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Introduction

Summary: The American Association of Insurance Services (AAIS) has filed a revised homeowners program with an effective date of July 2007. The prior forms were revised in 1996. While the form bears some similarities to the ISO homeowners program, there are also several differences. The chart that follows compares the language of the ISO HO 03 to the AAIS HO 0003, and indicates where the forms differ. When the forms have the same language and coverage, nothing is noted in the chart.

Differences appear in the policy language/coverage between the two policies as follows:

Policy section

ISO HO 3

AAIS HO 0003

Definitions

Aircraft, hovercraft, motor vehicle and watercraft liability described in one provision

Comparable provisions found in the liability exclusions and incidental liability coverages section. AAIS defines aircraft, hovercraft, watercraft and motor vehicles separately.

Actual cash value

Bodily injury – clarifies that harm, sickness that does not arise from physical injury is not BI

Specifies that business includes farming, does not include occasional rental for residential purposes on part of property normally used as residence by insured; no more than two roomers or boarders.

Business – activities not otherwise listed and for which the insured receives no more than $2000 per year

Business – activities not otherwise listed and for which the insured receives no more than $2500 per year

Declarations

Insured location/residence premises

Described location

Residence employee

Domestic employee

Fungi

Insured – relatives/persons under 24/21

Insured – relatives/persons under 25/21

Insured – real estate manager for described location for liability coverages

Insured – person or organization accountable by law for a golf cart owned by insured as long as liability for cart not excluded

Limit

motorized vehicle – AAIS specifies that it doesn’t include hovercraft, watercraft, or model hover/watercraft. Includes trailer or semi trailer that becomes detached while being carried or towed by self-propelled land or water vehicle

Occurrence – includes continuous and harmful in the definition

Pollutant referred to in perils insured against section

Pollutant-includes electrical, magnetic, electro-magnetic particles or fields and sound.

Property damage – includes loss of use of tangible property even if property itself is not damaged

Residence premises – one family, or two, three or four family unit when insured lives in one unit & shown on dec

Described location – AAIS one to four family house where insured lives & shown on dec. If town/row house, only related private structures used solely by insured are covered.

Terms

Vermin

Coverage A

Includes built-in component and fixtures

Does not cover land, including land dwelling is on

Does not cover land except as provided under incidental property coverage for fuel remediation

Water or steam is property not covered

Does not cover underground or surface water trees, plants, shrubs other than in incidental prop coverage Grave markers/mausoleums except as provided under incidental

Coverage B

Does not cover land, including land dwelling is on

Does not cover land except as provided under incidental property coverage for fuel remediation

Business property covered if solely owned by insured or tenant and business property doesn’t include gas/liquid fuel unless in permanently installed fuel tank of a vehicle parked in structure. The structure itself is covered if used to store business property.

Business property covered if solely owned by insured or tenant and business property doesn’t include gas/liquid fuel of more than 5 gallons unless in permanently installed fuel tank of a vehicle parked in structure. Is not a motorized vehicle – is only vehicle to service premises. The structure itself is covered if used to store business property.

Coverage C

$200 on money, bank notes, gold, silver, platinum etc.

$250 on money, bank notes, gold, silver, platinum

$1500 theft loss of jewelry, watches, furs

$2500 theft on jewelry, watches, furs

Specifically states does not insure insects

Excludes coverage for business data except cost of blank recording/storage media, prepackaged computer programs.

Includes coverage for cost to research, replace or restore business data subject to special limits for business property.

Grave markers, land and trees/plants not covered except for what is covered under incidental property coverage.

water or steam is property not covered

underground water or surface water not covered

Coverage D

Covers necessary increase in living expenses, doesn’t mention reasonable

Specifies necessary and reasonable increase in living expenses

Incidental Property Coverages

Incidental property coverages are additional insurance unless otherwise specified, and are subject to the terms applicable to coverages A, B, and C.

Association deductible

Covers association deductibles passed on to insured from homeowners, condominium or association master policy. Limited to $1,500 per occurrence coverage does not apply to loss resulting from earthquake, shock waves or tremors before, during or after a volcanic eruption.

Collapse

Includes rodents along with insects and vermin as cause of collapse

Damage hidden from view is covered

Damage that no insured could be expected to suspect the presence of before the collapse covered

states that awnings, bulkheads, cesspools, docks, swimming pools etc. are not buildings or parts of buildings, even if attached to a building.

What does and doesn’t constitute collapse doesn’t limit coverage for direct loss from a covered peril. Example – loss by weight of ice/snow is not limited by what does/doesn’t constitute a collapse.

The bacteria, wet/dry rot, fungi, ego and defects exclusions do not apply to the collapse coverage.

Credit card, EFT, forgery & counterfeit money

up to $500

up to $1500

Provides defense for suits seeking payment when checks, or negotiable instruments are forged/altered.

May provide defense for suits seeking payment when checks, negotiable instruments, or drafts have been forged/altered.

Defense will not be provided for excluded causes of loss-dishonesty of insured, results from business of insured.

Debris removal

Debris removal does not include cost to test for, monitor, clean up, remove, respond to or assess the effects of pollutants.

Weight of ice, snow, sleet is included as cause of trees falling.

Emergency removal

Refers to direct loss

Refers to direct physical loss

Coverage does not extend beyond the expiration date of the policy.

No coverage for intentional acts of insured who intended to cause loss, even if insured was not involved in act causing the loss.

Grave markers/ mausoleums

Limit of $5,000; does not increase limits applying to damaged property.

Limit of $2,500; is additional insurance.

Ordinance/law

Coverage for debris removal does not increase limit that applies to this coverage

Pollutants defined here

Pollutants defined in definitions section

Liquid fuel remediation

Not covered in the ISO policy

Covers up to $10,000 for loss caused by discharge, escape, leakage, seepage, etc. of liquid fuel from the fuel system of a heating, air conditioning, water heater, or domestic appliance on the described location. Applies to A, B, and C for land but not farm land. Land must be owned by insured, within described location, and on which the residence or related structure sits.

If caused by a coverage C named peril, damage to property by pollutants is covered, although land remediation is not covered.

Trees, plants, lawns included in this coverage.

Expense to stop further discharge/escape of fuel from system, prevent spread of fuel, clean up fuel from property, contents, land, trees, lawns, and debris removal is included in the $10,000 limit.

Cost to remove/replace parts to gain access to system is included, as are additional living costs if premises are unfit to live in due to fuel escape. Cost to monitor, assess, test effects of escaped fuel also covered.

Cost of monitoring covered only if required by statue/regulation or governmental authority or court of law. Cost of monitoring must be due to loss where payment has been made for the following costs: costs incurred to temporarily stop further discharge/spillage; to prevent spread of spillage, or clean up or remove fuel from covered property/land.

Policy period condition, pollutants exclusion don’t apply to this coverage.

Excludes underground/surface water, trees plants grown for business, replacement of discharged fuel, loss of value of property, cost to repair system from which fuel escaped unless is to prevent further leakage.

The most paid for trees is 5% of coverage A but not more than $500 for any one tree, shrub, plant or lawn. Does not increase the fuel remediation limit.

ALE pays shortest time to make location fit for use or to relocate family permanently. Does not increase limit for fuel remediation.

Loss Assessment

Excludes coverage for assessment that results from deductible; this is covered in another incidental coverage.

Pays up to $1000 per occurrence

Pays up to $1500 per occurrence

Refrigerated Property

Available by endorsement only

Provides coverage for any covered property in a freezer or refrigerated unit, not just food. Coverage is for complete or partial disruption of electrical power due to conditions beyond an insured’s control or mechanical breakdown.

Pays $500 per occurrence.

The power failure and bacteria, fungi, wet/dry rot exclusions don’t apply to this coverage.

Trees, plants, shrubs, lawns

Specifies that cost to remove debris of the covered item is covered as well.

Section 1 – perils insured against

Exclusions that apply to A&B

Theft

Building must be finished and occupied in order for theft coverage to be available

Building must be occupied for its intended use for theft coverage to be available

Vandalism/Malicious Mischief

Vandalism AND malicious mischief are excluded if premises is vacant 60 days before the loss

Vandalism OR malicious mischief are excluded if the premises is vacant for 60 days before the loss

Water, humidity, moisture, vapor

Unless no insured could have reasonably suspected such leakage, loss caused by continuous or repeated leakage of water, presence or condensation of humidity, moisture, or vapor over weeks, months or years is excluded.

Provisions in the Water damage exclusion for loss by flood, surface water, etc. and water below the ground don’t apply with respect to loss by water covered in this peril.

Excludes loss by mold, fungus or wet rot unless is hidden from insured and results from discharge/overflow of water/steam from plumbing, heating, air conditioning, sprinkler system or appliance on the premises. Also allows coverage if overflow/discharge is from drain, water, steam or sewer pipes off the residence premises.

Excludes bacteria, fungi, wet rot or dry rot that is not directly resultant from a peril insured against. Included in the bacteria, fungi, wet/dry rot from a peril insured against is the exception to the exclusion when the insured could not have reasonably suspected such leakage.

Collapse

Specifically excludes loss involving impairment of structural integrity; the exception is for what is included under the incidental collapse coverage. Impairment to integrity includes sagging, bowing, bending, etc.

Birds, vermin, rodents, insects

Excludes loss by birds, vermin, rodents etc. except as provided under the incidental property coverages. Vermin applies in accordance with the definition in the declarations.

Wear and tear

Refers also to any fault or weakness in property that causes it to damage/destroy itself, not just wear and tear.

Excludes loss caused by the pressure from or presence of roots of trees, plants, etc.

Coverage C perils

Theft

Excludes theft of property in a dwelling under construction until it is finished and occupied.

Excludes theft of property in a dwelling under construction until it is occupied for its intended use.

Specifically excludes coverage for loss of precious/semiprecious stone from its setting

Accidental discharge or overflow of water or steam

Loss caused by mold, fungus, wet rot is excluded unless hidden within walls or ceilings.

Excludes loss caused by continuous/repeated seepage/discharge etc. of water, presence/condensation of humidity/vapor/moisture over weeks, months, or years unless discharge could be reasonably suspected by insured.

Sinkhole collapse

Excluded under Earth Movement exclusion.

Coverage is provided by the AAIS form.

Exclusions to property coverages

War

Includes warlike action in hindering or defending against an actual attack and warlike action by any authority using military personnel or other agents as war and excluded. Also excludes is loss caused by usurped power, action taken by government in hindering/defending against insurrection, rebellion, revolution or usurped power. The war exclusion supersedes the Nuclear Hazard exclusion.

Earth Movement

Does not apply to sinkhole collapse.

Water Damage

Refers to water-borne material. Does not make any reference to “any other type of system designed to remove subsurface water”.

Excludes water or matter that backs up through sewers or drains, or overflows from sump, sump pump, related equipment or any other type of system designed to remove subsurface water.

Power Failure

Does not provide coverage for loss of power or utility service if the cause is not on a described location, whether or not caused by a covered peril.

Intentional Loss

Indicates that any loss arising out of any act an insured commits or conspires to commit is excluded.

Exclusion for intentional loss applies whether insured acted alone or in collusion or others, or the act was committed at the direction of the insured.

Bacteria, Fungi, Wet Rot/Dry Rot

Applies exclusion for mold, fungus and wet rot only to property covered under A & B.

Applies exclusion for these losses and dry rot to all property coverages.

Exception exists for loss that is hidden if the loss results from accidental discharge/overflow of water or steam from specified sources.

Exception exists for bacteria, fungi, wet/dry rot that is the direct result of a covered peril or the loss is caused by a covered peril that results from bacteria, etc.

Errors & Omissions/defects

Provides an exception for collapse for coverage provided under the Incidental Property Coverage for Collapse.

LIABILITY COVERAGES

Personal liability covered under Coverage section E.

Personal liability covered under Coverage section L.

Prejudgment interest is limited to the amount of liability that applies to the damages.

Prejudgment interest is provided under the incidental Liability for Claims and Defense costs, thus making this coverage additional to the limit of liability.

Medical payments

Appear in Coverage F.

Appear in Coverage M.

Bodily injury/damage related to business

Coverage appears as a exception to the Section II exclusion for business, E.2.b.

Coverage for injury/damage arising out of business activities is provided as an incidental coverage.

Makes a deliberate point to highlight that except the exclusion that applies to business activities, the incidental coverage for business is subject to all the liability exclusions.

Prejudgment interest

Prejudgment interest is subject to the same amount of liability that applies to damages.

Applies in addition to the limit of liability of the policy.

Injury/damage arising out of certain contracts

Coverage provided by an to Section II exclusion F.1.b.

Coverage is provided as an incidental coverage.

Damage must have occurred during the policy period and this is subject to all liability exclusions except for what the exclusion that applies to a contract or agreement covers.

Damage to property of others arising out of certain contracts is provided as an incidental coverage.

Damage to Property of Others

Exclusions that apply to Coverages L&M do not apply to this incidental coverage.

Excludes losses arising out of loaning, entrusting, supervising, and leasing of aircraft, watercraft, hovercraft, and motorized vehicles.

The exclusion does not apply to damage arising from a motorcycle if the bike is: Designed for use by the handicapped or used to only service premises of another, not in the course of business.

Loss Assessment

Specifies that reimbursement of expenses is not considered compensation.

Limit is $1000 per occurrence.

Limit is $1500 per occurrence.

Motorized vehicles

Limited coverage for motorized vehicles is provided as an exception to an exclusion, A.2.

Coverage for injury/damage arising out of the use of certain motorized vehicles is provided as an incidental coverage.

Coverage is provided only if at the time of the loss the vehicle is being used to assist a handicapped person or is parked on an insured location.

Coverage also extends to injury/damage that arises from the use of a motorized vehicle when it is used to service the property of another, as long as the vehicle is designed for off road use only.

Liability coverage is also provided for vehicles that are operated from an electrical current supplied by a battery and are not built or modified to exceed 15 miles per hour. Kiddie cars, for example.

Watercraft

Coverage provided as an exception to an exclusion, B.2.

Coverage provided as an incidental coverage.

Coverage for newly acquired outboard motors applies only for the policy period.

Exclusions that apply to liability coverage

War

Includes warlike action in hindering or defending against an actual/expected attack and warlike action by any authority using military personnel or other agents as war are excluded. Also excluded is loss caused by usurped power, action taken by government in hindering/defending against insurrection, rebellion, revolution or usurped power.

Aircraft/hovercraft/watercraft

Exclusionary language for all types of craft are combined into one definition in the definitions section.

One exclusion exists for the ownership, use, etc. of air or hovercraft, and one exclusion for water/motorized vehicles. The exclusion includes injury/damage arising out of the leasing or loaning of air/hovercraft.

Vicarious liability

Exclusion does not apply to the extent that coverage is granted un the Incidental Liability for Motorized Vehicles and Watercraft.

Business

The exclusion applies regardless of where the business activities take place.

Exceptions to the business exclusion exist for use of golf carts as long as they are covered under incidental liability coverage and to the extent that business coverage exists under incidental liability.

Expected or Intended injury

Exclusion also applies to injury/damage directed by an insured, is the result of a criminal or intentional and malicious act by or at the direction of the insured.

Exception that applies to use of force to protect people and property includes damage to property as well as bodily injury.

Molestation, abuse, corporal punishment, etc.

Puts all such exclusions together.

Breaks out each exclusion and discusses each individually.

Additional exclusions that apply to coverage L

Excludes sickness, disease or death of a domestic employee unless the insurer receives a notice within 36 months of the end of the policy period.

What Must be Done in Case of Loss

Specifies that the company may request written notice of loss from the insured.

Specifies that ALL insureds/representatives seeking coverage must cooperate with the carrier in the claims investigation.

Requires the insured to allow the company to take samples of the damaged property.

All insureds must submit to an examination under oath if so required.

A duty to assist the company in enforcing the right of recovery against a party causing a loss is imposed upon the insured.

How Much we Pay for Loss

States that settlement is subject to the Loss Settlement Terms.

Deductible

States that unless stated, the deductible applies to all perils insured against.

Loss to parts

If a loss occurs to a part of an item that is made up of several parts, the company pays only the value of the part itself, or the cost to repair/replace the damaged part.

Actual Cash Value Terms

Lists the types of property that are subject to the actual cash value terms.

Indicates that the actual cash value terms apply to all property that is not subject to replacement cost terms.

In stating that the policy pays the lesser of acv or cost to repair or replace, the form specifies that the cost is to specifically repair or replace the damaged part of the property.

Personal Liability

States that the personal liability limit applies regardless of the number of policy periods involved.

Applies only one limit that applies per person.

Applies two limits for Coverage M – one per person, one per accident.

Severability

States that if loss is payable by more than one coverage in the policy, the most that is paid is the actual amount of the loss.

Insured Under More Than One Policy

Has separate provisions for insurance in the name of an association/corporation and other forms of insurance.

Addresses other insurance that applies to a cost or expense, not just to the loss.

Specifies that the provision for other insurance does not apply to loss, cost or expense that is covered by a government fund, home, service, maintenance warranty/plan/agreement, or any other warranty/plan/agreement.

This insurance is excess over any insurance provided in the name of an association or corporation of property owners. The excess provision does not apply regarding the Incidental Property Coverage for Association Deductible.

When other insurance is also excess, the loss will be prorated.

If loss is also covered by a government fund the loss is pro rated.

If the company pays for the loss in money the company can take all or part of the damaged property.

If the dwelling is unfit for habitation for more than one month, the additional living costs will be paid on a monthly basis.

Anyone securing a judgment against an insured for a covered loss, or has a written agreement establishing liability between the claimant, insured, and company, is entitled to recover under the liability part of the policy.

Loss to personal property of others may be paid to the insured or to the property owner.

Conditions

Payment of unearned premium is not a condition of cancellation.

If policy terms conflict with state laws, the terms are changed to conform to state laws.

Coverage for a legal representative is provided only as is specified within the policy.

The company has the right to inspect the property with no implication of warranty of safety or compliance with laws, ordinances, etc.

Misrepresentation/fraud

Specifies that there is no coverage for an insured who willfully conceals or misrepresents facts, engages in fraudulent conduct or makes false statements.

Specifies that there is no coverage for ANY insured, not just the named insured, who willfully conceals or misrepresents facts, engages in fraudulent conduct or makes false statements.

The above provision applies even if the insured was not involved in the misrepresentation or fraudulent behavior.

Subrogation

If the insured impairs the company’s right of recovery, the company does not have to pay for the loss.

Appraisal

Specifies that the appraisal process is not to be used for policy interpretation, causation of the loss, or coverage. Appraisal is to be used for disputes regarding values or amounts of losses.

Mortgage

Specifies that a mortgagee includes a trustee.

Only the appraisal, suit against us, and loss payment provisions under property conditions apply to the mortgagee.

Unless changed by a clause, all terms of policy apply to mortgagee.

Recovery

If loss was paid below the agreed amount due to a deductible or similar term, the amount of any recovery will be prorated between the carrier and the insured.

Suit

If a state law makes the two years in the policy to file a suit invalid, the suit must be brought within the time allowed by the law.

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