Study 6 - Anatomy of a Property Policy: Exclusions

Question 1

Exclusions

Answer 1

• Never expand policy coverage but always restrict it
• Remove exposure to loss considered undesirable or uninsurable
• Exposure to trade risk or maintenance costs
• Exposures to inevitable (non-fortuitous) loss
• Exposures that reflect underwriting and rating considerations

Question 2

Buildings for Business or Farming

Answer 2

Helps ensure that insureds who present business or farming exposures will be be covered instead under commercial or farm policies that are more appropriate for the exposure

Question 3

Property on Exhibit

Answer 3

Generally can be insured under an exhibition floater

Question 4

Property Illegally Acquired or Subject to Forfeiture

Answer 4

Property stolen or illegally imported into Canada

Question 5

Evidence of Debt or Title

Answer 5

Denies coverage for property that may be insured by other forms specifically designed for it

Question 6

Sporting Equipment

Answer 6

Loss or damage due its use is excluded

Question 7

Animals, Birds, or Fish

Answer 7

Excluded unless the loss or damage is caused by a specified peril other than impact by aircraft or land vehicle

Question 8

Property Lawfully Seized

Answer 8

Supports public policy by denying coverage for property to which the insured has no legal claim

Question 9

Outdoor Radio and TV Antennae, Including Satellite Receivers

Answer 9

Not covered when caused by windstorm or hail, weight of ice, snow, or sleet; or collapse

Question 10

Marring, Scratching, Abrasion, Chipping, or Breakage

Answer 10

Unless caused by:

• A specified peril
• An accident to a land vehicle, watercraft, or aircraft; or
• Theft or attempted theft

Question 11

Wear and Tear

Answer 11

Purpose is to avoid disputes about what a risk is. Excluded because the cause of loss is inevitable

Question 12

Faulty Design, Material, or Workmanship

Answer 12

These are losses due to lack of expertise, lack of care, or both. Insurers do not want to pay for someone else’s poor workmanship

Question 13

Settling, Expansion, Contraction, Moving, Bulging, Buckling, or Cracking

Answer 13

Intended to exclude damages from gradual, naturally occurring events

Question 14

Data or Data Problem

Answer 14

May result in financial loss. Excluded unless directly caused by resultant fire, explosion, smoke, or water damage

Question 15

Vacancy

Answer 15

Excludes loss or damage if it occurs after the dwelling has, to the insured’s knowledge, been vacant for more than 30 consecutive days. Vacancy is material to the insurer’s acceptance of the risk

Question 16

Nuclear Incident & Radioactive Contamination

Answer 16

Excluded except for ensuing loss or damage which results directly form fire or explosion

Question 17

War Risks

Answer 17

Generally, the events listed in this exclusion are considered uninsurable

Question 18

Intentional or Criminal Acts

Answer 18

Recent legislation has been passed in some provinces to protect “innocent co-insureds”

Question 19

Property Being Worked On

Answer 19

Where damage results from that process or work. Resulting damage to other property is still covered

Question 20

Water Damage

Answer 20

In the IBC named-perils forms, water damage encompasses loss or damage to insured property caused by only four specific scenarios. Coverage for these scenarios is insured by making them exceptions to the exclusion of water damage.

1. The S&A escape of water or steam from within a plumbing, heating, cooling, sprinkler, or A/C system or domestic water container which is located within the insured’s dwelling or detached private structures
2. The S&A escape of water from a domestic water container which is located outside the dwelling or detached private structures
3. The S&A escape of water from a watermain located outside the insured’s dwelling or detached private structures
4. Water that enters the dwelling or detached private structures through an opening created suddenly and accidentally by an insured specified peril other than water damage

Question 21

Seepage

Answer 21

A slow flow of water that takes place over a more extended period of time than accidental discharge, usually through porous material

Question 22

Watermains

Answer 22

Damage caused by water suddenly escaping from a watermain is covered, but damage to the watermain itself is not.

Question 23

Pests

Answer 23

Loss due to birds, vermin, raccoons, insects, or rodents including bats is excluded except for loss or damage to glass of the dwelling or detached private structures

Question 24

Smudging and Industrial Smoke

Answer 24

Loss caused by such smoke is excluded because it comes from a friendly fire - a fire for useful purposes

Question 25

Earth Movement

Answer 25

Loss or damage caused by snowslide, earthquake, landslide, or any other earth movement

Question 26

Theft from Part of the Dwelling Rented to Others

Answer 26

Loss or damage due to theft or attempted theft is excluded if part of the insured's dwelling is rented to others partially or fully furnished and the tenant's employee or household member steals insured property from the rented portion

Question 27

Vandalism or Malicious Acts or Glass Breakage While Dwelling Under Construction or Vacant

Answer 27

This exclusion alerts the insured that such losses are virtually inevitable and will not be recoverable, so the insured should act prudently to avoid them

Question 28

Theft from a Dwelling Under Construction

Answer 28

Excluded for the same reason as vandalism, malicious acts, or glass breakage. Such premises are often targets for vandals and thieves

Question 29

Rust or Corrosion, Wet or Dry Rot, Fungi or Spores

Answer 29

These events occur naturally but can be prevented or controlled by adequate maintenance

Question 30

Fuel Oil

Answer 30

Loss due to the the release, discharge, or dispersal of fuel oil is excluded

Question 31

Trickery or Fraud

Answer 31

The possibilities are almost endless, and such losses may be difficult to prove

Question 32

Terrorism

Answer 32

Significant concern about terrorism continues, and it is widely thought that loss from such attacks, like loss from war risks, should not be covered under a property policy

Question 33

Electrical, Electronic, and Mechanical Breakdown

Answer 33

Loss or damage caused by breakdown is likely due to mechanical failure, wear and tear, or deterioration and is therefore not covered