Smoke from agricultural smudging or industrial operations is not covered.

Question 12

Vandalism or malicious acts

(Other perils)

Answer 12

Vandalism is the intentional defacement of property; malicious mischief is the willful destruction of another’s property. In practice, the adjuster need not distinguish between them.

Question 13

Water escape

(Other perils)

Answer 13

• Sudden and accidental escape of water from a watermain
• Sudden and accidental escape of water or steam from within a plumbing, heating, sprinkler, or air conditioning system or domestic water container located inside the dwelling
• Sudden and accidental escape of water from a domestic water container located outside the building (this kind of damage is not insured when the escape of water is caused by freezing)
• Water that enters the dwelling through an opening that has been created suddenly and accidentally by an insured peril other than water damage

Question 14

If frozen pipes rupture and the insured has been away from the premises for more than four consecutive days, there is no coverage unless the following precautions have been taken

Answer 14

• The insured arranged for someone to enter the house each day to ensure that heating was being maintained, or
• The insured shut off the water supply and drained all the pipes and domestic water containers.

Question 15

Transportation

(Other perils)

Answer 15

Property carried in an automobile or attached trailer is covered against:

• Collision
• Derailment
• Upset
• Stranding
• Overturn
• Sinking

Question 16

Theft

(Other perils)

Answer 16

Covers insured personal property anywhere in the world subject to certain limits

• Theft at another dwelling is only covered when the insured is temporarily living there
• Theft from a part of the dwelling rented to a tenant is not covered if the tenant committed the theft
• Theft from dwelling under construction not covered
• Theft of birds, animals, or fish is not covered
• Theft as a result of fraud or trickery that results in the transfer of ownership with the insured’s agreement is not covered

Question 17

Property away from the premises

Answer 17

• Personal property is insured while it is temporarily away from the insured’s premises, anywhere in the world, unless the personal property is normally kept at another location.
• Personal property of students temporarily living away from home for the purpose of attending school, university, or college is insured but subject to a limitation.

Question 18

Claims under all-risks coverage

Answer 18

• When an all-risks policy is in effect, the adjuster must first examine the exclusions to determine whether the loss falls within it.
• The adjuster must also examine other limiting features such as the special limits and any exceptions or exclusions under specified perils

Question 19

Typical extensions of coverage under a property policy

Answer 19

• Debris removal expenses
• Cost of removing property to protect it from a loss up to 30 days or expiration of policy, whichever is first
• Personal property in transit to another home
• Fire department charges up to $1,000
• Damage to property due to a change in temperature resulting from an insured peril
• Loss of food in a freezer due to loss of power or mechanical breakdown up to $2,000
• Replacement of locks if keys are stolen
• Tearing out of walls in the course of repairs
• Arson conviction awards
• Credit card, debit card, forgery, and counterfeit money up to $1,000

Question 20

When Property Is Vacant or Unoccupied

Answer 20

• Theft or vandalism losses that occur while the building is under construction or vacant are not covered, even when permission has been granted for construction or vacancy.
• Vacancy is permitted for up to 30 days for other losses before coverage lapses.

Question 21

Additional Living Expense Claims

Answer 21

• Covered when, due to an insured peril, the insured has to live somewhere else while repairs to the dwelling are underway
• Coverage also provided if a civil authority prohibits access
• If a civil order for mass evacuation, coverage typically for up to two weeks
• Only additional expenses are covered (ex. If the insured typically spends $200 per week on food and now spends $300, they can claim $100)

Question 22

Claims Under a Personal Articles Floater

Answer 22

• On a valued basis, the insurer and the insured agree that items are worth a particular amount. The insurer agrees to pay the amount stated in the policy if the item is lost.
• When a limit of insurance is set, the insurer agrees to pay up to that amount if the item is lost. But the loss adjuster must determine the value of the item; should it be worth less than the insurance limit, then the insurer is only required to pay that value.

Question 23

Overview of a property claim investigation

Answer 23

• Property claims investigations require skill and attention to detail in collecting factual information that enables the loss adjuster to determine coverage and assess the value of the loss.
• A loss adjuster will want to establish certain facts about a claim, including when the loss occurred, who discovered the loss, whether police were notified, descriptions of the items damaged, etc.

Question 24

Damage claim process

Answer 24

• During the course of handling a damage claim, the adjuster maintains control on the file by following up to ensure that repair work is progressing as it should.
• When the work is done, the contractor may ask the insured to sign a certificate of completion.
• The adjuster also contacts the insured to ensure that repairs have been completed and that the insured is satisfied.
• The loss adjuster must be able to guide the customer through not only the coverage aspect of the claim but the process involving repair, replacement, and settlement of the loss.

Question 25

Calculating payment to the insured on a replacement cost basis

Answer 25

Typically, homeowners building coverage pays for the cost of repairs or replacement (whichever is less) without deduction for depreciation. However, there are conditions attached to this promise:

• Repairs or replacement must take place at the same location.
• The same occupancy must be maintained.
• Materials of the same quality must be used.
• Repairs or replacement must take place within a reasonable time after the loss.

Question 26

Typically, personal property policies provide replacement cost coverage. There are two exceptions when only actual cash value (ACV) of the item applies

Answer 26

• Antiques, fine arts, paintings, and statuary, as well as memorabilia, souvenirs, and collectors’ items. These are things that cannot be replaced, or where their value is due to age or sentiment.
• The adjuster must identify property that has not been maintained in good working condition, or property that is no longer used for its original purpose, as this type of property would have limited value.

Question 27

Changes to the basis of loss payments

Answer 27

• The basis for loss payments is determined by the policy wording and guided by the market value of goods.
• Many variables might affect the final loss payment, and the loss adjuster is required to ensure that all variables are considered.