Ask Tim

When Is a Home 'Unoccupied' Under a Homeowners Policy?

Question from an IIABNY member: In a strict reading on the homeowners policy, after a period of the home not being occupied, coverage becomes limited. The question came up on clients who leave their summer homes in New York to go to their winter residence, such as in Florida. We have a disagreement in our office as to whether the summer home would be considered unoccupied under the policy. Is there a clear answer to this?

Answer: I found a 1999 New York appellate court decision that appears to address your question. In McCabe v. Allstate, which pertained to a seasonal home located in Saratoga County, the judge wrote: 

We next review Allstate's contention that it was entitled to summary judgment due to the following loss exclusion: "Freezing of plumbing, fire protective sprinkler systems, heating or air conditioning systems or household appliances, or discharge, leakage or overflow from within the systems or appliances caused by freezing, while the building structure is vacant, unoccupied or being constructed unless you have used reasonable care to: (a) maintain heat in the building structure; or (b) shut off the water supply and drain the system and appliances." We find plaintiffs' assertion that their house was not "unoccupied" in light of their continuing, albeit seasonal use of the premises, to be unavailing. Inasmuch as plaintiffs' primary residence was in Virginia and they concede that no one resided at or visited the house in Edinburg from September 1995 until March 1996, their claim falls squarely within the exclusion provision. This Court has previously determined that use of the word "unoccupied" in an insurance policy carries its ordinarily accepted meaning and that "[i]t is the regular presence of inhabitants that makes occupancy" (Coutu v Exchange Ins. Co., 174 AD2d 241, 244; see, Page v Nationwide Mut. Fire Ins. Co., 15 AD2d 306, 306-307). [EMPHASIS ADDED]

This decision has been cited by a federal court as recently as 2009, so it appears to still be a valid precedent. Consequently, it appears that the coverage limitations do apply to a home in New York that is unoccupied during the winter months.

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When a Carrier Terminates an Agency: Personal Lines Policies

Question from an IIABNY member: Can you please indicate where it is stated that an insured can request a one more year renewal for an automobile insurance policy after the required three successive one year policy periods, and if it also applies to personal lines insurance policies?

Answer: That’s not exactly what the law says. New York Insurance Law Section 3425(j)(1) states:

Where an insurer or an agent who is authorized by such insurer to accept lines of insurance from licensed agents or brokers notifies a licensed agent or broker that its contract or account shall be terminated:…

(B) with respect to an automobile insurance policy subject to this section, the insurer shall offer to continue the policy for any remaining part of the required policy period and, unless the policy is cancelled or non-renewed in accordance with the provisions of either subsection (b), (c) or (f) of this section, it shall, at the specific request of the insured, offer to continue the policy through the terminated agent or broker for three successive one year policy periods which commence within the year following the date of mailing or delivery to the terminated agent or broker of written notice of termination of such contract or account;

As a side note: 

• Subsection (b) permits the insurer to cancel a policy for any reason in the first 60 days.
• Subsection (c) permits the insurer to cancel after day 60 and on renewals for non-payment of premium; suspension or revocation during the required policy period of the driver's license of the named insured or any other person who customarily operates an auto insured under the policy; and discovery of fraud or material misrepresentation in obtaining the policy or in making a claim under it.
• Subsection (f) permits the insurer to non-renew up to two percent of its auto policies in a given rating territory per calendar year.

What the above provision of the law is saying is that the insurer must offer to finish the auto policy’s required policy period (which is one year – see subsection (a)(8),) and, if the insured requests, offer to renew the policy through the terminated agent for three consecutive one-year policy periods. Here’s an example to illustrate:

• Carrier notifies agent on Dec. 16, 2011 that the appointment is terminated
• Personal Auto Policy finishes the one-year required policy period on March 1, 2012

The carrier must offer to continue coverage under the policy until March 1, 2012. In addition, if the insured requests, it must offer to renew the policy through the terminated agent in 2012, 2013 and 2014. Effective March 1, 2015, it no longer has any obligation to offer a renewal.

With non-auto personal policies, it’s a bit different. The law states:

Where an insurer or an agent who is authorized by such insurer to accept lines of insurance from licensed agents or brokers notifies a licensed agent or broker that its contract or account shall be terminated:(A) with respect to a personal lines insurance policy required to be continued by this section, the insurer shall offer to continue the policy for any remaining part of the required policy period … and the insurer shall offer to continue the policy through the terminated agent or broker for at least its next one year policy period which commences within one year following the date of mailing or delivery to the terminated agent or broker of written notice of termination of such contract or account, and thereafter, at the specific request of the insured, shall offer to continue the policy through such terminated agent or broker for any remaining part of the required policy period …

Here are two illustrations (in more understandable English) to show what this means. First:

• Carrier notifies agent on Dec. 16, 2011 that the appointment is terminated
• Homeowners policy was written new on March 1, 2009, so the three-year required policy period (see subsection (a)(7)) ends on March 1, 2012.

The carrier must offer to continue coverage under the policy until March 1, 2012, it must offer to renew the policy through the terminated agent for the 2012-13 policy period, and, if the insured requests, must offer to renew the policy through the terminated agent for 2013 and 2014. Effective March 1, 2015, it has no obligation to offer a renewal.

Second scenario:

• Carrier notifies agent on Dec. 16, 2011 that the appointment is terminated
• Homeowners policy was written new on March 1, 2010, so the three-year required policy period (see subsection (a)(7)) ends on March 1, 2013.

The carrier must offer to continue coverage under the policy until March 1, 2013, but it has no obligation to offer to renew the policy through the terminated agent after that. This is because the three-year required policy period ends more than a year after the carrier notified the agent of termination.

The rules surrounding a carrier's obligations to insureds when it terminates an agent are complex, but they boil down to when the carrier notifies the agent and when a policy expires.

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Does the Homeowners Policy Cover Electronic Funds Transfer Fraud?

Question from an IIABNY member: I was meeting with a commercial insured yesterday and was talking to her about Computer Fraud and Funds Transfer Fraud coverage now available under a Crime bond. She then asked me if there is any coverage available for her personally under a homeowner’s policy. Identity Theft only covers the expense of having your identity stolen, money is usually only covered while at the insured’s residence so….my question-is there any coverage for someone personally? 

Answer: There is a little bit of coverage built into the ISO HO-3. SECTION I – PROPERTY COVERAGES, C. Coverage C – Personal Property, 1. Covered Property states, “We cover personal property owned or used by an ‘insured’ while it is anywhere in the world.” I.C.3 states, “The special limit for each category shown below is the total limit for each loss for all property in that category. These special limits do not increase the Coverage C limit of liability…a. $200 on money…” Therefore, the policy provides up to $200 coverage on money. Nothing in I.C.4. Property Not Covered appears to exclude coverage for money off-premises.

In addition, I.E.6. Credit Card, Electronic Fund Transfer Card Or Access Device, Forgery And Counterfeit Money provides up to $500 coverage for loss resulting from theft or unauthorized use of an electronic fund transfer card or access devise used for deposit, withdrawal or transfer of funds, issued to or registered in an insured’s name. So, if the loss is due to someone taking and using the insured’s ATM card without permission, the insured has up to $500 coverage.

Obviously, these are not very large limits. There is an ISO endorsement available for increasing the amount of credit card and EFT card coverage, but it sounds like your client is more concerned with someone hacking into her bank account. I’m not aware of any personal lines coverage for that exposure. As you pointed out , the ISO identity fraud endorsement covers costs resulting from identity theft, not theft of money. Ultimately, the financial institution holding her funds should be legally responsible for a theft from their systems.

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How Do You Insure a Storage Shed On Ice?

Question from an IIABNY member: I have a good one for you. We have an insured that lives near a small lake in upstate New York. They have a small shed ("Other Structure") on the property. It is there to store their mower 10 months out of the year, but for 6-8 weeks in the winter when the lake is frozen, they put it on the lake as an ice fish house.  If it is vandalized or run into by a snowmobile, would they have coverage under their Homeowners insurance policy? My thought was that since it is now off premises, it is no long an “Other Structure”, but does it then become “Personal Property”? The cause of loss is not so much the question as the location of it. I assume if the ice cracked and it fell in, there would not be coverage for it. They have a $500 Deductible and since it is not very big, it is probably not worth much more than that. What are your thoughts on this one?  

Answer: This is SO going to be a blog post… 

In the ISO HO-3 (HO 00 03 10 00), Section I – Property Coverage, B. Coverage B – Other Structures states: 

1. We cover other structures on the "residence premises" set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection.

 The Definitions section of the policy states: 

11. "Residence premises" means: 

a. The one family dwelling where you reside;

b. The two, three or four family dwelling where you reside in at least one of the family units; or

c. That part of any other building where you reside;

 and which is shown as the "residence premises" in the Declarations.

 "Residence premises" also includes other structures and grounds at that location.

To be honest, I don’t think this definition helps a whole lot. It includes “other structures and grounds at that location.” It doesn’t use the phrase “at that insured location,” which is too bad because the definition of “insured location” includes “any premises used by (the named insured) in connection with (the residence premises) and (other residence premises shown in the declarations or acquired during the policy term.)” The term “location” isn’t defined, so at best you have an ambiguity in the policy.

You said they live near a lake. If they live on the lake shore, you could argue that the lake is a premises that they use in connection with the residence premises. If the carrier views the word “location” as meaning “insured location,” you could find coverage that way. If the insured has to load it onto a truck, drive it a mile or so to the lake, unload it and push it out onto the ice, that would be a much harder case to make. 

I think calling it personal property would be a stretch. A shed just doesn’t fit within the ordinary meaning of that term. 

If the lake is in fact an insured location, then there should be coverage for a covered cause of loss, but expect an argument from the insurance company. If the insured doesn’t live on the lake shore, then my guess is that coverage ceases once the shed leaves the roads immediately connected the property.

Theoretically, some kind of inland marine insurance would be in order to cover this. Practically speaking, however, no one is going to want to write a policy on a $500 shed that sits on frozen water for two months each winter (well, maybe not this winter.) That being the case, this might be something your client has to self-insure. I admire his ingenuity, even if the idea of sitting around a hole cut in ice with a fishing pole for hours in the winter is not my idea of a fun time.

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Three More Victims of the Joplin Tornado

Made Insolvent by Joplin Twister, Three Companies Taken Over

By Chad Hemenway, PropertyCasualty360.com

December 20, 2011

  34

NU Online News Service, Dec. 20, 10:21 a.m. EST

Missouri regulators say a judge has approved a proposal to allow Missouri Farm Bureau to assume the operations of three insurers made insolvent by the May tornado in Joplin.

“This is a win for all involved,” says John M. Huff, director of the Missouri Department of Insurance (DOI), in a statement. “Policyholders’ claims will be paid and Missouri taxpayers will not have to foot the bill.”

According to the state Department of Insurance, Financial Institutions and Professional Registration, the three now-defunct insurers—Barton Mutual Insurance Co., Gateway Mutual and Cape Mutual—had combined premium sales of $29 million from 41,000 homeowners and fire policies in 2010, but reported claims of $48 million after the Joplin tornado.

The companies, known as “county mutuals” or “farm mutuals” that serve rural residents, were part of the Barton County Mutual Group. They were put into receivership on Dec. 1.

A Barton County, Mo. judge approved the proposal by the DOI, allowing the three companies to merge into one managed by Farm Mutual, which is the state’s seventh-largest homeowners’ insurance company and ninth-largest auto insurer.

“The Joplin tornado was a devastating event that resulted in property losses that were too much for the companies to handle,” says Blake Hurst, president of Missouri Farm Bureau, in a statement. “We will work to ensure that policyholder claims are paid and all policyholders’ coverage is continued.”

Under the plan, Farm Mutual will invest about $14 million in surplus notes to restore the companies’ surplus. The notes will be backed by the Missouri Property and Casualty Insurance Guaranty Assoc. The new company must also buy adequate reinsurance, determined by the DOI.

via www.propertycasualty360.com

This is really unfortunate news. The popular image of an insurance company is a multi-billion dollar corporation housed in a massive skyscraper, moving its chess pieces around and figuring out ways to not pay claims. These three companies were 180 degrees from that notion.

These were small businesses (part of an insurance holding group) with combined sales revenue less than some large insurance brokerages. They served the rural people of Missouri. They wrote 41,000 policies, barely a drop in the bucket of the overall insurance market. And they're gone.

Free markets work this way; things happen, and some players don't survive. Still, I don't think it's ever a good thing when competition is reduced. I'm glad that the companies' claimants will be paid, but the Missouri market is worse off with these carriers out of the picture.

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Brownstone Insurance: Chimney Safety is Important this Time of Year

Chimney Safety is Important this Time of Year

Monday, December 19, 2011 at 9:43AM

Fireplaces serve many purposes. They offer warmth, they can be a great gathering place or focal point in a room, they can be a beautiful architectural element of a home and it can be quite relaxing to sit near one during the cold, winter months. But they can also be a serious fire hazard if not properly cared for.

One of the biggest concerns when it comes to fire prevention in your chimney is creosote. Creosote is a an element that occurs naturally as a byproduct of burning wood. Should the creosote buildup go unnoticed, it becomes a dangerous fire hazard. Buildup of creosote can also result in carbon monoxide poisoning as the chimney becomes obstructed. Utilizing the services of a certified chimney sweep is important to keep creosote buildup to a minimum. Check the Chimney Safety Institute of America to locate a CSIA Certified Chimney Sweep®.

Here are some basic tips to follow when maintaining a chimney:

• Make sure the chimney has been cleaned and inspected before you purchase a new property that has one. If it has not, do not use it until you schedule an inspection yourself.
• Screen your fireplace. This keeps sparks and embers from escaping and keeps pets and family members safe as well.
• Do not go to bed or leave the house with your fireplace running, even if it has a screen. Wait until all embers are extinguished.
• Keep all branches and leaves at least 15-feet away from the top of your chimney.
• Cap your chimney! This will make sure that debris and animals such as squirrels and birds stay out of your chimney.
• Choosing the right fuel is important. For burning firewood in wood stoves or fireplaces, choose well-seasoned wood that has been split for a minimum of six months and stored in a covered and elevated location. Never burn Christmas trees or treated wood in your fireplace or wood stove.
• Never use flammable liquids to start your fire. Use kindling or a commercial firelighter to ignite firewood or firelogs that you've arranged at the rear of the fireplace.
• Keep furniture and other items at least 3-feet away from the fireplace.
• Install smoke and carbon monoxide alarms throughout your home and test them regularly to make sure they are in working order.
• Get your fireplace inspected annually by a certified chimney sweep.

via www.brownstoneinsurance.com

Some excellent home fire prevention advice, courtesy of the Brownstone Insurance in Massachusetts. Pass it on!

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Safety Tips for the Holiday Season

Safety Tips for Decking the Halls

Haul out the holly, string up the lights, and hang the stockings by the chimney (with care)! The holiday season is finally here, which means it’s time to deck the halls with all kinds of festive decorations.   Your Trusted Choice® independent insurance agent wants to ensure your holidays are as merry and bright as possible, so before you adorn your mantle with garland and dangle mistletoe over your door, please read these holiday decorating safety tips.   -  Christmas trees: Trimming the tree is the main decorating event in many households, but the tree can become a fire hazard if it’s dried out. Remember to replenish the water in your tree stand on a daily basis, so that your tree remains healthy and hydrated for the duration of the holiday season. (Also, check out this article  for more Christmas tree safety tips.)   -  Holiday foliage: Poinsettias, holly, Jerusalem cherries, and mistletoe are all toxic if ingested. If you have pets or small children in the house, avoid using these decorations or opt for the artificial versions.   -  Artificial snow: If you’re longing for a white Christmas, spraying windows with artificial snow can give your house a frosty glow – even if you live in a warm climate. However, spray-on snow can irritate your lungs, so make sure to follow the directions carefully and only use the spray in well-ventilated areas.   -  Fireplaces: Adorning the mantle with garlands, stockings, and other decorations is a holiday tradition in many households, but keep these trimmings clear of working fireplaces. You should also be careful when using fire salts, which produce colored flames, since they are highly toxic if ingested.   -  Lights: Before hanging lights indoors or outdoors, check the strings for cracked sockets, broken bulbs, or frayed/bare wires. Also, only use lights that are approved by a national testing lab, such as UL or ETL/ITSNA. Do not use electric lights on metallic trees because faulty lights can cause branches to become charged and possibly electrocute someone. If you’re using outdoor lights, make sure they are approved for that use and plugged into a ground-fault circuit interrupter device.   -  Candles: Flickering candlelight can give your home a cozy, warm glow, but candles cause more than 11,000 fires every year, according to the U.S. Consumer Product Safety Commission. If you’re using candles to decorate for the holidays, keep a close eye on them when they’re lit, and don’t leave the room without extinguishing the flames. Never put a lit candle on a tree.

via www.trustedchoice.com

Your faithful Insurance Geek™ enjoys the holiday season as much as anyone, though the lack of appreciation for the gifts I buy can be frustrating. I spent a lot of money on that Personal Umbrella Policy for my kids last year. I even wrapped it. Sheesh...

Anyway, as you enjoy all the activities this time of year, take a few minutes to review this excellent list of tips from Trusted Choice®. If you're an insurance agent or broker, pass them on to your clients. Let's remember this holiday season for happy reasons.

Now, I must get back to my shopping. If I get them a boat policy this year, we'll just have to get a boat...

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Ask Tim, Episode #27 -- 5 Things You Didn't Know About Homeowners Insurance

The new episode of the Ask Tim podcast discusses five coverage wrinkles in the ISO Homeowners policy (year 2000 edition) that you might not be aware of. The highlights:

• I've got a trivial mind
• The Homeowners policy will pay to remove fallen trees that are blocking a driveway or handicapped-access ramp.
• The policy covers, without a specific dollar limitation, personal property at home that the insured uses occasionally for business.
• The policy does not cover the cost of refilling a swimming pool that had to be drained for repairs.
• Without the Special Coverage endorsement, the policy does not cover a TV damaged by someone throwing a Nintendo Wii game controller into the screen.
• The policy provides up to $200 coverage for gift cards.
• For more information, visit the Big "I" Virtual University Research Library section on Homeowners insurance.
• I hint at a potential career change.

Download Ask Tim Episode #27

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'Where You Reside' Redux

In case any of you thought that the alarm I sounded in episode #21 of the podcast (which described a potentially major coverage gap in the ISO Homeowners policy) was theoretical, take a look at a New York trial court's September 27 opinion in the case of Josma v. Interboro Insurance Co.:

Plaintiff alleges that she entered into a contract on or about June 9, 2010 with Nubia to perform work, labor, and services, and to furnish materials, in connection with the addition of a second story onto plaintiff's premises located in Uniondale, New York. Nubia allegedly began work shortly thereafter, which included removal of the house's roof and the placing of a tarp over the open portions of the roof at the end of each work day. On or about July 13, 2010, a wind and rainstorm allegedly caused portions of the tarp to be removed from plaintiffs roof and exposed the openings in the roof to the elements. Plaintiff alleges that because Nubia failed to properly secure the tarp over the open portions of the house's roof, rain from the storm entered the plaintiff's house and caused damage to the interior of the house, as well as to personal property.

Nubia was insured by a Commercial General Liability insurance policy through Kingstone at the time of this incident...

Nubia notified Kingstone that it was seeking coverage under the Kingstone policy for plaintiff's claim against Nubia for the damage to plaintiff's home and property and Kingstone disclaimed coverage based upon the exclusion in the Kingstone policy for "property damage or products/completed operations liability arising out of your work which involves the removal and/or replacement of roof materials," among other items. In addition, plaintiff sought coverage through her homeowner's policy with Interboro, but Interboro denied coverage because the premises were not plaintiff's primary residence and were not occupied by the homeowner, contrary to the information contained in plaintiffs insurance application to Interboro, which was allegedly prepared and submitted by defendant First Choice Coverages. [EMPHASIS ADDED]

This isn't just theory, folks. Carriers can and do deny coverage because an insured allegedly did not reside in the home.

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Check Out This New Home Inventory Tool

I recently learned about a service that might save homeowners some trouble if they have insurance claims. It's called Lockboxer, and it appears to be a pretty slick piece of technology. If it works as advertised (and I haven't tried it out yet myself,) a subscriber can create a home inventory by taking four digital photos of each room in the house or apartment and two of each closet. The subscriber uploads the photos to the site, and the software prepares a detailed inventory based on the photos.

As insurance professionals, we always encourage our clients to inventory their belongings before a loss happens. Until now, that has seemed like a daunting task (show of hands — how many of you have actually done it?). This service appears to make it a lot less daunting. The service is free for storage of information about 50 items or less; unlimited storage is available for $1.99 per month. Users can also simply do a search on the site for free to determine the value of a particular item.

The site states that user data is protected by Secure Sockets Layer encryption, which should provide subscribers with some peace of mind. I suggest that anyone interested take it for a test spin and see how it works. If you like what you see, you may want to suggest it to your clients. Hopefully, they'll never need to use a home inventory for insurance claim purposes, but it's always good to have it handy.

I've embedded a couple of videos about the service below. Full disclosure: I have absolutely no financial interest in this site, and neither does IIABNY. I just think it's a cool service that will help people if it works as advertised. I'll leave it up to you to decide whether it does or not.

Lockboxer Intro Video from Lockboxer on Vimeo.

Lockboxer's home inventory solution proves there is a better way to manage your stuff from Lockboxer on Vimeo.

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