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Can They Be Filled?

Summary: For most personal lines insureds, standard homeowners and auto policies provide sufficient coverage. There are situations, however, that qualify for special attention—coverage gaps that should be filled to maximize protection for the insured. Recognize, though, that not all gaps can be neatly filled. There are some situations that are simply uninsurable.

In the following discussion, we examine personal lines coverage gaps and what, if anything, can be done to bridge those gaps. Unless otherwise noted, the forms alluded to in this discussion include ISO’s homeowners HO 00 03 04 91 and HO 00 03 10 00 ] and personal auto policy (PAP) PP 00 01 06 98.

Topics covered:Introduction—property coverage gapsWater damageMold and wet rotEarthquakeResidence held in trust; nonrelated residents Identity theftIntroduction—liability coverage gapsBodily injury to an insuredVolunteer activitiesRenting a motor vehicleBusiness pursuits

Introduction—Property Coverage Gaps

For most insureds, standard homeowners policies will provide coverage for most of their needs. However, there are coverage gaps that insureds—as well as other insurance professionals—must address in order to protect themselves. Some coverage gaps can be closed, but, unfortunately, others cannot. At the very least, being aware of exposures for which there is no coverage may encourage prudence. In the following discussion, we examine common property coverage gaps, suggesting coverage that may be added when available, and urging caution when it is not.

Water Damage

Claims for water damage to property appear to be on the increase, although this may be a result of increased attention to a frequent result of water damage—mold—which is discussed later. Water damage can originate from many sources, some covered and some not.

Commonly, water that escapes from a plumbing, heating, air conditioning, or automatic fire sprinkler system or a household appliance and damages covered property has been held to be covered. The form also states that the insurer will cover the cost of tearing out and replacing any part of a building necessary to access the system or appliance from which the water escaped. Loss to the system or appliance itself is not covered. In the ISO homeowners form there is no further restriction of coverage.

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