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Tailoring to Meet Coverage Needs
Summary: The coverages of the American Association of Insurance Services (AAIS) standard homeowners forms (Forms 1, 2, 3, 4, 5, 6, and 8) are designed to provide the kinds of insurance protection that most homeowners will need. Circumstances in which coverage needs diverge can be obtained through endorsements to the policy. The most commonly required modifications of homeowners coverage are described. Endorsements that are limited to one or two states have not been included. Many endorsements were revised in 2011 or 2014, 2015. Endorsements that were added in 2007 are at the end of the article. Recent revisions are referenced in the specific endorsements that changed.
Notable in the AAIS program are the endorsements that may be used for incidental farming operations. Many of these are included in the following discussion. Comments relating to individual endorsements below are based on form designations and language of the current AAIS homeowners program. As with any endorsements, their use is governed by the individual insurer. This article summarizes the endorsements; please see the forms for actual policy language and details.
Alphabetical Guide to Endorsements
Accidental Discharge or Overflow Coverage (Liquid-Filled Furniture) HO 2721
This endorsement covers direct physical loss to covered property caused by accidental discharge or overflow from liquid-filled furniture, as from a waterbed. The prior endorsement specified water filled furniture, which is narrower coverage. The freezing exclusion on this endorsement has also been changed; freezing is now excluded regardless of the occupancy of the dwelling unless heat is maintained or the liquid is drained from the furniture. Since water-filled furniture falls outside the definition of a plumbing device, this endorsement covers damage not addressed by the peril of accidental discharge from within a plumbing device. Presumably, the endorsement could cover, as well, a situation where a large fish tank bursts, damaging carpeting and other furniture.
Actual Cash Value HO 4815
This endorsement, used at company discretion, deletes the replacement cost terms and replaces them with an actual cash value settlement.
Additional Insured HO 6041
A person or an organization may be added as an additional insured on the policy. The additional insured is protected as his interest may appear with respect to coverages A, B, L, and M; however, liability and medical payments apply only with respect to the described premises. The endorsement does not cover bodily injury to any employee of the additional insured person or organization arising out of the course of employment. The revised endorsement specifies that bodily injury for any person leased to the person or organization by a labor leasing firm is not covered.
Additional Insured—Landlord HO 6016
It is not uncommon for an apartment owner to require being named as additional insured for liability coverage on a tenant’s insurance policy. This endorsement provides the means to do so. Liability and medical payments apply only to premises liability; bodily injury to an employee of the landlord arising out of the course of employment is excluded, as is bodily injury or property damage arising out of new construction, alterations, or demolition performed for the landlord. The revised endorsement specifies that bodily injury for any person leased to the person or organization by a labor leasing firm is not covered.
In 2015 editorial revisions were made to this endorsement for clarification and to provide coverage equal to that for landlords under commercial liability additional insured endorsements. It was also clarified that the terms of the policy apply other than amendments by this endorsement.
Additional Limits Coverages A, B, C, and D HO 4843
This endorsement provides increased limits in event of a loss that exceeds the policy limits as long as certain conditions have been met. Those conditions are that the insured has notified the carrier of any alterations or remodeling to the property that resulted in an increase in value of five percent or more and the carrier was able to adjust the limit and premiums. When this has been followed, in the event of a loss coverage A will be increased to equal the replacement cost of the dwelling and coverages B, C, and D will be increased by the same percentage that A was increased.
Additional Residence Rented to Others (Liability Coverage Only) HO 6270
When an insured owns rental property, the rented residential premises can be scheduled on this endorsement. These premises then become “insured premises” for both liability and medical payments to others coverage. The revised form clearly states that bodily injury or property damage that arises out of the rental or holding for rental for residential purposes for the described location in the schedule is covered.
Automatic Adjustment of Limits HO 2584
This endorsement allows the coverage A, B, C, and D limits to be increased by a selected percentage annually. In event of a covered loss in the middle of a policy term, the limits are adjusted on a pro-rata basis.
Business Activities HO 3571
Liability coverage for activities arising out of certain businesses not owned by an insured may be provided through this endorsement. Although it is commonly used for teachers, it may be used for salespersons, collectors, messengers, or clerical office workers. Coverage for corporal punishment may be included. Many activities teachers often engage in, such as driving students to, say, a track meet, are excluded. The new form has been revised for clarification with no change in coverage.
Care Provided for Others HO 3557
As in the prior form, this form has been revised for clarification. The form stipulates that coverage A applies in the event this is attached to an HO 0006 and that coverage B applies when the policy is other than an HO 0006. This endorsement may be used to cover both the liability arising from care for others on the insured premises and if a related private structure is used for this purpose, the structure itself. The following are excluded under liability coverage: maintenance, use, loading, unloading, or entrustment by the insured to others of draft or saddle animals, or vehicles used with them, aircraft, all motorized land conveyances, or watercraft, whether owned, operated, or hired by or for the insured or employee, or used by the insured for instruction in their use. A new exclusion in the 06 form is for the negligent supervision of any person with respect to such property. Excluded also is injury to any employee of an insured (other than a residence employee), arising out of the operation.
The endorsement also imposes a policy year aggregate limit for liability and medical payments combined. The limit corresponds to the coverage E limit shown in the declarations. Limits described on the endorsement apply even if contrary to those contained in the policy or declarations. The severability of insurance clause specifies that coverage applies separately to insureds except with respect to the aggregate limit, so the aggregate limit remains unaffected by the number of insureds. Further, with respect to coverage provided by this endorsement, the restoration of limits provision does not apply.
The exclusion of property coverage for a related private structure used for business purposes is deleted. The coverage C limit on property used in business is amended so that it does not apply to property used in the described business.
Check the insurer’s underwriting guidelines regarding maximum number of persons being cared for that the endorsement is intended to cover.
Collision or Upset ML 26
A common cause of loss for a mobile home is upset, or collision with another object. This endorsement provides coverage for these perils while the mobile home is on the insured premises, and away if endorsement ML 25, consent to move mobile home, is attached. This form has not been replaced or updated.
Computer Coverage ML 170
Since the named peril of sudden and accidental damage from artificially generated electrical current excludes damage to tubes, transistors, and similar electronic components, much of what can be damaged in a computer in event of a power surge is not covered. This endorsement provides coverage on an open perils basis for scheduled hardware and software. A separate deductible may be selected.
Among the exclusions are those for loss resulting from war, acts of civil authority, wear and tear, mechanical malfunction, loss of use, or changes or extremes of temperature. Loss to software caused by a power supply disturbance occurring more than 100 feet from the insured premises is excluded. This form was updated in 2015; a definition of “computer equipment” was added, and the policy was changed to open perils coverage. The exclusions are for freezing, theft to a residence under construction, repeated leakage or discharge unless insured could not know of leak, dampness or atmosphere or extreme temperatures, wear and tear, marring, breakdown, pollutants, animals. There are exceptions for ensuing losses and other conditions.
Changes to this endorsement in 2015 include addition of a definition of “computer equipment” that includes hardware and software, changes to exclusions to be similar to those for buildings on an open perils basis, some exceptions for loss caused directly by rain, snow, sleet or hail, exclusion for damage due to repair, refinishing or reprocessing, exceptions for ensuing losses, and other changes.
Consent to Move Mobile Home ML 25
This endorsement is attached when the mobile home is away from the insured premises, perhaps being moved to a new location. The endorsement does not apply to loss caused by collision or upset. (See above.) This form has not been replaced or updated.
Coverage C (Higher Limits on Certain Property) HO 2565
The coverage previously provided on form ML 65 has been broken into two separate endorsements. Coverage C, personal property, imposes special sublimits with respect to certain categories of property. This endorsement may be added to increase these limits for some of these categories—money, precious metals, coins, medals, scrip and smart cards; securities, accounts, deeds, evidences of debt, letters of credit, and other valuable papers; jewelry, watches, precious and semi-precious stones, and furs; silverware, goldware, and pewterware; firearms; and electronic devices and accessories that can be operated from the electrical system of a “motorized vehicle”. New to this form is electronic devices used primarily in business. These devices must be used primarily in business and not be in or on a motorized vehicle, if the device can be operated by both the electrical system of the motorized vehicle and another power source. This is the only property primarily used in business property covered by this form; all other personal property used in business with higher limits is covered on the HO 3565, discussed later.
The special limits are increased for the categories of jewelry; silver and goldware; and guns with respect to theft, since the special limit for such items applies only to theft losses. The coverage for guns now includes items related to guns.
Attachment of this endorsement does not increase the coverage C limit of liability.
Coverage C (Higher Limits on Personal Property Used for Business) HO 3565
The coverage provided on this form had been included on the ML 65 form which also covered higher limits on certain property, mostly personal property. The business property increased coverage has been separated out onto a new form. This form only covers personal property that is used primarily for business purposes. For example, an insured has a personal laptop computer that is used mainly for the insured’s real estate business. When property is away from the described location, an extra twenty percent of the amount shown on the schedule is available. Specifically excluded from this coverage is business property in storage or that is held as a sample, for sale or delivery after sale, or pertains to a business conducted on the described location. If the insured was running the real estate company from the described premises, there would be no coverage. Since the insured works for a real estate firm outside the home, the laptop would be covered.
Attachment of this endorsement does not increase the coverage C limit of liability.
Coverage C Personal Property (Special Coverage) HO 2730
This form has been retitled from Tenants Personal Property (Special Coverage) and has been revised. Use of this endorsement changes the named peril coverage of the contents broad form 4 to open perils coverage. Additionally, the coverage C limit for theft of certain classes of property (i.e., jewelry, for example) is changed to “loss by theft, misplacing, or losing.”
Certain exclusions apply, among them accidental discharge of plumbing if the “insured premises” are vacant; theft in or to a dwelling under construction until it is occupied; damage done by an animal owned or kept by an insured; and pollution. Ensuing losses, unless excluded, are covered, however. Breakage of fragile articles (except for jewelry, watches, bronzes, cameras, and photographic lenses) is excluded unless the breakage is a result of fire, theft, hail, explosion, riot, vehicles, etc.
Under the exclusions that apply to coverage C, the exception to the exclusion for freezing, discharge, leakage or overflow has been expanded and clarified; requirements are included for buildings with or without automatic sprinkling systems. The settling, cracking, shrinking, bulging or expanding exclusion now includes a more extensive list of items not covered. A new exclusion is wear and tear, including marring, deterioration, latent defect, inherent vice, etc. An exception to the refinishing, renovating exclusion is that if the process results in a fire the loss caused by the fire is covered. Another new exclusion is for acts or decisions of any person, group, organization, governmental body or authority or the failure of any of those listed.
A new section of exceptions is included; ensuing losses are covered from the following excluded losses: freezing, theft, water, settling, birds, smoke, pollutants, wear and tear, acts or decisions, unless the ensuing loss itself is excluded. Another exception is that loss to property covered under coverage C that is damaged from water or steam that overflows from a storm drain, water, steam or sewer pipe away from the described location or a plumbing, heating, air conditioning, sprinkler or appliance on the described is covered. The system causing the loss is not covered.
Exclusions that apply to property coverages have been redefined; earthquake is no longer removed, it is defined in this section. The 01 15 form revises the language regarding sinkhole collapse to correspond with changes to the earth movement exclusion by mandatory endorsement. An extra exclusion is added to water damage that damage to property covered under coverage C while on a premises owned, rented to, occupied by or controlled by an insured is excluded even if weather conditions initiate, set in motion, or in any way contribute to the loss. The 01 15 form clarifies what exactly is surface water.
Crop Dusting and Spraying Operations ML 426
Liability resulting from crop dusting, seeding, or spraying operations carried out for the named insured by a licensed independent contractor are covered by this endorsement. Coverage is on a “per occurrence” basis. Since the farm liability coverage form HO 7500 (see below) excludes coverage for bodily injury or property damage arising from the release of substances from an aircraft, the coverage provided by this endorsement is the only coverage available for this type of operation. This form has not been changed or revised.
Custom Farm Work HO 7515
When farming is carried out for another on a contract basis, it is called custom farming. Farm liability coverage form HO 7500 (see below) provides coverage for bodily injury or property damage arising from custom farming only if the receipts for the prior twelve months do not exceed $5,000. Further, bodily injury or property damage from the use of herbicides or pesticides is excluded. Endorsement HO 7515 provides coverage when receipts exceed $5,000. The option of covering bodily injury or property damage from use of herbicides or pesticides has been removed from this form.
Debris Removal ML 420
The homeowners forms provide up to 25 percent of the limit applying to damaged property for debris removal, with an additional 5 percent available if the covered loss plus the cost of debris removal is more than the applicable limit. This endorsement removes the 25 percent cap. The extra 5 percent is still available if the loss plus the debris removal cost exceeds the limit applying to the loss. The endorsement is unnecessary with form 5, the special building and contents form, since debris removal up to the limit of liability, with an additional 5 percent is provided. This form has not be revised or updated.
Earthquake Coverage HO 2754
There is no coverage for loss resulting from “earth movement” under the homeowners forms; this applies to form HO 0005 as well. The previous form 5 did provide coverage for earthquake which it no longer does. An insured may add earthquake as an insured peril for coverages A (dwelling), B (other structures), and C (contents) by adding this endorsement. Insureds with open perils coverage on contents need to add earthquake coverage only for coverages A and B.
The endorsement now states that a single occurrence is one or more earthquake shocks within a seventy-two-hour period, and this applies to property coverages only. The prior form used 168-hours and applied it to all coverages.
The 01 15 edition has removed the exclusion for landslide, etc. since the exclusion already appears in the form’s earth movement exclusion. The exclusion is revised to indicate that there is no coverage for loss caused by waves, including but not limited to tidal waves and tsunamis.
Under payment of claim, there is no separate deductible percentage for premises located in Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, Oregon, Utah, or Washington. The deductible no longer applies to loss under coverage D or the incidental property coverages. The deductible is calculated by multiplying the coverage A limit or the coverage C limit by the deductible percentage shown in the schedule.
Masonry veneer coverage is optional; if excluded, the deductible applies to the applicable limit minus the value of this veneer. Stucco is not included within the meaning of masonry veneer.
The deductible for the endorsement does not apply to coverage D or certain incidental property coverages. The deductible does not apply separately to losses under A, B and C but the total of all earthquake loss under A, B, and C.
Earthquake Loss Assessment HO 2753
If an insured is assessed by his or her residential association (condo, homeowners, or mobile-homeowners) for damages caused by loss due to earthquake or land shock waves caused by volcanic eruption, this endorsement provides coverage. The base deductible of 5 percent of the applicable limit has been removed from the revised form, but in no event will the deductible be less than $250.
The assessment must be made during the policy period. The loss must be to property owned collectively by all association members, and must be charged against the insured as owner or tenant of the premises scheduled in the endorsement.
An assessment resulting from loss caused by flood, whether caused by or aggravated by earthquake, is not covered. Loss that results from the association’s deductible is not covered, nor is the cost of filling land. An assessment resulting from mudflow, landslide, subsidence, or earth rising, sinking, or contracting is not covered unless this type of earth movement is caused by an earthquake.
The policy conditions now specify that one or more earthquake shocks that occur within seventy-two hours will be considered a single occurrence.
Employer’s Liability (Farm Employees) HO 7520
When endorsement HO 7500 farm liability coverage (see below) is attached to the policy, endorsement HO 7520 may be added to provide liability (bodily injury) and medical payments coverage for farm employees while performing duties in connection with the insured’s farming operations.
While the prior form provided Coverage L and M for the ownership, use, loading or unloading of aircraft, motorized vehicles or watercraft unless the employee was engaged in operation or maintenance of the craft, the revised form only excludes such coverage from aircraft.
Also excluded are bodily injury to a farm employee if there is a workers compensation policy, or such benefits are required to be provided by law. Coverage is excluded for anyone employed illegally with the knowledge or approval of the insured, and for any employment practices related claims, such as harassment.
This endorsement now specifies that coverage L does not apply to bodily injury to a spouse, child, parent, or sibling of a farm employee that is a consequence of bodily injury to a farm employee. Also excluded is liability assumed under a contract or an agreement entered into by an insured.
Notice must be sent to the insurer within 36 months after the end of the policy period in which an injury, sickness, or death occurred for liability coverage to apply.
Extended Theft Coverage (Described Location Occasionally Rented to Others) HO 2736
This endorsement has been renamed; previously it was Residence Rented to Others. If the insured occasionally rents the portion of the insured premises normally occupied by him to others, this endorsement deletes the exclusion of coverage for theft of personal property owned by the insured while the premises is rented. The endorsement could be used, for example, when an insured owns a vacation home that is sometimes rented to others. The endorsement may not be used with the broad form contents form 4, special building and personal property form 5, limited form 8, or unit owners form 6 with the unit owners personal property special coverage endorsement HO 7029 attached.
The endorsement is not intended for use when a condominium is regularly rented to others. See below for this coverage.
Farm Chemicals Limited Liability Coverage HO 7525
When endorsement HO 7500 farm liability coverage (see below) is attached, this endorsement may be used to provide liability resulting from the release of farm chemicals on the farm premises. Coverage is limited to physical injury to property of others. There is no coverage for physical injury to property owned, rented to, or borrowed by the insured.
The revised form has expanded both coverages and exclusions. The carrier will now defend a suit seeking damages if the suit resulted from injury to property covered under this form, and the defense will be at the expense of the carrier and by counsel that they select. The carrier also has the right to investigate and settle claims or suits that they decide are appropriate. They are not obligated to provide a settlement or defense if they have paid an amount equal to the limit that applies.
The endorsement excludes any liability coverage for any farming operations that violate any ordinance or law.
New exclusions include injury to property that is expected or intended by the insured and liability under a contract or agreement entered into by an insured. If an insured is liable under a written contract that directly relates to ownership, maintenance or use of an insured premises; or for which the insured is liable under a written contract in which tort liability was assumed, the exclusion does not apply.
Losses, costs or expenses that arise from any request, demand, or statutory or regulatory requirement, or claim or suit on behalf of any governmental authority, for the testing, monitoring, cleaning up, removal, detoxifying the effects of chemicals, liquids or gases is excluded. The exclusion does not apply to liability the insured would have had in the absence of such a request/claim/suit by or on behalf of a governmental authority. The prior exclusion did not include statutory or regulatory authorities.
Severability is also added to this new form; the coverages apply separately to each insured except with respect to the applicable limits. The Farm Chemicals Limited Liability Coverage Annual Aggregate Limit is therefore not increased, regardless of the number of insureds.
It is also stated that this endorsement is excess over other valid insurance.
Farm Liability Coverage HO 7500
When farming is not the insured’s principal business, this endorsement may be attached to provide liability coverage for activities arising out of incidental farming operations. The rates contemplate limited farming or grazing of small numbers of animals. Acceptability of any farming risk is determined by each individual insurer.
The updated form requires that the initial farm premises and any additional farm premises be identified on a schedule.
The endorsement amends the definition of “business” so that farming is not considered a “business;” also not considered a business is activity not listed for which the insured’s total compensation for a twelve-month period was more than $2,500.The definition of “domestic employee” is amended so that farm employees are not included within the definition; farm employees are defined separately, and are not “domestic employees” or “employees.” “Insured premises” is defined and includes, under the endorsement, the farm premises described on the schedule, other land used by the insured for farming purposes, new farm premises acquired by the insured during the policy period, and vacant land owned or rented to an insured, including land upon which a one to four family house, townhouse or row house is being built for an insured’s use. The previous endorsement covered vacant land on which a farm structure was being built, not a residence.
Coverages L and M are extended to apply to farming. The endorsement includes, as well, an incidental coverage for custom farming, but only if the receipts for this activity do not exceed $5,000 in the twelve months just before the date of an “occurrence.” The endorsement provides liability coverage for a farm roadside stand, but does not provide liability coverage for horse boarding or for “pick-your-own” operations. Coverage may be purchased for these activities through use of endorsement ML 423 (see later discussion).
Certain exclusions apply. Two exclusions—for bodily injury or property damage resulting from the discharge of substances from an aircraft, and bodily injury to a farm employee while in the course of employment, can be amended by endorsement (see above—crop dusting and spraying operations ML 426 and employer’s liability [farm employees] HO 7520).
Policy conditions have been added to this endorsement; the carrier has the ability to examine and audit the insured’s books and records related to this policy during the policy period and for the subsequent three years from the expiration of the policy. The second condition stipulates the requirements for premium payments at the end of each audit period.
Fruit or Vegetable Picking by Public HO 7530
This endorsement had originally covered both fruit/vegetable picking by the public and horse boarding operations; they have since been broken into separate endorsements. The horse boarding endorsement HO 7535 will be discussed below. When the insured’s farming operations include allowing the public onto the premises on a “pick-your-own” venture this endorsement may be attached. The activity to be insured is scheduled on the endorsement. There is no coverage for bodily injury resulting from the use of ladders or off-the-ground picking unless indicated in the schedule. The policy exclusion 1.g. injury or damage related to a business on premises does not apply to this endorsement.
Functional Replacement Cost Loss Settlement Terms HO 4857
This endorsement may be used at the option of the insurer, and was previously titled Repair Cost Terms. This form has been changed significantly. Functional replacement cost is defined as the cost to repair/replace a building with commonly used and less expensive construction materials that are functionally equivalent to obsolete, antique or custom materials or methods used in the original construction. This type of replacement cost was developed to handle older homes where replacing the horsehair plaster, solid panel doors, marble foyers, and such are difficult if not impossible due to the nature of the materials; this is often seen in homes over one hundred years old.
The endorsement states that losses are settled to functional replacement cost terms, and if those terms do not apply then actual cash value applies. Functional terms apply to buildings covered under coverage A or B with a permanent foundation and roof. Any increased costs from ordinances or laws are not covered in this form. Functional terms do not apply to window air conditioners, awnings/canopies, appliances, carpets, and antennas.
The form then details payment when the house is insured to eighty percent of its replacement cost and when is it not insured to eighty percent. The insured has the option to settle under actual cash value and later make a claim under functional replacement cost terms if they have informed the carrier within 180 days that they intend to do so.
Golf Cart Liability Coverage HO 3832
While the homeowners forms provide liability coverage for golf carts used for golfing purposes, they do not cover the liability that may result from, say, the insured’s use of the cart to get to the course, as often happens in communities built around a golf course. This endorsement fills that gap. There is no coverage for a cart used to carry persons for a charge or other business purposes, or while used in any racing or stunting activities. The revisions to this endorsement are for clarification and specify when liability coverage is afforded; crossing roads in a golfing establishment, traveling to or from where the carts are kept, or within a private residential community.
Incidental Farming HO 7540
When farming is not the principal business of the insured, this endorsement schedules either the insured’s farming operations on the insured premises, or on another designated location. Coverages L and M of the homeowners are extended to apply to the farming operations. Endorsement HO 7500, farm liability coverage, is then attached to further broaden the coverage. This form has minor wording changes for clarification from the prior form.
Incidental Property Coverages (Higher Limits) HO 2530
Under form 3 homeowners, the incidental property coverages provide $500 for a fire department service charge, $1,500 for credit card, forgery, and counterfeit money, and $500 for refrigerated food spoilage. Coverage form 4, the contents broad form, allows up to 10 percent of the coverage C limit to apply to tenant’s improvements in event of a covered loss. This endorsement allows for increased amounts of insurance for incidental coverages as specified in the schedule.
Incidental Coverage for Motorized Vehicles (Low Power Vehicles) HO 3828
This endorsement has been renamed; previously it was Coverage for Motorized Vehicles. Attachment of this endorsement to the homeowners forms allows for off-premises liability coverage—”bodily injury” and “property damage”—for certain “motorized vehicles,” such as an all-terrain vehicle. Coverage does not apply to motorized bicycles, mopeds, golf carts, or vehicles capable of speeds greater than 15 miles per hour. The definition of insured now excludes not only people or organizations using the vehicle without the insured’s permission, but also using the vehicle in the course of business without the insured’s consent.
Increased Cost – Ordinance or Law HO 2557
This form has been re-titled; previously it was Ordinance or Law. This endorsement allows the insured to increase the amount of the limit that applies for ordinance and law to an amount selected by the insured. The exclusions on the prior form regarding loss in value of the property or costs or expenses from ordinances or laws that require testing/clean up of pollutants have been removed.
Lead Liability Exclusion HO 1323
This mandatory endorsement deletes liability coverage for bodily injury arising out of ingestion, inhalation, or absorption of lead in any form. Deleted as well is coverage for any property damage resulting from any form of lead.
Livestock Collision HO 7545
Loss or destruction of any owned cattle, horse, mule, donkey, swine, sheep, goat or hybrid thereof, because of collision between the animal and a vehicle not owned or operated by an insured is covered. The hybrids are a new addition to this form. The form also elaborates that the animal must be standing in, crossing, or moving along a public road, or be injured in a collision or overturn of a vehicle. Collision is defined as the contact of the vehicle transporting the livestock with another vehicle or other object. If the truck carrying the livestock hits a tree, that is a collision. The exclusion for death of livestock caused by contact with the insureds own vehicle is the same. The remaining coverage is the same, except that a horse, mule, or head of cattle that is under one year of age is counted as half a head.
The loss or destruction must occur on a public road, and not result from the animal’s being transported. Loss is limited to the lesser of: the market value of the animal, $400 per animal, or the insured’s interest in the animal.
Loss Assessment Coverage HO 2550
The policy limit for loss assessment coverage, whether for a direct loss to property owned in common by all association members, or for a liability loss, is $1,500. This amount can be increased by way of this endorsement. Additional locations can be scheduled. In no case will more than $1,500 be paid if the assessment is the result of a deductible in the association policy. The wording in the new form has been revised for clarification; the coverage provided remains the same.
Modified Replacement Cost Terms HO 4856
At the insurer’s discretion, this endorsement allows coverage for partial losses on a replacement cost basis. If at least the selected percentage of the replacement cost is carried, then the insurer will pay the smaller of the cost to repair or replace the damage on the same premises using materials of like kind and quality to the extent practical, or the amount spent to repair or replace the damaged property. If the selected percentage of the replacement cost is not carried, then the insurer will pay the larger of the actual cash value at the time of the loss, or that part of the replacement cost of the damaged part which the limit on the building bears to the selected percentage of the full replacement cost. One change in the revised form is the inclusion of the requirement that when a damaged building is rebuilt at another location, the cost is limited to the cost that would have been incurred if the building was replaced at the original location.
Office, Professional, Private School, or Studio Occupancy HO 3542
The only change to this endorsement is the specification of coverage parts depending on which policy form is being used; Coverage A for HO 0006 or Coverage B for HO 0003. There are three coverages provided by this endorsement. The first is liability coverage for occurrences arising out of the incidental use of the insured premises for office, professional, private school or studio activities. The incidental liability coverage for business covers bodily injury or property damage arising out of the rental of part of the insured premises for use as a school, studio, office, or private garage; this endorsement adds that coverage also applies to business activities of an insured that relate to the use of the premises as described in the endorsement.
The second coverage provided is for direct physical loss or damage to a related private structure used as described in the endorsement. Coverage would otherwise be excluded, except for rental to a tenant or for a private garage. Finally, the endorsement deletes the limitation of coverage for personal property used in business.
Note, the coverage is intended to apply to business that is incidental to the use of the premises for residential purposes. The home business program may be used when the business is more than incidental.
Other Residents of Your Household HO 6033
This endorsement was previously titled Additional Insureds (residents of household) and the endorsement was been changed significantly in 2007. Who is covered under this endorsement is explicitly defined; they must be living with the insured as a member of the household but are not insureds by policy definition and are not a guest, employee, tenant or roomer. Those under the age of twenty-one must be in legal custody of the person in the schedule and not just in that person’s care. The named insured is required to act as representative for the scheduled individual, and the named insured is required to notify the company within thirty days of the date the scheduled person leaves the household and pay any premiums due. This endorsement is covering the gap for people staying at the residence who do not fit the policy definition of an insured; they’re living with the insured but not related; this catches “significant others.”
The limit stated for personal property of the scheduled person in the prior form has been deleted. The form specifies that property of the identified individual is covered while on the described location occupied by an insured.
Personal Injury HO 4001
This endorsement has been greatly expanded from the prior form. Included in the definition of personal injury is the invasion of the right of private occupancy of a room, dwelling, or premises; oral, written or electronic publication of material that disparages a person’s or organization’s goods, products or services, or material that violates a person’s right to privacy. Because of the clarifications made to the definition of personal injury, communicable disease and sexual molestation are no longer addressed.
The principal liability coverage are expanded to include defense in a suit seeking damages if the suit resulted from personal injury covered in this form. The carrier has the option to choose the defense. The carrier also has the ability to make investigations and settle claims or suits as they see fit.
A new section involving loss assessment has been added; the form pays for the insured’s share of an assessment levied by a homeowners, condominium, or similar association if the assessment is the result of personal injury that is not excluded. Assessments that are not covered are those against an insured or homeowners or similar association that is levied by a governmental body or agency. The most paid for all assessments during a policy period is $1,500. This limit applies regardless of the number of assessments or offenses committed.
There are many exclusions to this endorsement. Personal injury is excluded if the injury arises from acts of the insured where the insured: knew the act would violate the rights of others, publication of material that the insured knew was false, and published material that was published before the policy effective date. Criminal acts committed by or directed by the insured, liability arising out of a contract agreement unless it involves the use of the insured premises, injury sustained by a person resulting from employment by an insured, and arising out of business conducted from the insured premises or undertaken by the insured are also excluded. Exceptions to this last exclusion include the rental or holding for rental of an insured premises on occasional basis as a residence, in part for use as a residence, school, studio, office, or private garage, endorsed as additional residence rental to others, a farm premises endorsed on the farm liability coverage form, or business activities of an insured under the age of twenty-one which is party time, has no employees, and the personal injury arises from activities related to the business.
The remaining exclusions include activities arising out of civic/public duties for pay, claims made for which another may be liable, discharge, emission, disposal, seepage of pollutants, fungi, wet or dry rot, testing required by regulation or statute regarding monitoring, cleaning up, detoxification of pollutants, fungi, wet rot, dry rot or lead, suits regarding the same by governmental authority, exposure to lead, and electronic chat rooms, bulletin boards the insured hosts or has the ability to update. Information the insured may post on a chat room or website run by others is not excluded. A final exclusion is added to clarify that there is no coverage personal injury that arises out of electronic aggression.
Duties of an insured in case of an offense are listed – the insured must provide notice as soon as possible, payments made by an insured are at his expense, the insured must cooperate with any investigation or settlement, and give the carrier all notices, demands, suit papers. The coverage applies separately to each insured but this does not increase the limits.
Pollution Liability Exclusions ML 435
This mandatory endorsement is used when the underwriter wishes to limit the insurer’s liability exposure for potential losses relating to pollution. If the policy provides coverage for personal injury, then the definition of “personal injury” is amended so that any pollution-related action is not encompassed by the definition. (For example, claims for damages because of the migration of pollutants onto neighboring premises have sometimes been brought under invasion of privacy or wrongful entry.)
If the policy provides coverage for farming activities, the exclusion will not apply to deliberate fires set to burn off stubble, so long as no ordinance is violated. There is coverage if a hostile fire results in bodily injury or property damage. There have been no changes to this endorsement.
Protective Devices HO 6516
Premium credits apply when a fire or burglar alarm, automatic sprinkler system, or another protective device described on the declarations is installed on the insured premises. The insured is required to maintain the system in working order and notify the insurer when it is not working or has been removed. No changes have been made.
Punitive or Exemplary Damages Exclusion HO 1347
The 2014 revision of this form changes the title to include exemplary damages. This mandatory endorsement states that the policy will not apply to a claim for punitive or exemplary damages; however, if a claim or suit seeks both compensatory and punitive or exemplary damages for a covered occurrence or offense, then the insurer will provide defense coverage. Punitive damages are defined in the new form as damages imposed to punish a wrongdoer and to deter others from similar conduct.
Related Private Structures HO 3048
An additional amount of insurance for specific private structures located on the insured premises can be provided through this endorsement. The limit shown on the endorsement is an additional amount of insurance for that structure, although the limit for coverage B shown in the declarations is not increased.
Related Private Structures (Away from Premises) HO 6217
If the insured owns, say, a private garage or a pole barn located away from the insured premises and used in conjunction with the insured premises, this endorsement provides coverage. A new exclusion in this form is if the structure is used in whole or in part to store business property. The coverage B limit of liability does not apply to structures away from the insured premises. Through endorsement HO 3048, scheduled related private structures (away from premises), additional amounts of insurance on each structure may be scheduled. The loss settlement terms state that actual cash value does not include costs that result from enforcement of a code, ordinance or law; coverage for that is found on the Increased Cost – Ordinance or Law endorsement HO 2557.
Related Private Structures Rented to Others HO 3540
A structure located on the insured premises that is rented to others and occupied by no more than two families may be scheduled on this endorsement. The limit shown on the endorsement is the maximum that will be paid in event of a covered loss. The coverage B limit of liability is amended so that it does not apply to the scheduled structure, nor does the exclusion of coverage to structures used for business purposes. The scheduled structures, for liability coverage purposes, are included in the definition of “insured premises.” The only change to this endorsement is that coverage A is referred to when the form is an HO 0006, and coverage B is referred to when using an HO 0003.
Replacement Cost Terms (Mobile Homes) ML 200
The replacement cost terms of the homeowners forms apply only to buildings, and not to mobile homes whether or not they are on a permanent foundation. This endorsement changes this provision so that replacement cost terms apply to the mobile home shown on the endorsement. There is no equivalent endorsement in the new forms.
Replacement Cost Loss Settlement Terms HO 4855
This endorsement changes the actual cash value loss settlement provisions for personal property to replacement value. (The endorsement need not be attached to form 5, special building and contents, since the coverage is included.) Replacement cost coverage also applies to appliances and window air conditioners, carpets and window coverings, awnings and canopies, and antennas. Certain scheduled classes of personal property are included: jewelry; furs; cameras; musical instruments; silver-, gold-, platinum-, and pewterware; golfer’s equipment; and bicycles.
Four categories are ineligible for the coverage: fine arts or rare articles; memorabilia, souvenirs, collector’s items and the like; items not maintained in good or workable condition; or items that are outdated or obsolete and are stored or not being used.
The recovery terms have been changed; they are limited to the smallest of: the replacement value of the property or the full cost to repair the damaged property. The stipulation of the application of limits under the policy has been removed.
If replacement cost coverage does not apply, settlement is on an actual cash value basis.
Residence Under Construction (Theft) HO 2722
Theft in or to a dwelling under construction, or theft of materials or supplies for use in the construction, is excluded until the dwelling is occupied. This endorsement covers loss by theft or attempted theft in or to a dwelling being built; materials and supplies for use in the construction; or in or to a dwelling newly built but not yet occupied. A limit of coverage is scheduled. All premium for this endorsement is fully earned; that is, if the endorsement is deleted from the policy there is no refund.
The revised form uses the term residence instead of dwelling, and has included exclusions for mysterious disappearance or shortage of property unless there is evidence of theft.
Scheduled Motorized Golf Cart Coverage HO 3831
Two definitions were added in the 2007 update, “collision” and “golf cart.” “Collision” is defined as contact of a cart with another object or the upset of a cart without contact with another object. “Golf cart” is defined as designed to carry no more than four people for the purpose of playing golf, and does not reach speeds over twenty-five miles per hour; permanently installed parts and equipment are included. The property coverages include accessories that are listed in the schedule and are not permanently installed if, at the time of loss, they are at a residence premises owned by the insured or are in or upon a golf cart while away from residential premises. For example, the insured has just purchased a buggy bag and dash tray for his golf cart and they are on the deck when the deck catches fire and burns them as well. The golf accessories would be covered. The accessories would also be covered if the insured has taken them and put them on a cart at the local course for his use while playing. The golf carts and accessories are not covered if the loss is covered by another policy including mechanical breakdown coverage. If the existing coverage is less than the limits of this endorsement, the carrier will pay the difference up to the limit stated.
Instead of perils insured against being the coverage C perils, the perils are stated as being covered unless excluded under the exclusions that apply to scheduled golf carts. This is open perils coverage. Several exclusions are then listed; loss that’s excluded under exclusions that apply to property coverages, if the golf cart is used in preparation or for a racing/stunt activity, the cart is rented, used to carry people for a fee, or used for business except while on a golf course. Collision or overturn is excluded unless the schedule indicates that collision coverage applies; loss to tires, tubes, wheels contacting the ground is excluded, as is loss to tires or tubes punctured by an object lying on the ground.
Losses related to the electrical system, caused by artificially generated electricity, or resulting from repair work are not covered. Vandalism is not covered if the golf cart was stored in an area that was unoccupied, closed for the season or not in operation for more than sixty days immediately prior to the loss. The remaining exclusions are wear and tear, fungi, mechanical breakdown, rust, latent defect, animals unless collision coverage is selected.
When losses are paid the deductible is applied separately to each golf cart involved in a loss as well as parts, equipment and accessories if not in or on a cart at the time of loss. Settlement is the lesser of the cost to repair/replace the property or the actual cash value of the property just before the loss.
Scheduled Personal Property Coverage HO 3061
There are many changes in this endorsement. The purpose remains the same, the broadening of coverage on certain personal articles. The use of this endorsement makes it convenient for a homeowners insured who wishes to broaden the scope of coverage on personal property by writing the coverage on an open perils basis, or who has property valued in excess of the limits specified in the homeowners form for certain categories of property—jewelry, furs, or silverware, for example. A schedule has been built into the revised form of the endorsement.
Golfer’s equipment now includes street clothes kept in a locker while the insured is golfing. The insured must agree that fine arts, when being moved, will be packed and unpacked by competent packers. New to the property not covered is contraband or property in the course of illegal transportation or trade; the exclusion for coins or stamps being transported by a common carrier no longer carries the exception that the property is covered if the value is declared to the transportation company. The exclusion for golfer’s equipment held for sale has been removed. It is important to remember the coverage C exclusion of “property covered by scheduled insurance” when deciding on amounts of insurance to be inserted in the endorsement. The coverage C amount will not contribute in case of loss to any property insured in the endorsement, so it is important that each item is scheduled for an adequate amount of coverage.
The excluded perils now includes intentional acts or neglect; mechanical breakdown is now included in the exclusion for bicycles. The exception to the exclusion for breakage of fine arts such as art glass windows, statuary, marble, glassware, etc. has be changed significantly and is narrower than on the previous form. The following are no longer covered as a cause of breakage: hail, sinkhole collapse, volcanic action, sonic boom, smoke, spacecraft, self-propelled missiles, falling objects, collapse of building, weight of ice, snow or sleet, strike, riot, or civil commotion, vandalism, and sprinkler leakage.
Under the settlement provisions for fine arts, the insured now has to option to buy the damaged or stolen and recovered property from the company. For example, the insured’s favorite Rembrandt painting is stolen; the company pays the insured the agreed amount. The painting is then later recovered; the company is entitled to keep the painting as they have paid for it, but the insured can request to keep the painting and pay the carrier an agreed amount.
The full effect of the “other insurance” provision can be avoided if an insured chooses not to schedule blanket items (such as “silverware”) in the endorsement, but instead lists only the more valuable items specifically, i.e., “a four-piece service for eight of ABC brand silverware, ‘Sonata’ pattern.” Other silverware items in the household thus escape the “other insurance” provision and continue to have the protection of coverage C.
Despite its appearance as a mere endorsement attached to the homeowners policy, the personal articles floater remains a separate contract. Note that the usual exclusions of coverage for loss resulting from flood or earthquake are absent from this endorsement. Further, coverage applies anywhere in the world.
Secured Party’s Interest (Additional Coverage) ML 27
As noted in a different discussion (see “Conditions and Provisions—AAIS Homeowners”), the AAIS homeowners forms address loss settlement in the case of a secured party, such as a mechanic’s lienholder or the lender on a mobile home. The secured party’s interest is not protected for embezzlement or conversion by the insured unless this endorsement is attached. The endorsement may also be used to add the perils of earthquake, flood, or collision (as, for example, if the mobile home collides with the vehicle to which it is attached).
Collision is defined as accidental contact of the mobile home with another object, the transporting vehicle, parts or equipment attached to the vehicle, or upset of the home while in transit.
The endorsement responds to the secured party’s interest in the case of intentional damage to the mobile home by the insured, or inability to repossess the mobile home because it is either secreted or has been transferred without consent to a third party. There is no endorsement comparable to this in the revisions.
Snowmobile (Liability Coverage Only) HO 3864
This endorsement provides liability coverage for the snowmobile(s) described in the schedule while they are used away from the insured premises or at the described location. The coverage at the described location is new to this endorsement, and includes: premises used as a residence and shown on the declarations; premises used as part of a residence and acquired during the policy period; premised not owned by an insured but used temporarily by an insured as a residence; part of a premises occasionally rented to an insured for other than business purposes, and vacant land not including farmland. There is no coverage if the snowmobile is rented to others or used to carry persons for a charge, or if the snowmobile is used for any racing or stunting activities.
Unit-Owners Additions (Special Coverage) HO 7032
This endorsement replaces the named peril coverage for the unit owner’s fixtures, alterations, decorations, installations and appliances that are part of the unit with open perils coverage. There are exclusions for damage caused by freezing or accidental discharge of plumbing if the unit is left vacant or unoccupied and the insured has failed to take proper precautions; requirements for units with sprinkler systems have been added; theft in or to a unit under construction if the unit is unoccupied; animals owned or kept by an insured; pollution; agricultural or industrial smoke; settling; continuous or repeated seepage or leakage; freezing or pressure of ice against structures that are not buildings; and collapse (other than that provided in the incidental property coverages). The vandalism time limitation has been expanded from thirty days to sixty days. New exclusions are water, humidity, moisture or water vapor caused by continuous leaks unless the insured could not have known or suspected of such leaks and wear and tear.
A new area of exceptions to exclusions is included; ensuing losses from certain exclusions are covered unless the ensuing loss itself is excluded. The discharge of water or steam that is excluded by settling, animals, smoke, pollutants or wear and tear is covered if it flows from a sewer, storm drain, water or steam pipe away from the described location or a plumbing, heating, air conditioning or appliance in the building where the described location is located. The removal of parts to get to the affected areas is covered, but the systems themselves aren’t. For example, a water pipe breaks behind the wall; the removal of the wall to access the pipe is covered, but the repair of the pipe is not.
Also added are exclusions that apply to property coverages; weather conditions that contribute to an excluded event or cause or loss are excluded, and acts or decisions of any person, group, organization, governmental authority are excluded, as is a defect, weakness or inadequacy in development, planning, zoning, construction of any property.
Unit-Owners Coverage C (Special Coverage) HO 7029
Use of this endorsement changes the coverage applying to the condominium owner’s personal property to an open perils basis. The limits for theft coverage on certain classes of property—jewelry; silverware; and guns—are broadened to include misplacing or losing. Items related to guns are now included in that class of property. The collapse coverage has been broadened.
As in the other endorsements, the freezing excluded is expanded to explain the requirements for property with an automatic fire protective sprinkling device. Water, humidity, moisture or vapor is a new exclusion and excludes continuous or repeated seepage, leakage, discharge, or condensation, moisture, vapor over a period of weeks, months or years unless the insured cannot reasonably be expected to suspect such discharge. This covers issues hidden behind walls and excludes visible leaks that are maintenance items. The exclusion for settling/cracking has expanded the list of items not covered.
The pollution exclusion has removed the exception for ensuing losses. Wear and tear is another new exclusion and excludes the normal wear, tear, deterioration, breakdown, inherent vice that is normally found in such an exclusion. An exception is now present in the refinishing/renovation exclusion that states that if the renovation process results in a fire or explosion, the damage from the fire or explosion is covered. The same new exclusion regarding acts or decisions of people, groups, and governmental authorities has also been added to this endorsement. Likewise, the exception for water that overflows from a sewer pipe off-premises etc. is also included.
The earth movement exclusion has also been changed to include earth movement resulting from human or animal forces as well as acts of nature, and earth movement is defined. The water damage exclusion is amended so that personal property away from the insured premises or a location owned by, rented to, occupied by, used by, or in the care of an insured is covered. Property on such premises is excluded, even if weather conditions initiate on contribute in any way to the loss.
Unit-Owner Rental to Others HO 7033
This endorsement amends the definition of coverage C personal property used for business purposes so that it does not apply to property which is incidental to the use of the unit for residential purposes. The exclusion of theft from a part of the insured premises when it is rented to others is amended so that theft of items such as money, silverware, securities, or jewelry is excluded. Added in the revision of this endorsement is scrip, smart cards, or other devices which store a cash value electronically under this exclusion. Theft of other items—furniture, a TV, china—would be covered.
This endorsement may not be used when unit owners special property coverage HO 7029 is attached.
Water Back up and Sump Discharge or Overflow HO 2708
The title of the endorsement was changed to better reflect the coverage provided. Limits and the deductible are now set by being listed on the schedule in the form. Coverage is for loss caused by water or matter present in, carried or otherwise moved by water.
Coverage is for water that backs up through sewers or drains, or overflows or otherwise discharges from sumps, sump pumps, related equipment, or other system designed to remove subsurface water from the foundation area. The revised endorsement covers overflow or discharge loss caused by mechanical breakdown; loss to a sump, sump pump, related or similar equipment due to mechanical breakdown is not covered.
Waterbed Liability HO 4009
A leaking waterbed can seriously damage other property. For example, a bed belonging to a tenant in an upstairs apartment can damage property in the apartment below. This endorsement provides liability coverage for damage to property of others. Coverage for property the insured owns may be added by endorsement HO 2721, accidental discharge or overflow coverage (see above). There are no changes to this endorsement.
Watercraft HO 3801
This endorsement is used to enlarge the homeowners incidental liability section L coverages pertaining to the ownership, maintenance, or use of certain watercraft. The endorsement provides liability coverage, otherwise excluded, with respect to scheduled and described watercraft powered by one or more outboard engines or motors of more than twenty-five total horsepower; any inboard or inboard-outdrive powered watercraft over 50 horsepower; and sailing vessels, with or without auxiliary power, of twenty-six or more feet in length.
Coverage under the endorsement does not apply to job-connected bodily injury to an insured’s employee whose principal duties involve the maintenance or use of watercraft, nor is there coverage while the watercraft is used to carry paying passengers or while it is rented to others. The exclusion for employees now specifies that it is in relation to a watercraft on the schedule that is a sailing vessel, powered by an inboard or inboard/outboard motor, including an engine or motor that powers a jet pump. The endorsement also excludes coverage for liability arising out of the operation of watercraft in a prearranged or organized race, speed contest, or similar competition, unless the competition is for sailing vessels (with or without auxiliary power) or is a predicted log cruise.
Windstorm or Hail Deductible HO 4505
Coverage for the perils of windstorm or hail may be given a deductible different from that for other covered perils under this endorsement. Different percentage options are available. The deductible applies only once per occurrence regardless of the number of loss assessments applied or association deductibles applied.
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