Final Homeowners Printout - National...

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Welcome Owning a home is not exactly a low risk investment. Losses from damage to real and personal property are often very costly. There is no “typical” home. Each customer has a unique set of property and liability exposures which can be insured under the Homeowners Program. Homeowners Property Endorsements Intro p1 Personal residential coverage is designed to handle risks inherent to the lifestyles, activities and property ownership of individuals and families. Homeowners Property Endorsements Intro p2 Often, your customer’s insurance needs must be met by endorsing their Homeowners Policy. The insurance contract can be changed by:

• Increasing limits • Changing "who is an insured" • Extending coverage to an excluded property • Extending coverage to an excluded cause of loss and

Changing the valuation method used for loss settlement Homeowners Property Endorsements Intro p3 Your goal in the course is to identify special types of loss exposures to property which might produce coverage problems in the standard ISO Homeowners Policy. Then, match these exposures with the endorsements to the Homeowners Policy which can be offered as solutions. The endorsement forms can be printed throughout the course or by clicking the links below. Homeowners Property Endorsements Intro p4

The first part of our course covers exposures to the homeowner's real property Section 1 HO 04 48 - Other Structures on the Residence Premises - Increased Limits Section 2 HO 04 91 - Other Structures Away from the Residence Premises Section 3 HO 04 43 - Replacement Cost for Non-Building Structures on the Residence Premises Section 4 HO 04 35 - Loss Assessment Coverage Section 5 HO 04 77 - Ordinance or Law - Increased Limits

The second part of our course covers exposures to the homeowner's personal property Section 1 HO 04 90 - Personal Property Replacement Cost Loss Settlement Section 2 HO 04 61 Scheduled Personal Property and HO 04 60 Scheduled Personal Property (With Agreed Value Loss Settlement Section 3 HO 04 65 - Coverage C Increased Special Limits of Liability Section 4 HO 04 14 - Special Computer Coverage Section 5 HO 04 50 - Personal Property At Other Residences - Increased Limits

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It’s important to have a systematic process to identify exposures to loss that your customer may have. Exposures to loss are circumstances or factors leading to the possibility of a loss to a person or property. Standard agency procedures during policy renewal cycles may include a step by step procedure for updating information and discovering changes in the customer’s property and lifestyle. For the CSR, this is often accomplished with an interview driven by checklists

and questionnaires. A checklist is a list of pre-determined questions that serves as a guide to interview clients and prospects. The list should include questions regarding specific exposures that might exist and can be addressed via insurance or other risk management techniques. As you study each endorsement in this course, you’ll build a checklist of questions to ask your customer. Homeowners Property Endorsements Intro p5

Our promise of a distinctive learning experience. Named in honor of William T. Hold, Ph.D., CIC, CPCU, CLU, president of The National Alliance for Insurance Education & Research, these seminars – formerly known as Advanced Learning Seminars (ALS) – are innovative courses developed especially for CSRs. They are unique, in-depth learning opportunities for insurance professionals who have earned the CISR, CIC, CRM, ACSR, or CPSR designations.

Homeowners Property Endorsements Intro p6 This course is designed to fulfill 4 hours of the annual update requirement (8 hours) for persons holding the CISR Designation. Additionally, you may use this course to earn CE credit towards your state insurance license renewal. The requirements for receiving CISR update credit are not the same as the requirements for receiving state continuing education credit. Our courses are built to conform to the regulations and standards of learning specified by state departments of insurance. You must pass all of the self quizzes in the course and the Review Test (no exam proctor required) in order to receive CISR 4 hour annual update credit for the course. If you wish to request CE credit hours for your insurance license, successful completion of all the self quizzes, the review test and the final exam (in the presence of a disinterested third party proctor/monitor) is required. If you would like to print the sections of the course, you may use the print link located on the bottom navigation bar of the course. Adobe Reader is required to print the course. Use the Course Menu link on the top menu bar or the checkmark on the bottom navigation bar to navigate to the beginning of each section. Use the Email Mentor link to send any questions you may have about the course material. Homeowners Property Endorsements Intro p7 FLORIDA RESIDENTS ONLY The Florida Department of Insurance is committed to assisting agents with the problem of selling unapproved insurance through unauthorized entities.

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In many cases, agents fail to recognize that the entities used are not licensed insurance companies. The problem has resulted in the loss of hundreds of millions of dollars to Florida residents due to unpaid claims and theft of premiums. Agents who sell the lines of insurance that these entities typically offer should educate themselves on laws and issues relating to this problem. Click on the link and review the information about Unauthorized Entities from the Florida Department of Insurance. Homeowners Property Endorsements Intro p8 If you are updating your CISR designation only: In order to earn 4 hours of update credit for your CISR Designation, you must pass the self quizzes and the review test. The review test contains 10 application level questions. The review test does not require the presence of a proctor. An affidavit of exam is not required after passing the review test. The final exam is not necessary unless you request continuing education credits for your insurance license. If you also plan to request continuing education credits/hours: You must pass the proctored final exam which follows this course, in addition to passing all of the self-quizzes in the course. Three attempts are allowed for the final exam. A score of 70% is required to pass. You are required to take your final exam in the presence of a disinterested third party proctor/monitor. An affidavit of exam, signed by you and your proctor/monitor, must be submitted to The National Alliance for Insurance Education & Research in order to receive credit for any successful exam. Please refer to the course information memo, emailed to you with your username and password, for more information. Homeowners Property Endorsements Intro p9 Before getting started, find out how much you already know by playing the matching game on the next few pages. Homeowners Property Endorsements Intro p10

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Drag the endorsement title to the solutions field for each coverage problem. Homeowners Property Endorsements Intro p11 Homeowners Property Endorsements Intro p12

Your insured has an old rose cut, "fancy" yellow diamond ring which he would like to insure for the appraised value of $50,000.

Your customer doesn't want to specifically insure his home theatre equipment. Still, he doesn't want depreciation to reduce the value of any damage claim that might occur for its components: plasma screen, sound system, etc.

HO 04 90 Personal Property Replacement Cost Loss Settlement

HO 04 60 Scheduled Personal Property (with Agreed Value Loss Settlement)

Endorsements Solutions

HO 04 65 Coverage C Increase Special Limits of Liability

HO 04 35 Loss Assessment Coverage

Your customer reports that he's built a beautiful metal fence around his home when you've contacted him about his Homeowners policy renewal. He asks you, "How will it be covered?"

Your customer wants to know how he might insure a garage on some property he owns away from his principal residence. He uses it for his hobby, building kit cars.

HO 04 61 Scheduled Personal Property Endorsement

HO 04 48 Other Structures on the Residence Premises Increased Limits

HO 04 43 Replacement Cost for Certain Non-Building Structures ON the Residence Premises

HO 04 91 Other Structures Away from the Residence Premises Increase Limits

Endorsements Solutions

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Homeowners Property Endorsements Intro p13 How well did you do? You may wish to try the matching game after completing the sections which follow. We'll start the course by studying the coverage problems that arise with your insured's real property. Homeowners Property Endorsements Intro p14 Section 1 – Other Structures On the Residence Premises — Increase limits Under Coverage B Section 2 – Other Structures Away from the Residence Premises — Extend Coverage to Additional Structures not located on the Residence Premises Section 3 – Replacement Cost for Non-Building Structures on the Residence Premises — Amend the loss settlement provisions for property valuation of specified non-building structures Section 4 – Loss Assessment Coverage — Increase the amount of insurance available for loss assessments from a homeowners association Section 5 – Ordinance or Law — Increase the percentage of Coverage B limit for Ordinance or Law exposures. Exposures to Real Property Intro p1

Your customer has a large detached garage with guest quarters upstairs. It has been damaged in a fire. In order to get a new permit, he'll have to demolish the whole thing and rebuild it.

Your customer wants to increase the limit of insurance available to cover his extensive gun collection.

HO 04 48 Other Structures on the Residence Premises Increased Limits

HO 04 90 Personal Property Replacement Cost Loss Settlement

HO 04 77 Ordinance or Law Increased Limits

HO 04 65 Coverage C Increased Limits Of Liability

Solutions Endorsements

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Exposures to Real Property Exposures to Real Property Intro p2

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SECTION 1 – OTHER STRUCTURES ON THE RESIDENCE PREMISES Learning Objectives — Be able to identify a structure which is eligible for coverage under ISO HO 00 03 Special Form Coverage B - Other Structures. — Understand how the limit of liability is calculated for an Other Structure on the Residence Premises by policy provision or by endorsement. — Identify the customer with a potential exposure to an Other Structure due to inadequate limits of liability under Homeowners Coverage B. — Describe two examples of business use of an Other Structure on the Residence Premises, one which excludes the structure from Homeowners Coverage B eligibility and one which does not. — Explain how coverage is applied in a loss involving both scheduled and unscheduled Other Structures on the Residence Premises. S1 - Other Structures on Resident Premises p1 In this section we'll study the coverage for Other Structures, such as detached garages, guest houses and recreation rooms which are located on the residence premises but not physically a part of the dwelling itself. When interviewing your customer, it's important to identify any Other Structure on the residence premises, and note which structures have a high replacement cost. Checklist Question 1 Are there any additional buildings around your home? Description _____________________ Square feet _____________________ Additional limit of liability $_______________________ S1 - Other Structures on Resident Premises p2

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Increasing Limits under Coverage B - Other Structures

The Calamity Family insures their home under the ISO Homeowners 3 Special Form (HO 00 03). The dwelling limit is $300,000. The house is located on an acre lot which includes a detached garage with living quarters and a game room upstairs. There is also a shed for the garden tools and lawnmower.

Replacement cost for detached garage: $40,000.

Replacement cost for the shed $2,000.

As we'll see shortly, the coverage grant which applies to these two structures is located in Section I - Property Coverages, Coverage B - Other Structures.

S1 - Other Structures on Resident Premises p3 How will the Calamity’s Homeowner’s Policy respond if the garage and shed are destroyed in a covered cause of loss such as a tornado? Assume that both of the structures are eligible under Coverage B – Other Structures. A. Covered up to a limit of 10% of the dwelling limit - cannot reduce dwelling limit. B. Covered up to a limit of 10% of the dwelling limit - paid in additional to dwelling limit. S1 - Other Structures on Resident Premises p4 The answer is B. Covered up to a limit of 10% of dwelling limit - paid in addition to dwelling limit. The amount of the loss can be recovered, in this case, up to a limit of $30,000 (the Calamity’s dwelling limit of $300,000 X 10%). The Homeowners Policy provides this automatically without reducing the limit of insurance available for the dwelling. It’s easy to see the coverage gap. Type 30,000 (without the comma) into the Limit field below and press enter. Garage Shed Limit Coverage Gap 40,000 + 2,000 - _____ = ___________ S1 - Other Structures on Resident Premises p5

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Review the Homeowners Policy Click on the image at right to open an excerpt from ISO HO 00 03 Special Form and review the coverage granted to Other Structures. Then answer the question on the next page. Examples of Other Structures Anything that is constructed and not attached to the Dwelling and located on the "resident premises" is called Other Structures. The policy defines clear space between the structures as being not attached even if a covered walkway, fence, or utility line attaches to both the Dwelling and the Other Structure.

• fence attached to a dwelling • sidewalks • driveways • in ground swimming pool • gazebos

are all considered Other Structures also on the residence premises S1 - Other Structures on Resident Premises p6 A small building used as a game room is connected to the dwelling by a covered walkway. Is this an eligible other structure under Coverage B? A. Yes B. No S1 - Other Structures on Resident Premises p7 The answer is Yes. Structures connected to the dwelling by only a fence, utility line or similar connection are considered Other Structures, not part of the dwelling. S1 - Other Structures on Resident Premises p8 HO 04 48 Other Structures on the Residence Premises - Increased Limits The Calamity's can endorse their Homeowners Policy to increase the limits available for Other Structures. This endorsement applies only to structures located on the residence premises. S1 - Other Structures on Resident Premises p9 Triggering Coverage The coverage is triggered on the endorsement schedule by listing each structure next to the additional limit requested. Since 10% of the replacement value of the structures is already covered under the Homeowners policy, we’ve entered 90% of the replacement value as the additional limit. State company rates are applied separately to each location. S1 - Other Structures on Resident Premises p10

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How are Limits Applied? Any structure which is not specifically scheduled has blanket coverage up to 10% of the limit of Coverage A. Each structure described on the HO 04 48 Endorsement Schedule is covered up to the limit of Coverage B PLUS the limit requested on the endorsement schedule. Tip: Look for Other Structures on the residence premises which have a replacement cost that exceeds 10% of the Dwelling limit. Schedule these structures under HO 04 48. S1 - Other Structures on Resident Premises p11 Mrs. Calamity did something to make the garage ineligible for coverage. Which one of the following would cause the garage to lose coverage? A. She let her best friend Judy use the garage to store her Lexus SUV. She charged Judy $1000 B. She installed a computer and a phone in the living area upstairs and started a tax preparation service. C. She began storing documents and receipts from her gift basket business in the garage, along with excess baskets and supplies. She owns this inventory and will use it for her business next season. S1 - Other Structures on Resident Premises p12 The answer is B. She installed a computer and a phone in the living area upstairs and started a tax preparation service. If the structure is being used to conduct a business, it is excluded from Coverage B – Other Structures of the Homeowners Policy. It is important for your customer to understand the definition of business in the homeowners policy. S1 - Other Structures on Resident Premises p13 Tell your customer how a business activity is defined in the Homeowners Policy: A trade, profession or occupation engaged in a full-time, part-time or occasional basis, or Any other activity engaged in for money or other compensation, except the following:

• Any activities for which an insured received not more than $2,000 in the twelve months before the inception date of the policy

• Volunteer activities performed for no money other than expenses

• Home day care for no money other than an exchange of services

• Home day care to a relative

S1 - Other Structures on Resident Premises p14

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Mr. Calamity rents the garage apartment to a college student for $125 a month. Is the structure still covered under the HO 04 48 – Other Structures on the Residence Premises Endorsement? A. Yes B. No S1 - Other Structures on Resident Premises p15 The answer is No. Although the amount in question is less than $2000 annually, the policy specifically excludes the rental use of the garage apartment. S1 - Other Structures on Resident Premises p16 To understand when one of your Other Structures would not be covered under this endorsement, we’ll review the policy language in the Homeowners Policy, Section I Property Covered, Coverage B – Other Structures S1 - Other Structures on Resident Premises p17 Review the Homeowners Policy

Remember, we are looking at Coverage B of the Homeowners 3 Special Form again. Properties not covered here are also ineligible for coverage under the endorsement. Click on the image at right to open the excerpt from ISO HO 00 30 Special Form and review the policy language about ineligible structures.


Not Covered

Mr. Calamity rents his garage apartment to a college student for $300 per month.

Mr. Calamity uses the garage to store a cotton candy machine, popcorn machine and cases of beverages for his neighbor's carnival concession business.

Covered

Mr. Calamity rents his garage to a friend for the storage of a vehicle.

Mr. Calamity uses the garage to store an owned cotton candy machine, popcorn machine and cases of beverages for his own carnival concession business.


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Related Coverage - HO 04 40 Structures Rented to Others - Residence Premises If your customer has a structure on their residence premises which is rented, use Structures Rented to Others – Residence Premises Endorsement HO 04 40. The specific structures are scheduled on the endorsement Schedule with the location and the requested increased limit of liability. State company rates are applied separately to each location. There are three requirements under the property section of this endorsement:

1. Structure rented must be located on the residence premises. 2. Structure must be rented or held for rental to a person who is not a tenant of the dwelling. 3. Structure must be occupied as a private residence.

S1 - Other Structures on Resident Premises p20 Key Points: Section 1 - Other Structures on the Residence Premises What is an Other Structure? How is the limit of liability calculated for an Other Structure? Describe an Other Structure which could have insufficient limits of liability under an unendorsed Homeowners Policy. How does HO 04 48 increase the amount of coverage available for Other Structures? What types of situations would make an Other Structure ineligible for coverage under HO 04 48 Other Structures on the Residence Premises? Determine the limit of liability applicable to an unscheduled Other Structure and an scheduled Other Structure. S1 - Other Structures on Resident Premises p21

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SECTION 2 – OTHER STRUCTURES AWAY FROM THE RESIDENCE PREMISES

Learning Objectives — Understand the coverage exclusion for Other Structures Away from the Residence Premises under ISO Homeowners 3 Special Form. — Identify a situation which would prompt the CISR to offer the HO 04 91 Other Structures Away from the Residence Premises endorsement. — Describe a loss scenario which would be ineligible for coverage under HO 04 91 Coverage B - Other Structures Away from the Residence Premises. — Explain how limits of liability are applied on a blanket basis in a covered loss under HO 04 91 Other Structures Away from the Residence Premises. S2 - Other Structures Away From The Resident Premises p1

In this section we'll study the coverage for Other Structures away from the residence premises. When interviewing your customer, it's important to identify any Other Structure away from the residence premises.

Checklist Question 2 Do you own any additional structures away from the premises of your home? Description of structure ________________ Location of the structure __________________ Additional limit of liability $________________

S2 - Other Structures Away From The Resident Premises p2

Mr. Calamity owns several acres of land about 10 miles from his home. He has a large shed on this land. If the shed is destroyed by a tornado, can his Homeowners Policy respond to the loss to this Other Structure?

A. Yes B. No

S2 - Other Structures Away From The Resident Premises p3 The answer is No. Coverage B is designed only for Other Structures located on the residence premises. S2 - Other Structures Away From The Resident Premises p4

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HO 04 91 Coverage B – Other Structures Away from the Residence Premises

In order for the Homeowners policy to insure against a loss to this structure, the policy must be endorsed to give back coverage for eligible other structures which are not located on the residence premises. S2 - Other Structures Away From The Resident Premises p5

Review the Homeowners Policy

The Homeowners Policy Forms HO 00 02, HO 00 03 and HO 00 05 automatically provide Coverage B – Other Structures on a blanket basis to any Other Structure located on the residence premises. Under HO 04 91, an eligible Other Structure away from the residence premises is added as covered property under Coverage B. The limit increase is blanketed with the Coverage B limit, but only for the structure listed on the endorsement. This is also blanket coverage.

S2 - Other Structures Away From The Resident Premises p6 Triggering Coverage There is no schedule to fill out. Coverage is reflected on the Declarations Page of the Homeowners Policy. The Other Structures coverage limit of the policy is not changed by this endorsement. The HO 04 91 simply broadens the definition for Other Structures used by the policy. S2 - Other Structures Away From The Resident Premises p7 Tell Your Customer It’s important to review the endorsement language about the types of structures which are ineligible for this coverage. S2 - Other Structures Away From The Resident Premises p8

Mr. Calamity lets another fellow graze cattle on his land for an annual fee. The barn, however, only contains items of property belonging to Mr. Calamity. If the barn is damaged in a fire, do you think he can claim the loss under the HO 04 91 Endorsement?

A. Yes B. No

S2 - Other Structures Away From The Resident Premises p9 The answer is Yes. He’s not making a business use of the barn. If he’d allowed the leaseholder to use the barn for his cattle business, the structure would not be eligible for coverage under the HO 04 91 Endorsement. S2 - Other Structures Away From The Resident Premises p10

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Make sure you've read the HO 04 91 Endorsement language about property which is ineligible for coverage. S2 - Other Structures Away From The Resident Premises p11 Not Covered The Calamities have a cabin on their land, for weekend use. Mr. Calamity allows his nephew to use an outbuilding to store antique farm machinery which he sells at auction. Covered Mr. Calamity uses an outbuilding on his property to store antique farm machinery which he owns and occasionally resells to other collectors. Annual sales never exceed $2000. S2 - Other Structures Away From The Resident Premises p12

Related Coverage When higher limits are required for a structure away from the residence premises, use the Specific Structures Away from the Residence Premises Endorsement HO 04 92. This endorsement may be attached to all ISO Homeowners Forms. State company rates are applied separately to each location. An important provision of this endorsement addresses loss settlement. Covered losses under this endorsement are settled on an ACV basis not to exceed the cost to repair or replace the structure.

S2 - Other Structures Away From The Resident Premises p13

Key Points: Section 2 - Other Structures Away from the Residence Premises

The Homeowners Policy can be endorsed to include coverage for Other Structures Away from the Residence Premises. How is this accomplished? What types of Structures away from the residence premises are ineligible? Explain how the limit of liability is applied under HO 04 91 Other Structures Away from the Residence Premises. S2 - Other Structures Away From The Resident Premises p14

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SECTION 3 - REPLACEMENT COST SETTLEMENT (NON-BUILDING STRUCTURES)

Learning Objectives

— Describe what a non-building structure is, with respect to the Homeowners 3 Special Form, and explain how it is valued differently from building structures for loss settlement purposes. — Identify a non-building structure which would prompt a CSR to offer the HO 04 43 Replacement Cost Loss Settlement for Non-Building Structures on the Residence Premises Endorsement. — Given a specific loss scenario, calculate a possible coverage gap for a non-building structure under the unendorsed Homeowners 3 Special Form. — Recognize conditions which would prevent the use of replacement cost valuation for loss settlement under HO 04 43 Replacement Cost Loss Settlement for Certain Non-Building Structures on the Residence Premises Endorsement.

S3 - Replacement Cost Settlement for Non-Building Structures p1

In this section, we'll study the coverage for Non-Building Structures on the residence premises. When interviewing your customer, it's important to identify any Non-Building Structure on the residence premises.

Checklist Question 3 Do you have any property such as patios, walkways, or driveways that you would want to insure at replacement cost rather than actual cash value? Items and Limit Amount $__________________


Replacement Cost for Non-Building Structures

The Calamity's have made two very expensive improvements to their home. The improvements include a metal fence around the perimeter of the property and a new brick patio attached to the

back of the house.

Replacement cost for fence is $5,000.

Replacement cost for patio is $8,000.

The Calamity's have certainly had a few claims in the past. Mrs. Calamity worries about a loss scenario involving someone driving an auto into her fence.


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The metal fence is a non-building structure attached to the dwelling and covered under Coverage B of the HO 00 03 Homeowners 3 - Special Form. How will the fence be valued for loss settlement if it is damaged by a covered cause of loss?

A. Replacement Cost Value B. Actual Cash Value S3 - Replacement Cost Settlement for Non-Building Structures p4 The answer is B. Actual Cash Value. The provision is found in HO 00 03 Section I Conditions C. Loss Settlement 1. a – d. Remember that ACV (Actual Cash Value) is a method of establishing the value of property with depreciation deducted from the replacement cost value of the property. Formula: replacement cost - depreciation = actual cash value. As opposed to replacement cost which is the cost to replace property with like kind and quality without taking depreciation into account. S3 - Replacement Cost Settlement for Non-Building Structures p5 Review the Homeowners Policy The ISO Homeowners Policy settles losses for damage to non-building structures using actual cash value. These structures are exposed to the elements and are often made of materials which deteriorate more rapidly than the dwelling. If a windstorm ruins the whole fence, or a car drives through the fence, the adjuster will depreciate the value of the fence to determine what amount will be paid. Example: The Calamity's originally paid $8500 to install their metal fence, but the cost to replace this type of fence has gone down. For loss settlement, it will be valued as follows: Current replacement cost of fence = $5,000 Depreciation = 20% Amount paid = $4000 S3 - Replacement Cost Settlement for Non-Building Structures p6 HO 04 43 Replacement Cost Loss Settlement for Certain Non-Building Structures The Calamity's can endorse their Homeowners Policy to receive replacement cost valuation for:

• Reinforced masonry walls • Metal or fiberglass fences • Fences made of plastic/resin materials • Driveways


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Triggering Coverage When the HO 04 43 Endorsement is attached, any eligible non-building structures are valued for the cost to repair or replace, rather than actual cash value. There is no schedule to fill out. Coverage is reflected on the Declarations Page of the Homeowners Policy. The Other Structures limit of insurance is not increased by this endorsement. S3 - Replacement Cost Settlement for Non-Building Structures p8

Mrs. Calamity loses the fence in a windstorm and elects not to replace it. Her policy is endorsed with HO 04 43. How do you think the fence will be valued when she makes the claim?

A. Actual Cash Value B. Replacement Cost Value S3 - Replacement Cost Settlement for Non-Building Structures p9 The answer is A. Actual Cash Value. Replacement cost valuation is only granted when the non-building structure is repaired or replaced. S3 - Replacement Cost Settlement for Non-Building Structures p10 Tell Your Customer It’s important to note that replacement cost is only available if you choose to repair or replace the non-building structure. If the cost is more than $2500, the cost will not be paid until the repairs are complete. The policy will pay ACV initially and then pay a claim for the remainder of replacement cost, if made within 180 days after the loss. S3 - Replacement Cost Settlement for Non-Building Structures p11

Mr. Calamity loses the fence in a windstorm and elects to build a wooden fence in its place. How is the loss settled under Mr. Calamity's HO 04 43 Replacement Cost Loss Settlement for Certain Non Building Structures Endorsement?

A. ACV B. Replacement Cost C. Neither, the wooden fence is excluded from coverage under HO 04 43 S3 - Replacement Cost Settlement for Non-Building Structures p12 The answer is A. ACV. The insured is only allowed to receive actual cash value for the fence if she does not replace it with like kind materials. Further, the wooden fence is not be eligible for coverage under HO 04 43, so she should review the necessity for having the endorsement. S3 - Replacement Cost Settlement for Non-Building Structures p13

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Key Points: Section 3 - Replacement Cost Settlement for Non-Building Structures

How are Non-Building Structures valued for loss settlement purposes under the unendorsed Homeowners Policy? Give an example of a Non-Building Structure that could qualify for replacement cost coverage under HO 04 43 Replacement Cost Loss Settlement for Non-Building Structures.. What situation would prevent the insured from receiving replacement cost loss settlement for a Non-Building Structure, even with the endorsement? S3 - Replacement Cost Settlement for Non-Building Structures p14

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SECTION 4 - LOSS ASSESSMENT

Learning Objectives

— Explain how the limit of liability for loss assessment charges under the ISO Homeowners Policy might create a coverage gap for your customer. — Know how the HO 04 35 Loss Assessment Coverage Endorsement extends the limit of liability for loss assessment exposure under the Homeowners Policy. — Know which causes of loss qualify for Loss Assessment Coverage. — Identify specific examples of loss assessment charges which would be excluded from coverage under HO 04 35 Loss Assessment Coverage Endorsement.

S4 - Loss Assessment p1

In this section we'll study loss assessment coverage. When interviewing your customer, it's important to identify if your customer is a member of a homeowners association.

Checklist Question 4 Are you a member of a homeowner’s association? Additional amount of insurance required for residence premises $__________ Additional location ____________ Limit of liability $___________


Loss Assessment Costs

Mr. and Mrs. Calamity are members of the homeowners association for the subdivision where they live. The association's properties include a clubhouse, swimming pool, tennis courts, and playgrounds.

The Calamity's are surprised to receive an invoice from the homeowners association after the clubhouse was damaged in a fire. It seems that someone let the insurance policy for the clubhouse lapse. Each member of the association has been billed for his or her share of the loss assessment.

The amount is $2250.


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Mr. Calamity knows he didn’t purchase any extra coverage for this type of loss expense. He seems to think that some coverage was already provided in his Homeowners Policy. What portion of the $2250 in loss assessment charges can he recover from his HO 00 03 Homeowner’s Policy Special Form?

A. $0 B. $1000 C. All of it, the policy pays this up to a limit of 10% of Coverage A as Additional Coverage. S4 - Loss Assessment p4 The answer is B. $1000. The HO 00 03 pays up to $1000 for loss assessment. The policy language is found under E. Additional Coverages 7. a – c. Type 2,250 (without the comma) in the field below and press enter. The Calamity's pay the difference, $1,250, out of pocket. It might easily have been a larger amount. As long as they carry a membership in the homeowners association, they have an exposure for loss assessment charges. S4 - Loss Assessment p5

HO 04 35 Loss Assessment Coverage

For many homeowners additional coverage for loss assessment charges is a good idea. The endorsement specifies a limit over and above what is automatically available in the Homeowners Policy. The loss must be a covered cause of loss under Section I or Section II Additional Coverage – Loss Assessment (or both) of the ISO Homeowners Forms.

Take a moment to review the provisions for Loss Assessment in the ISO Homeowners Policy.


Review the Homeowners Policy Click on the policy excerpt (image at right) and print the Additional Coverage for Loss Assessment granted under Section I Property Coverages of the Homeowners Policy (assume HO 00 03 Special Form).


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The clubhouse was damaged when a water main break in the neighborhood caused a flood. If the Calamity's have to pay a loss assessment in this instance, will the unendorsed Homeowner’s policy cover it?

A. Yes B. No


The answer is No.

Flood is not a covered cause of loss under the ISO Homeowners Policy.


Review the Homeowners Policy Click on the policy excerpt (image at right) and print the Additional Coverage for Loss Assessment granted under Section II Liability Coverages of the Homeowners Policy (assume HO 00 03 Special Form).


The homeowners association is sued for bodily injury to a child injured at the swimming pool because of failure to provide a lifeguard. The association does not carry liability insurance. If a loss assessment charge to the Calamity's occurs as a result of this cause of loss, will coverage under the Homeowners 3 Special Form HO 04 35 Loss Assessment endorsement apply?

A. Yes B. No

S4 - Loss Assessment p11 The answer is Yes. This is a cause of loss covered under the liability section of the Homeowners Policy, and it is not excluded with respect to loss assessment coverage. S4 - Loss Assessment p12

Triggering Coverage

Coverage is triggered by specifying an additional limit of insurance and the location of the residence premises on the endorsement schedule. The insurance company underwriting this coverage determines the maximum amount of additional coverage for loss assessment.


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Up to two locations other than the residence premises can be scheduled on this endorsement. For example, the Calamity's own a condo close to the local university. Their daughter is living there while she attends college. They may specify an additional limit of liability for loss assessment for this residence as well.


The Calamity's have attached the HO O4 35 Endorsement to their Homeowners Policy. The limits they’ve selected are $1000 for their primary residence and $1000 for a condo which they own and make available to their daughter. What is the maximum amount of insurance available for their residence premises for eligible loss assessment claims?

A. $1000 B. $2000 C. $3000 S4 - Loss Assessment p15

The answer is B. $2000.

$1000 is available as Additional Coverage from the Homeowners Policy and another $1000 is available under the endorsement.


Special Limits under HO 04 35

If the loss assessment is the homeowner’s share of an insurance deductible incurred by the homeowners association, the endorsement will pay up to a limit of $1000.


Key Points: Section 4 - Loss Assessment

Describe how an unendorsed Homeowners Policy offers coverage for loss assessment fees charged to the insured by a homeowners association. What provisions does HO 04 35 offer for increasing loss assessment coverage under the Homeowners Policy? How do you determine whether the cause of loss is covered, with respect to a loss assessment fee? What types of loss assessment charges does HO 04 35 exclude? S4 - Loss Assessment p18

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SECTION 5 - ORDINANCE OR LAW COVERAGE

— Recognize an Ordinance or Law exposure. — Understand how the Homeowners Policy covers Ordinance or Law. — Explain why an insured might need to endorse the Homeowners Policy for additional Ordinance or Law Coverage. — Know how the HO 04 77 Ordinance or Law Endorsement increases coverage for Ordinance or Law by increasing the percentage of the Coverage A limit of liability. — Recognize loss scenarios which would not qualify for Ordinance or Law Coverage under HO 04 77.

S5 - Ordinance or Law Coverage p1 In this section, we'll study ordinance or law coverage. When interviewing your customer, it's important to identify any building code or zoning issues in their area. Checklist Question 5 How old is your home? Do you have enough insurance to re-build your home in case of damage caused by a covered loss? Are you aware of any new building ordinances or laws that could increase the cost of re-building, repairing or demolishing your damaged home? What increased amount of coverage would you consider adequate to handle these increased costs to comply with ordinances or laws affecting re-construction, re-building or demolition? S5 - Ordinance or Law Coverage p2

The Coverage Gap

The Calamity's Homeowners Policy has a dwelling limit of $300,000. This amount satisfies the coinsurance requirement, which stipulates that the insured carry insurance for 80% of the value of the residence premises.

A fire destroys 75% of the square footage of their home. In their city, an ordinance requires them to have the entire structure demolished and cleared, including the undamaged portion, before they will be allowed to rebuild.

S5 - Ordinance or Law Coverage p3

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The Calamity's are about to face a loss due to ordinance or law. Property policies usually allow only a limited amount of coverage for this exposure, and the ISO Homeowners Policy is no exception. Ordinance or Law Coverage pays for the increased costs to repair, remodel or replace the building property which are incurred due to the enforcement of any ordinance or law. S5 - Ordinance or Law Coverage p4 Let’s look more closely at the loss scenario: The Calamity's have a rebuilding estimate from a contractor for $230,000. Of that, $22,000 represents upgrades or "increased costs" due to new building codes which were not in place when their home was originally constructed. In other words, instead of like kind replacement, the Calamity's must install these upgrades in order to meet the requirements of their building permit. The $22,000 is an ordinance or law loss. The total cost to demolish their home is $15,000. This cost was also incurred due to the enforcement of an ordinance or law. The cost of the upgrades, $22,000 will be recovered under which part of the Homeowners Policy? A. Property Covered: Coverage A B. Property Covered: coverage B C. Additional Coverages S5 - Ordinance or Law Coverage p5 The answer is C. Additional Coverages. The costs do not represent like kind replacement and are not paid out of the limits applicable to the dwelling. A percentage of the Coverage A limit is made available as additional coverage to handle this type of exposure. S5 - Ordinance or Law Coverage p6 Review the Homeowner’s Policy When required by ordinances or laws, the types of costs which can be recovered are:

• Increased costs for repair, rebuilding, or remodeling the damaged covered building/structure.

• Increased costs for repair, rebuilding, or remodeling the undamaged part of covered building/structure when completing repairs or replacement.

• Demolition costs for the undamaged portion of the building/structure. • Increased costs for debris removal that results from any of the above activities.


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Tell Your Customer Extra coverage for ordinance or law is needed since your residence could be condemned if substantially damaged. However, the coverage will not pay for repairs or replacement which are required for the removal of a pollutant such as lead or asbestos. S5 - Ordinance or Law Coverage p8 Choose whether the following losses are Eligible or Not Eligible for Ordinance or Law coverage under the ISO Homeowners Policy.



Improved Fire Retardant roofing required due to a new building code Removal of an undamaged wall when a room, damaged by a covered peril, must be rebuilt due to an ordinance or law Demolition cost of the undamaged portion of the building when required by an ordinance after a covered cause of loss. The cost to remove lead pipes from the house and replace with pipes which meet building code requirements The cost to elevate a home when required by local flood ordinance Mold remediation ordered by the jurisdiction of the residence, regardless of whether the cause of loss is excluded

Eligible Not Eligible _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____

Improved Fire Retardant roofing required due to a new building code Removal of an undamaged wall when a room, damaged by a covered peril, must be rebuilt due to an ordinance or law Demolition cost of the undamaged portion of the building when required by an ordinance after a covered cause of loss. The cost to remove lead pipes from the house and replace with pipes which meet building code requirements The cost to elevate a home when required by local flood ordinance Mold remediation ordered by the jurisdiction of the residence, regardless of whether the cause of loss is excluded

Eligible Not Eligible __x___ _____ ___x__ _____ ___x__ _____ _____ __x___ _____ ___x__ _____ ___x__

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HO 04 77 Ordinance or Law – Increased Amount of Coverage

Ordinances requiring a building condemnation after a substantial loss are common. Also, building codes having to do with fire suppression, wind resistance, wastewater and other issues change frequently. Over time, building codes and ordinances are modified to reflect new standards in building construction. Often, the event which triggers new building requirements is a fire, storm or other occurrence which results in substantial damage to structures. If your customer’s residence is subject to such an ordinance, explain to him that the percentage of the dwelling limit available for Ordinance or Law Coverage can be increased.

S5 - Ordinance or Law Coverage p11 Ordinance or Law Coverage is an additional coverage with or without the endorsement. All other provisions of the Homeowners Policy apply.

• For the HO 00 04 Building Additions and Alterations Form the percentage of Coverage A available for ordinance or law coverage can be increased up to 100%.

• For HO 00 06 the increase can be as high as 50% of Coverage A.

S5 - Ordinance or Law Coverage p12 Triggering Coverage Coverage is triggered by increasing the percentage shown on the endorsement schedule. In our example, the amount has been increased to 20% of the Coverage A limit. 20% X $300,000 = $60,000 S5 - Ordinance or Law Coverage p13 Key Points: Section 5 - Ordinance or Law Coverage What is an example of an ordinance or law exposure for a homeowner? What amount of coverage does the Homeowners Policy provide for Ordinance or Law? How does the HO 04 77 Ordinance or Law Coverage Endorsement increase the amount of coverage available for this exposure? What types of ordinance or law exposures are excluded under the HO 04 77 Ordinance or Law Coverage Endorsement? S5 - Ordinance or Law Coverage p14

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Exposures to Personal Property Objectives Overview Section 1 – Scheduled Personal Property Endorsements — Two endorsements which can change coverage to:

• increase the limits available to certain classes of personal property • provide agreed value loss settlement to scheduled personal property • expand causes of loss from named perils to open perils

Section 2 – Personal Property Replacement Cost Loss Settlement — Change the valuation method used for loss settlement for personal property. Section 3 – Increased Special Limits of Liability — Extra coverage for personal property with special limits Section 4 – Special Computer Coverage — Change the perils insured against for eligible computer equipment Section 5 – Personal Property at Other Residences — Increase the limits available under the Homeowners Policy Coverage C for – Personal Property Exposures to Personal Property Intro p1 Exposures to Personal Property

• Schedule Personal Property • Property at Other Residences • Increase Special Limits • Replacement Cost Loss Settlement

Exposures to Personal Property Intro p2

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SECTION 1 – SCHEDULED PERSONAL PROPERTY Learning Objectives — Understand the advantages offered by scheduling certain items of personal property under HO 04 60 Scheduled Personal Property (with Agreed Value Loss Settlement) or the HO 04 61 Scheduled Personal Property Endorsement. — Describe an example of a loss exposure which suggests the need to specifically insure an item of personal property. — Know the 16 named perils applicable to personal property coverage under HO 00 03 Special Form Coverage C Perils Insured Against, and contrast this to the open perils coverage available under the Scheduled Personal Property Endorsement. — Describe a personal property loss which would be excluded from coverage under the Scheduled Personal Property Endorsements. — Give examples of how the HO 04 60 and HO 04 61 Scheduled Personal property Endorsements would settle the same loss. — Understand how the Scheduled Personal Property Endorsements handle newly acquired property. S1 - Scheduled Personal Property p1 Why Schedule? Some items of personal property should be specifically insured or scheduled for coverage. Such items typically require special treatment because they may be expensive items or they may be difficult to value at the time of the loss. Property of this type, such as jewelry, may suffer damage from unique causes of loss. For example, high value jewelry items have very limited coverage under the standard provisions of the Homeowners Policy and are often underinsured. Checklist Question 1 Do you own any personal property such as jewelry, furs, golf accessories, or collectibles that you would want to insure on a schedule? Type ___________________ Amount of insurance $__________________ (Examples: fine arts, furs, gun collections, stamp and coin collections, musical instruments, cameras) S1 - Scheduled Personal Property p2

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Why Schedule? continued The word scheduled means that coverage applies to articles of personal property that are individually described on the schedule of covered property, and that a specific amount of insurance is designated for each listed item of personal property. The advantages of scheduled coverage for eligible personal property includes providing:

• Flexibility to tailor coverage • Higher limits of insurance • Broadened coverage

S1 - Scheduled Personal Property p3 The Coverage Gap

Mrs. Calamity owns a valuable diamond ring. Let's use her situation as an example:

The Calamity's Homeowners Policy provides coverage for personal property under Coverage C - Personal Property up to a limit of $150,000. In accordance with ISO rules, the Coverage C limit of insurance should be 50% of the Coverage A - Dwelling Limit. The Calamities have a Dwelling Limit of $300,000, so the Personal Property limit must be $150,000. Mrs. Calamity knows that jewelry is eligible covered property under Coverage C. However, she did not remember that jewelry is one of the types of personal property, subject to a special limit if the cause of loss is theft.

Problem: Mrs. Calamity's ring has a current appraised value of $20,000 subject to a special limit.

S1 - Scheduled Personal Property p4 If the diamond ring is stolen, what part of this value can she recover from the unendorsed Homeowners 3 Special Form? A. $20,000 B. $1500 C. $2500 D. $0 S1 - Scheduled Personal Property p5 The answer is D. $1500. For theft, the ring is only covered up to a special limit of $1500. S1 - Scheduled Personal Property p6

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If the diamond falls out of the ring setting and is lost, what part of this value can Mrs. Calamity recover from her unendorsed Homeowners 3 Special Form? A. $20,000 B. $1500 C. $2500 D. $0 S1 - Scheduled Personal Property p7 The answer is D. $0. Occurrences such as the stone falling out of the ring or losing the ring are not covered perils. S1 - Scheduled Personal Property p8 Review the Homeowners Policy To understand the issues involved with scheduled personal property, we’ll first review the coverage granted to any personal property under the Homeowners Policy Coverage C (assume HO 00 03 Special Form):

• Includes personal property owned or used by the insured anywhere

• Includes personal property owned by a guest or resident employee of the insured while in any residence occupied by the insured

• Includes personal property owned by others while the property is on the residence premises

• Outlines special limits for certain types of property • Insures personal property for 16 named perils

S1 - Scheduled Personal Property p9 Review the Homeowners Policy This is a good time to recall the special limits applicable to personal property under the unendorsed Homeowners Policy, as well as the 16 named perils available for personal property coverage under Homeowners 3 Special Form. First, review the special limits (sub-limits) applicable to certain types of personal property. Click on the image and make sure you've read HO 00 03 Section I, Coverage C - Personal Property 3. Special Limits of Liability. S1 - Scheduled Personal Property p10

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Review the Homeowners Policy Taking a closer look at Mrs. Calamity's Homeowners Policy, you will note that her diamond ring is only subject to a special limit for the theft peril. In the unlikely event that Mrs. Calamity's diamond is irreparably damaged in a covered cause of loss such as a fire, the special limit of $1,500 would not apply. E & O Tip: When losses to high-valued items are paid under the unendorsed Homeowners Coverage C, the overall Coverage C limits of insurance are reduced and may be insufficient to pay for damages to other Coverage C property. By scheduling high valued property under separate endorsement, the Coverage C limit of insurance will be available for losses to general personal property. S1 - Scheduled Personal Property p11 Review the Homeowners Policy

ISO HO 00 03 Special Form insures building property and other structures on the residence premises against direct damage from any cause of loss that isn't specifically excluded by the policy. This is open perils coverage.

In contrast, Coverage C - Personal Property under the ISO HO 00 03 provides coverage for 16 named perils only. When coverage is provided on a named perils basis, it is necessary to explain to the insured that only physical damage caused by those listed perils will be covered. This makes the coverage restrictive. Other options should be considered to broaden coverage. S1 - Scheduled Personal Property p12 HO 04 60 and HO 04 61 What can be done to adequately insure Mrs. Calamity's $20,000 diamond? The $1500 special limit of insurance provided by the Homeowners Policy is insufficient. Two Homeowners Policy endorsement options exist:

• HO 04 60 Scheduled Personal Property Endorsement (with Agreed Value Loss Settlement) and

• HO 04 61 Scheduled Personal Property Endorsement

Both endorsements provide coverage on a scheduled basis. E & O Alert - The need for Appraisals Typically, when scheduled personal property is requested, insurance company underwriters will require the insured to submit appraisals prepared by qualified appraisers. Appraisals may be required every 3 to 5 years. This allows both the insurer and insured to keep up with fluctuating values. Limits of insurance can be assessed and modified as needed. S1 - Scheduled Personal Property p13

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HO 04 60 Scheduled Personal Property Endorsement (with Agreed Value Loss Settlement) This endorsement, HO 04 60, is used to specifically insure certain items of personal property, and provides for loss settlement at an agreed value. In essence, before the loss occurs, the insured and insurer will reach an agreement on the property's value. This becomes the limit of insurance scheduled for that item. Look at the endorsement form at right. Scheduled coverage is triggered by indicating an amount of insurance for any of the following nine classes of personal property:

• Jewelry • Furs and garments trimmed in fur • Cameras and related equipment but not if used

professionally - exception applies • Silverware and related items • Golfer's equipment • Fine arts • Postage stamps • Rare and current coins • Musical Instruments and related articles of equipment

S1 - Scheduled Personal Property p14 Tell Your Customer Scheduling personal items at an agreed value requires the expense of an appraisal in addition to the extra premium. However, it’s an excellent way to insure high value items such as jewelry which have a fluctuating market value. S1 - Scheduled Personal Property p15 HO 04 61 Scheduled Personal Property Endorsement The HO 04 61 Scheduled Personal Property Endorsement differs from the HO 04 60 in its loss settlement provision. This endorsement does not settle losses on an agreed value basis. It will pay the lesser of:

• Actual cash value (ACV) at the time of loss • Cost to repair • Cost to replace • Amount of Insurance shown on the Endorsement

Schedule

However, agreed value is paid on fine arts and cash market value is paid on postage stamps and coins insured on a blanket basis. S1 - Scheduled Personal Property p16

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Which one of the following items is not eligible to be scheduled under HO 04 60 or HO 04 61? A. Scuba Gear B. A valuable painting C. A diamond brooch D. Movie projector S1 - Scheduled Personal Property p17 The answer is A. Scuba gear. The only sporting equipment eligible for the Scheduled Personal Property Endorsements is golfer's equipment. S1 - Scheduled Personal Property p18 Loss Settlement Under HO 04 60 and HO 04 61 A few points to remember about loss settlement under these two endorsements:

• If HO 04 61 is attached to a Homeowners Policy which has been modified to include the replacement cost option for personal property, replacement cost will be considered in the loss of a scheduled item.

• HO 04 60 pays losses according to an agreed value. However, if a loss occurs to a pair or set, the insurance company may either replace the missing piece or pay the difference between the actual cash values of the pair before and after the loss.

• Under HO 04 60, if the insurance company pays the agreed value of a pair or set, the insured must surrender the remaining part(s) of the pair or set, receiving a refund for any unearned premium. If an item is later recovered the insured is obligated to return it to the insurer, or may buy back the pair or set from the insurer.

• Only a total loss reduces the amount of insurance available for a scheduled article.

S1 - Scheduled Personal Property p19 Mrs. Calamity has scheduled her grand piano under HO 04 60 Scheduled Personal Property Endorsement (with Agreed Value Loss Settlement) for $10,000. In January the piano is damaged and must be repaired. The insurance company pays for the repairs, totaling $250. In June, the piano is stolen while she is on vacation. What amount of insurance will she receive for the loss of the piano? A. $10,000 B. $7,000 C. The lesser of the cost to replace or actual cash value. S1 - Scheduled Personal Property p20 The answer is A. $10,000. According to the endorsement language, only a total loss can reduce the amount of coverage available for a scheduled item. S1 - Scheduled Personal Property p21

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Loss Settlement Under HO 04 60 and HO 04 61 Contrast how coverages apply under both scheduled personal property endorsements for Mr. Calamity's Rolex watch: Scheduled Jewelry Item: Serial "F" 2004 President Rolex Watch with Mother of Pearl Dial and Roman numeral markers. — Amount of Insurance: $21,300 (appraised and manufacturer's Retail Sales Price) — Cost to Replace: $6500 (same watch is available in the marketplace at this price) — Actual Cash Value at the time of loss: $17,000 — Cost to Repair: Total loss - the watch was dropped into a paint bucket and cannot be repaired Coverage Option 1 - HO 04 60: He schedules the watch with an amount of insurance of $21,300. This endorsement will pay the full $21,300 agreed value for the loss. Coverage Option 2 - HO 04 61: If he schedules the watch with an amount of insurance of $21,300, this endorsement would only pay $6500. This amount is the lesser of the ACV and the amount of insurance as dictated in the loss settlement provisions of the endorsement. S1 - Scheduled Personal Property p22 Perils Insured Against - Scheduled Personal Property The HO 04 60 and HO 04 61 Endorsements have the added advantage of providing broadened coverage. Both endorsements provide open perils coverage as opposed to named perils coverage. Open perils means that all risks of physical loss to scheduled property are covered subject to the listed exclusions. Example: Mrs. Calamity has scheduled her fur coat under HO 04 60. As she steps outside onto the porch to leave, her daughter accidentally sprays paint on her fur coat while working on a school project outside. The fur is badly damaged. Paint damage is not an excluded cause of loss, therefore, the HO 04 60 Scheduled Personal Property (with Agreed Value Loss Settlement) Endorsement will pay the loss. S1 - Scheduled Personal Property p23

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Perils Insured Against - Scheduled Personal Property continued There are additional restrictions. When a loss occurs due to the breakage of a fragile object such as art glass, statues, or porcelain, the endorsement only insures for 5 named causes of loss. Loss to fine arts during exhibition is excluded. Musical instruments used professionally are excluded. Both endorsements have common exclusions. The endorsement will not pay for damages to personal property due to wear and tear, deterioration, and inherent vice. Likewise, damage caused by insects or vermin will not be covered. Damage to property caused by war and nuclear hazard are also excluded. S1 - Scheduled Personal Property p24 Tell Your Customer Scheduled personal property receives coverage in a greater number of loss situations. Your scheduled personal property is covered up to the limits selected. Unscheduled items of personal property are subject to your Coverage C – Personal Property limit. Unscheduled personal property is covered for the causes of loss described in the policy under Coverage C – Perils Insured Against S1 - Scheduled Personal Property p25 Mr. Calamity drops his expensive camera, with the telephoto lens in place, onto a sidewalk. The camera can be repaired but the lens must be replaced. This accident is a covered cause of loss under: A. Homeowners 3 Special Form only B. Both Scheduled Personal Property Endorsements forms (HO 04 60 and HO 04 61) C. Homeowners 3 special Form and the Scheduled Personal Property Endorsements (HO 04 60 and HO 04 61) D. Not covered under any form. S1 - Scheduled Personal Property p26 The answer is B. Both Scheduled Personal Property Endorsement forms (HO 04 60 and HO 04 61). These two endorsements are very advantageous to your customers with high value personal property. When an item has been damaged because it was dropped, or if it has simply been lost, the insured can recover the loss. S1 - Scheduled Personal Property p27

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Which one of the causes of loss listed below is a covered cause of loss under the Scheduled Personal Property Endorsements for a collection of porcelain figurines? A. The item is knocked over and broken by a housekeeper. B. The item is damaged during restoration and cleaning C. The item is being transported in an automobile and is broken when the auto rear-ends another vehicle. D. The item is stored next to a window and the color fades. S1 - Scheduled Personal Property p28 The answer is C. The item is being transported in an automobile and is broken when the auto rear-ends another vehicle. This example is just one of several causes of loss are excluded under the Scheduled Personal Property Endorsements. Breakage to fragile objects is covered under only limited circumstances. S1 - Scheduled Personal Property p29 Newly Acquired Property In addition to having common exclusions, the HO 04 60 and HO 04 61 endorsements have other coverage features in common:

• Coverage territory is worldwide

• A deductible does not apply

• Coverage for newly acquired property is provided

Many insureds who schedule property often purchase or acquire similar property after policy inception. If the property acquired is of a class that is already scheduled on the policy, automatic coverage under the endorsement will extend to the additional property. However, there are limitations to the coverage: Newly acquired jewelry, furs, cameras or musical instruments are only covered for 25% of the amount of insurance listed for that class, OR $10,000, whichever is less.

• Newly acquired property must be reported to the insurer within 30 days • Premium must be paid from date of acquisition

Newly acquired fine arts is only covered for 25% of the amount of insurance for fine arts.

• New fine arts property must be reported within 90 days • Premium must be paid from date of acquisition

S1 - Scheduled Personal Property p30

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HO 04 61

Mr. Calamity has scheduled his grand piano using the HO 04 61 Scheduled Personal Property Endorsement form.

To settle the loss, the insurance company pays for repairs to the piano.

The workmanship on the repairs doesn't even come close to the beauty of the original piece.

HO 04 60

Mr. Calamity has scheduled his grand piano using the HO 04 60 Scheduled Personal Property Endorsement (with Agreed Value Loss Settlement) form.

To settle the loss, the insurance company simply pays the agreed value listed on the endorsement Schedule for the piano.

S1 - Scheduled Personal Property p31 Key Points: Section 1 - Scheduled Personal Property Give an example of an item of personal property which should be scheduled to broaden the covered causes of loss. Give an example of an item of personal property which should be scheduled to increase the limit of liability available. How does loss settlement under HO 04 60 Scheduled Personal Property (with Agreed Value) differ from loss settlement under HO 04 61 Scheduled Personal Property? List the nine named perils under Homeowners 3 Special Form Coverage C Perils Insured Against. If your insured acquires a new item of personal property in a class that has already been scheduled, how is coverage applied to the newly acquired item? S1 - Scheduled Personal Property p32

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SECTION 2 - PERSONAL PROPERTY REPLACEMENT COST LOSS SETTLEMENT Learning Objectives — Know how personal property is valued for loss settlement under the ISO Homeowners Policy. — Know which types of personal property are eligible for coverage under the HO 04 90 Personal Property Replacement Cost Settlement:

• Coverage C Personal Property • Any specifically insured personal property not subject to agreed value loss settlement.

— Describe an example of a loss exposure which suggests the need to purchase replacement cost coverage for personal property under the HO 04 90 Personal Property Replacement Cost Loss Settlement Endorsement. — Give examples of personal property which is ineligible for replacement cost loss settlement and explain why. S2 - Personal Property Replacement Cost Loss Settlement p1 Personal Property is valued at actual cash value for loss settlement purposes under the ISO Homeowners Policy. The insured can purchase replacement cost coverage for certain classes of personal property by endorsing the policy. It’s important to question your customer about their personal property, and identify any items that they’d like to insure for replacement cost. Checklist Question 2 Do you have any personal property that you would want replacement cost provided? Type ___________________ Amount of insurance $__________________ S2 - Personal Property Replacement Cost Loss Settlement p2 Loss Settlement at Replacement Cost for Personal Property

Like many families, the Calamity's own washing machines, TVs, home theatres, stereos, microwaves and other electrical appliances. The Calamity's home is struck by lightning during a storm. In addition to the damage to the home, five different electrical appliances are ruined by the lightning strike. S2 - Personal Property Replacement Cost Loss Settlement p3

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The appliances can be replaced for $1800. The original prices of each totaled $2100. The adjuster allows for 20% depreciation. What amount can the Calamities recover under their unendorsed Homeowners Policy? (Assume ISO HO 00 03 Special Form.) A. $1800 B. $2100 C. $1680 D. $1440 S2 - Personal Property Replacement Cost Loss Settlement p4 The answer is D. $1440. Actual cash value is calculated using current replacement cost minus the amount of depreciation. It’s easy to see the coverage gap. To demonstrate enter the amount that the Calamity’s will spend, enter 1800 in to the calculation below and press 'Enter'. Replacement Cost Amount Paid by Insurer Out of Pocket Expense _____ - $1400 = ___________ If this had been an even larger loss, such as fire damage to much of the personal property in the house, the Calamity Family would pay a considerable amount out of pocket, just to replace what they owned before the loss. S2 - Personal Property Replacement Cost Loss Settlement p5 Review the Homeowners Policy The Calamity’s television, washing machine, dryer, microwave and sound system were ruined by the lightning strike. Unless the policy is endorsed to provide like kind replacement for these types of properties, the adjuster will value them at replacement cost minus depreciation, or actual cash value. S2 - Personal Property Replacement Cost Loss Settlement p6 HO 04 90 Personal Property Replacement Cost Loss Settlement Endorsement The Calamity Family will benefit by attaching HO 04 90 Personal Property Replacement Cost Loss Settlement Endorsement to their Homeowners Policy. S2 - Personal Property Replacement Cost Loss Settlement p7 Triggering Coverage There is no schedule to fill out. Coverage is indicated on the Declarations Page. S2 - Personal Property Replacement Cost Loss Settlement p8 Tell Your Customer Some types of personal property are ineligible for replacement cost coverage, even if the endorsement has been attached to your policy.

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Look at the endorsement language under B. Ineligible Property.

• Items such as antiques, fine arts, paintings, and other rare items which cannot be replaced are ineligible.

• Items with historical value such as memorabilia and collectors pieces cannot be settled at replacement cost.

• Items which are not maintained or working, outdated or obsolete or in storage are not eligible.

S2 - Personal Property Replacement Cost Loss Settlement p9

Ineligible for Replacement Cost Valuation - HO 04 90

Mr. Calamity has an old washing machine and dryer down in the basement. The appliances aren't hooked up, in fact, he's been meaning to resell them. If they were damaged in a fire, the loss settlement would be actual cash value.

Mr. Calamity's collection of old baseball cards and autographed baseballs would be settled at actual cash value if damaged or stolen.

Eligible for Replacement Cost Valuation - HO 04 90

Mr. Calamity is a football fan and his home theatre equipment is state of the art. If it were ever stolen while the family was away, he'd like to recover the replacement cost.

Mrs. Calamity has purchased very high quality installed carpeting for the family home. She'd like to be able to recover the cost to replace it if there were a fire or other covered cause of loss.

S2 - Personal Property Replacement Cost Loss Settlement p10 Tell Your Customer You can refer to Part C of the HO 04 90 Personal Property Replacement Cost Loss Settlement Endorsement to understand how a loss to your personal property would be settled. The policy will pay no more than the cost to replace the item, the cost to repair the item or the applicable limit of insurance, whichever is lowest. The policy will pay no more than the actual cash value of any item over $500 until it is actually repaired or replaced. S2 - Personal Property Replacement Cost Loss Settlement p11

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Replacement Cost Loss Settlement for Scheduled Personal Property

When the HO 04 90 Endorsement has been attached to the policy, certain classes of scheduled personal property under HO 04 61 Scheduled Personal Property Endorsement receive replacement cost valuation for loss settlement. (It has no effect on personal property subject to agreed value loss settlement.) Make sure you read the endorsement language under HO 04 90 Personal Property Replacement Cost Loss Settlement with respect to loss settlement for scheduled personal property.

S2 - Personal Property Replacement Cost Loss Settlement p12

Mr. Calamity has endorsed his policy to include HO 04 90 Personal Property Replacement Cost Loss Settlement. He has no other optional endorsements related to Personal Property Coverage. His firearms collection must be replaced after a theft loss. The replacement cost is $3,000. How much will his Homeowners 3 Special Form pay?

A. $1500 B. $3000 C. $2500 D. $500 S2 - Personal Property Replacement Cost Loss Settlement p13 The answer is C. $2,500. HO 04 90 will not pay more than the available limits or any applicable limits stated in the policy. S2 - Personal Property Replacement Cost Loss Settlement p14 Key Points: Section 2 - Personal Property Replacement Cost Loss Settlement Does personal property receive replacement cost valuation for loss settlement under the unendorsed Homeowners Policy? When does HO 04 90 Personal Property Replacement Cost Loss Settlement offer replacement cost loss settlement to specifically insured personal property? What types of personal property are ineligible for replacement cost loss settlement under HO 04 90? Explain why a customer might want to purchase replacement cost coverage for personal property. S2 - Personal Property Replacement Cost Loss Settlement p15

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SECTION 3 - INCREASED SPECIAL LIMITS OF LIABILITY ENDORSEMENT Learning Objectives — Know the classes of personal property which are subject to special limits under the unendorsed Homeowners Policy. — Know the provisions applicable to electronic apparatus and the special limits which apply. — Calculate a coverage gap due to insufficient limits of liability under the unendorsed Homeowners Policy for certain classes of personal property which are subject to special limits of liability. — Know the maximum limits of insurance allowed for personal property under HO 04 65 Coverage C Increased Special Limits of Liability. — Explain the provisions for Loss Settlement under HO 04 65 S3 - Increased Special Limits of Liability Endorsement p1 Several classes of personal property which your customer will insure under Homeowners Coverage C are subject to special limits of liability. It’s important to get a clear picture of any type of personal property which could present an exposure for loss to your customer. Some items should be specifically insured, such as the jewelry we discussed in the last section. For others, the limit of liability can simply be increased for that class of property. Checklist Question 3 Certain types of personal property are subject to special limits in the homeowners policy as shown in parenthesis ( ) below. For each category of property, what is the total value of property you own? _________ ($200) money and related property _________ ($1,500) securities, accounts, deeds, and letters of credit _________ ($1,500) jewelry, watches, furs and precious stones subject to loss by theft _________ ($2,500) firearms subject to loss by theft _________ ($2,500) silverware and related property subject to loss by theft _________ ($1,500) various electronic apparatus while in or upon a motor vehicle or motorized land conveyance S3 - Increased Special Limits of Liability Endorsement p2

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Increasing the Homeowners Coverage C - Special Limits In the previous section, Mrs. Calamity decided to schedule a $20,000 diamond ring using the HO 04 60 Scheduled Personal Property (with Agreed Value Loss Settlement). The diamond ring is really the most expensive piece of personal property that she owns, but the Calamities own other items which she is concerned about:

$2000 Stock certificates $3500 Rolex watch $3500 Mr. Calamity's gun collection $5000 Jewelry (all items less than $1000)

All of these items are covered by Coverage C - Personal Property under the HO 00 03 Special Form. However, special limits of liability apply.

S3 - Increased Special Limits of Liability Endorsement p3 Mr. Calamity’s gun collection has an actual cash value of $3500. Do you remember the special limit of insurance which applies to this gun collection under HO 00 03 Special Form Coverage C – Personal Property? A. $500 B. $1000 C. $1500 D. $2500 S3 - Increased Special Limits of Liability Endorsement p4 The answer is D. $2500. The potential loss exposure for Mr. Calamity’s collection of firearms is $1000. S3 - Increased Special Limits of Liability Endorsement p5 Review the Homeowners Policy When discussing the special limits of liability which apply to certain classes of personal property, you can refer your customer Section I Property Coverages C. Coverage C 3. a-k. S3 - Increased Special Limits of Liability Endorsement p6

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Exercise – Special Limits under Coverage C Calculate the exposure for the other items which are of concern to the Calamity Family. The special limit for the watch is applicable if the cause of loss is theft. Type the correct special limit into the field provided and then press enter: Items ACV Homeowners Limit Uninsured Portion Firearms $3500 - ________ = ________ Jewelry $5000 - ________ = ________ Stock Certificates $2000 - ________ = ________ S3 - Increased Special Limits of Liability Endorsement p7 Special Limits for Electronic Apparatus The special limits for electronic apparatus are applied according to whether or not the item is:

• in business or personal use;

• attached or not attached to a vehicle;

• is in use on the residence premises; or

• away from the residence premises

S3 - Increased Special Limits of Liability Endorsement p8 Review the Homeowners Policy Let's look at an example from the provisions for "electronic apparatus" under Homeowners Coverage C Special Limits. Imagine that Mr. Calamity is a salesman who regularly travels to call on customers. He owns a satellite phone which he uses when he is traveling to make sales calls. The ACV of this phone is $3,000.

• used primarily for business • installs in his auto and can be powered by it • also used away from the auto

What special limit of liability applies to the satellite phone? A. $500 B. $1500 C. $2500 S3 - Increased Special Limits of Liability Endorsement p9

Electronic apparatus; on the residence premises; not in a motor vehicle, not designed to be installed in and powered by a motor vehicle. Electronic apparatus; away from the residence premises, not in a motor vehicle, not designed to be installed in and powered by a motor vehicle. Electronic apparatus equipped to be installed and powered by a motor vehicle, used in or upon a motor vehicle anywhere Electronic apparatus equipped to be installed in and powered by a motor vehicle, not used in a motor vehicle, used away from the residence.

Business Use Personal Use $2500 Coverage C Limit $500 Coverage C Limit $1500 $1500 $1500 $1500

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The answer is B. $1,500. If someone steals Mr. Calamity's satellite phone, the uninsured portion of the loss is estimated to be $1,500. S3 - Increased Special Limits of Liability Endorsement p10 HO 04 65 Coverage C Increased Special Limits of Liability The Calamity's have personal property items with values above the special limits of liability available under the Homeowners Policy. The policy can be endorsed to increase the special limits for some of these items. Coverage is triggered for eligible classes of property on this endorsement. Individual items of personal property are not listed on the endorsement. S3 - Increased Special Limits of Liability Endorsement p11 The table at right describes the maximum limits allowable under ISO rules for increases to the special limits for certain classes of personal property. Note that for jewelry, not more than $1,000 will be paid for any one item. Review the Calamity's personal property items for the endorsement:

• Firearms: Uninsured portion $1,000, new limit required $3,500 • Jewelry: Uninsured portion $3,500, all items under $1,000, new limit required $5,000 • Stock Certificates: Uninsured portion $500, new limit required $2,000 • Satellite Phone: Uninsured portion $1,500, new limit required $3,000

S3 - Increased Special Limits of Liability Endorsement p12 Triggering Coverage How should the HO 04 65 Endorsement Schedule be completed to adequately cover the Calamity's firearms, securities and jewelry exposures? On the endorsement schedule, the increase to the special limit of liability is listed next to the class of property, then the total limit of liability is shown for that class of property. S3 - Increased Special Limits of Liability Endorsement p13 Do you remember Mr. Calamity's Rolex watch? We included it at the beginning of the lesson because this endorsement is not the appropriate solution for insuring it! Which one of the following endorsements would be used if the insured wishes to recover a specific amount for the Rolex? A. Scheduled Personal Property (with Agreed Value Loss Settlement) B. Personal Property Replacement Cost Loss Settlement C. Scheduled Personal Property Endorsement S3 - Increased Special Limits of Liability Endorsement p14

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The answer is A. Scheduled Personal Property Endorsement (with Agreed Value Loss Settlement). The other two endorsements can insure the Rolex, but loss settlement will not be a value agreed to by the insured and the insurer. S3 - Increased Special Limits of Liability Endorsement p15 Tell your Customer The HO 04 65 Coverage C Increased Special Limits of Liability Endorsement does not change any of the loss settlement provisions for personal property. Any loss to an item covered under this endorsement will be settled at the lesser of actual cash value, the cost to repair or replace or the available limits of liability scheduled for that class of property, subject to the maximum limit available for Coverage C – Personal Property S3 - Increased Special Limits of Liability Endorsement p16 Mr. Calamity is crossing a lake with a hunting partner when their boat capsizes. The two hunters get to shore in good shape, but their guns and gear headed straight for the bottom of the lake. Mr. Calamity has endorsed his Homeowners Policy to include HO 04 65 Coverage C Increased Special Limits of Liability. He lost three guns valued at $1200 actual cash value. His limit of insurance for firearms was increased by $1000. What is the amount that Mr. Calamity is able to recover for the guns? A. $1200, available limits are $2500 B. $1200, limits available up to the limit of Coverage C C. $0, this is not a covered cause of loss D. $100, maximum increase to limit shown on the endorsement S3 - Increased Special Limits of Liability Endorsement p17 The answer is C. $0, this is not a covered cause of loss. Don’t forget that this endorsement does not change any coverage provisions other than to increase limits of liability for certain classes of Coverage C Personal Property. S3 - Increased Special Limits of Liability Endorsement p18

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Important Points about HO 04 65 Coverage C Increased Special Limits of Liabilty Endorsement Remember that certain classes of property under this endorsement may only receive a limit of liability up to $1,000. Not all of the classes of personal property which are subject to special limits under the Homeowners Policy can be increased with this endorsement. Classes which cannot be scheduled for increased special limits are:

• Watercraft • Trailers • Business Property

Any scheduled personal property separately insured, such as personal property scheduled under HO 04 60 or HO 04 61, is not eligible for increased limits. If the Personal Property Replacement Cost Loss Settlement Endorsement has been attached to the Homeowners Policy, replacement cost loss settlement also applies to personal property scheduled under HO 04 65. S3 - Increased Special Limits of Liability Endorsement p19 Related Coverage HO 04 65 Coverage C Increased Special Limits of Liability is only used with Homeowners 3 Special Form. For the ISO Homeowner Comprehensive Form, HO 00 05, you must use HO 04 66. For the ISO Homeowners Tenants Form, HO 00 04, use HO 05 24. For the ISO Homeowners Unit Owners Form, HO 04 06, use HO 17 31. Links to these forms are provided for your information. The final exam and review test will not cover these additional forms. S3 - Increased Special Limits of Liability Endorsement p20 Key Points: Section 3 - Increased Special Limits of Liability Endorsement List three types of personal property which are subject to special limits under the Homeowners Policy. What is the limit of liability for an item of electronic equipment, not attached to a motor vehicle, used primarily for business, when away from the residence? Describe how HO 04 65 Increased Special Limits of Liability improves coverage for certain classes of personal property. Explain how losses are settled under HO 04 65 Increased Special Limits of Liability. S3 - Increased Special Limits of Liability Endorsement p21

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SECTION 4 - SPECIAL COMPUTER COVERAGE ENDORSEMENT Learning Objectives — Know the coverage provisions for computer equipment under the unendorsed Homeowners Policy. — Recognize examples of losses to computer equipment which are excluded from coverage under the HO 00 03 Special Form. — Describe examples of losses to computer equipment which are covered by the HO 04 14 Special Computer Coverage Endorsement. — Describe a loss to computer equipment which would be excluded from coverage under HO 04 14. — Explain how a loss would be settled under HO 04 14 Special Computer Coverage Endorsement. S4 - Special Computer Coverage Endorsement p1 The Homeowners Policy insures computer equipment under Coverage C – Personal Property. It’s very likely that your customer will have an exposure for loss to computer equipment which cannot be recovered under an unendorsed Homeowners Policy. Be sure to check for this loss exposure when working with your customer. What is computer equipment? Although not defined in the Homeowners Policy, computer equipment commonly refers to:

• Computer hardware and software • Computer operating systems & networks • Electronic parts, equipment and peripheral equipment connected to computers

Checklist Question 4 What are your concerns about your computer coverage? What type of computer equipment do you have in your home? How many computers do you have in you home? Are any computers under warranty? How are your computers used at home, personal use or for business? S4 - Special Computer Coverage Endorsement p2

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Special Computer Coverage

The Calamity's have four computers. Like many families, they spend a lot of time using computers, the internet and software which they've purchased for their own private use.

Mr. Calamity and the children use laptops. Mrs. Calamity uses a desktop computer at home. It is connected to a scanner, and a display monitor. A printer and wireless router (a home network device for connecting to the internet) are located in a closet on the first floor of the home.

S4 - Special Computer Coverage Endorsement p3 Computer coverage is restricted by several means under the unendorsed Homeowners Policy. Let's review how the Coverage C Limits and Special Limits apply to computer equipment and electronic apparatus. S4 - Special Computer Coverage Endorsement p4 You can see immediately that the personal use of a computer at the residence premises is covered just like any other personal property, unless it is installed in and powered by a motor vehicle. Business use is subject to more restrictions. Application of Limit of Liability for Coverage C Personal Property S4 - Special Computer Coverage Endorsement p5

Personal property used on the residence premises (computer and computer equipment, as a class, are not subject to a special limit.) Personal Property (such as computers and computer equipment) used away from the residence premises (computers and computer equipment, as a class, are not subject to a special limit.) Electronic apparatus (such as computer equipment) not in a motor vehicle, which can be installed in and powered by a motor vehicle, used away from the residence premises. Electronic apparatus (such as computers and computer equipment) installed in and powered by a motor vehicle.

Business Use Personal Use $2500 Coverage C Limit $500 10% of Coverage C Limit $1500 10% of Coverage C Limit $1500 $1500

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Computer coverage is also restricted under the unendorsed Homeowners Policy with respect to causes of loss. Computers are covered for the 16 named perils under the unendorsed Homeowners 3 Special Form.

• Fire or Lightning • Windstorm or Hail • Explosion • Riot or Civil Commotion • Aircraft • Vehicles • Smoke • Theft

S4 - Special Computer Coverage Endorsement p6 Mrs. Calamity is painting a wall in her son’s room. She doesn’t realize he’s left his computer open on the floor. She accidentally spills paint onto the keyboard of her son’s lap top computer. Is this accident covered under the Calamity’s unendorsed Homeowners Policy? (Assume HO 00 03 Special Form) A. Yes B. No S4 - Special Computer Coverage Endorsement p7 The answer is No. Personal Property under Homeowners 3 Special Form is covered for 16 named perils, and spilled paint is not one of them. If the Calamity’s Homeowners Policy is endorsed to include HO 04 14 Special Computer Coverage, this loss situation is covered. S4 - Special Computer Coverage Endorsement p8 Review the Homeowners Policy Computer equipment is covered property under the Homeowners Coverage C Personal Property. Subject to the Coverage C Limit and Special Limits of Liability, both personal use and business use are covered. Homeowners who use their computers for business purposes will be interested in the Property Not Covered section under Coverage C of the Homeowners Policy. Losses to business data and software on a computer are specifically excluded under Section I Coverage C 4. Property Not Covered i. Business Data. When we study the Special Computer Coverage endorsement, this restriction will be reinforced. S4 - Special Computer Coverage Endorsement p9

• Falling Objects • Weight of Ice, Snow or Sleet • Accidental Discharge of Water or Steam • Sudden & Accidental Tearing Apart, Cracking,

Burning or Bulging Freezing • Sudden & Accidental Damage from Artificially

Generated Electrical Current • Vandalism or Malicious Mischief • Volcanic Eruption

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Which of the following types of losses to the Calamities software will be covered under the unendorsed Homeowners Policy? Disregard any special limits which apply. S4 - Special Computer Coverage Endorsement p10 The router and the stolen computer are covered up to 10% of the limit of Coverage A, so we don’t have a problem with limits of liability. The real problem is that the 16 named perils which apply to Coverage C – Personal Property do not often cause a loss to computer equipment. S4 - Special Computer Coverage Endorsement p11 What if your insured reports that he was working at his personal computer at his home and a power surge "fried" the computer's circuit board and ruined the software and personal data on his computer? Can the unendorsed Homeowners Policy respond to any or all of the costs of this loss? A. Cost to repair the circuit board of the computer B. Cost to re-install the operating system and applications present on the computer at the time of the loss C. Technician's labor hours to retrieve the data which was on the hard drive at the time of the loss D. All of the above S4 - Special Computer Coverage Endorsement p12 The answer is D. All of the above. The Homeowners Policy will respond to each loss because the use of the computer is personal. Loss to business data, for example, would not be covered. S4 - Special Computer Coverage Endorsement p13 HO 04 14 Special Computer Coverage Endorsement HO 04 14 Special Computer Coverage Endorsement first defines computer equipment:

• Computer hardware, software, operating systems or networks

• Related equipment, electronic parts, equipment designed to be used or connected to computer equipment listed above

S4 - Special Computer Coverage Endorsement p14 Triggering Coverage There’s no schedule to fill out, coverage is indicated by listing the endorsement on the Policy Declarations Page. The endorsement does not the increase limits of liability for computer equipment, nor does it add back any types of computer equipment not covered under the Homeowners Policy. Also, the endorsement does not change loss settlement provisions. Qualified losses to computers will be valued at the lesser of the cost to repair or replace or actual cash value just like qualified Personal Property losses. S4 - Special Computer Coverage Endorsement p15

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Perils Insured Against We've seen that the most common coverage problem with computer equipment is that the damage that is likely to occur is often not a covered cause of loss listed under the Coverage C Personal Property named perils. With respect to computer equipment, HO 04 14 Special Computer Coverage Endorsement replaces the Section I Coverage C Perils Insured Against with policy language which broadens coverage to "open perils." Open perils coverage means risk of direct damage or loss unless specifically excluded by the endorsement language. S4 - Special Computer Coverage Endorsement p16 HO 04 14 Exclusions It's important to understand that although the HO 04 14 Special Computer Coverage Endorsement broadens coverage for computers, there are still several important exclusions. Homeowners Section I Property Exclusions still apply. These include Ordinance or Law, Water Damage, Power Failure, Neglect, War, Nuclear Hazard, Intentional Loss, and Governmental Action. This endorsement adds 14 additional exclusions which can be found under HO 04 14 Section I Perils Insured Against. 1-9. S4 - Special Computer Coverage Endorsement p17 Summary of Exclusions under HO 04 14 Special Computer Coverage Remember that the endorsement does not change the exclusions under Homeowners Section I Exclusions. You can review those by looking at your print of the Homeowners 3 Special Form. 14 additional exclusions named in the endorsement language are:

• Freezing of plumbing, heating and other household systems* • Theft from dwellings under construction (until finished or occupied) • Mold, fungus, wet rot • Vandalism or malicious mischief • Dampness & changes in temperature* • Refinishing, renovating or repairing property • Collision* • Acts or decisions, including failure to act or decide* • Wear and tear, marring, deterioration • Mechanical breakdown, latent defect, inherent vice or any quality that causes it to

damage or destroy itself • Smog, rust, corrosion, dry rot • Pollution losses other than those covered in the Homeowners Policy • Birds, vermin, rodents, insects • Animals owned or kept by the insured

* Exceptions apply - see the endorsement form S4 - Special Computer Coverage Endorsement p18

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Does the Endorsement Cover Damage from a Computer Virus? The short answer is No. Even though the definition of covered computer equipment in the endorsement includes software, the endorsement's Section I Perils Insured Against 2.b.(9)b. excludes the damages caused by a virus. ("Mechanical breakdown, latent defect, inherent vice, or any quality in property that causes it to damage or destroy itself.") Here's an example of a software loss which IS covered: Mrs. Calamity's desktop computer, located in her kitchen, was damaged when it was covered in fire extinguisher foam used to suppress a stovetop fire. All the software contained in the computer had to be replaced. The program which she relied on for household management had to be replaced. The cost of this software alone was $350.00. If a virus had ruined her hard drive, she would not be able to recover the cost to replace this software under HO 04 14. S4 - Special Computer Coverage Endorsement p19 Mr. Calamity left his laptop in the basement. While the family was away, heavy rains entered the basement through an open window and ruined the computer. Can he recover the value of the computer under his HO 04 14 Special Computer Coverage Endorsement? A. Yes B. No S4 - Special Computer Coverage Endorsement p20 The answer is No. If the cause of loss is specifically excluded under the homeowners policy, it is excluded under the HO 04 14 Special Computer Coverage Endorsement. This loss is excluded under Water Damage. S4 - Special Computer Coverage Endorsement p21 Tell Your Customer The endorsement language in HO 04 14 Special Computer Coverage does not change the provisions for loss settlement under the Homeowners Policy. The endorsed policy will pay actual cash value, cost to repair or replace, or available limit of liability, whichever is lowest. If a service agreement or warranty exists for the computer equipment which has been damaged, coverage under the endorsement or under the Homeowners Policy is always excess over any amount provided by the warranty or service agreement. S4 - Special Computer Coverage Endorsement p22

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Key Points: Section 4 - Special Computer Coverage Endorsement What limit of insurance is applicable for loss to a personal use computer at the residence premises? What limit of insurance is applicable for loss to a computer that is primarily used for business at the residence premises? Describe an example of a loss to a computer that would be excluded from coverage under the Homeowners Policy. How does the HO 04 14 Special Computer Coverage Endorsement improve coverage for computers under the Homeowners Policy? Does the HO 04 14 Special Computer Coverage Endorsement cover damage to a computer by a computer virus? Which coverage is primary, a dealer or a manufacturer's warranty or the Special Computer Coverage Endorsement? S4 - Special Computer Coverage Endorsement p23

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SECTION 5 - PERSONAL PROPERTY AT OTHER RESIDENCES Learning Objectives — Know how to calculate the amount of coverage for personal property at other residences. — Describe personal property at another residence which is ineligible for coverage under Homeowners 3 Special Form Coverage C. — Given a specific example, estimate the amount of potential loss to personal property at other residences. — Understand when the limit of liability for personal property at other residences would not apply. — Explain how a loss would be settled under HO 04 50 Personal Property at Other Residences - Increased Limits Endorsement. S5 - Personal Property at Other Residences p1 It’s important to explain to your Homeowners customer that the limit of liability available for any personal property at another owned residence is only a percentage of the limit Coverage C – Personal Property. If your insured has a weekend or vacation residence, for example, make sure you identify any potential loss exposure to personal property stored or located at the secondary residence. Checklist Question 5 How much personal property do you have at other residences? Location of the residence ________ Total Personal Property at this location $________ S5 - Personal Property at Other Residences p2 Increasing Limits for Personal Property at Another Residence

The Calamity family spends several weeks throughout the year at their lake house.

Rather than having to bring their favorite personal property items each trip, they've decided to leave certain items permanently at the lake house. These items include their computers, a TV, the children's video game consoles, personal audio players, fishing equipment, golf clubs, mountain bikes, Mr. Calamity's outdoor grill, a generator and plenty of other miscellaneous personal property along with them.

S5 - Personal Property at Other Residences p3 In the Calamity’s case, the dwelling limit on their Homeowners Policy is $300,000 and the limit of liability for Coverage C is $150,000 (300,000 X 50%).

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How much of the Coverage C limit of liability is available for personal property at other residences? A. All of it, the insured's owned personal property is covered anywhere. B. $2500 C. 10% of the limit of liability for Coverage C - Personal Property or $1000, whichever is greater D. 5% of the limit of liability for Coverage C - Personal Property or $1000, whichever is greater S5 - Personal Property at Other Residences p4 The answer is C. 10% of the limit of liability under Coverage C – Personal Property or $1000, which ever is greater. In the Calamity’s case, the dwelling limit is $300,000 and the limit of liability for Coverage C is $150,000 (300,000 X 50%). This means that the limit of liability available for their personal property at other residences is $15,000 (150,000 X 10%). S5 - Personal Property at Other Residences p5 Review the Homeowners Policy Make sure that you’ve reviewed the Homeowners policy language applicable to personal property at another residence. S5 - Personal Property at Other Residences p6 What limit of liability applies to personal property at other residences if the Calamity Family must move to their lake house while their home is getting repaired after a fire? A. 10% of the limit of liability for Coverage C - Personal Property B. The limit of liability for Coverage C - Personal Property C. The total limit of liability scheduled under HO 04 50 Personal Property at Other Residences - Increased Limit. S5 - Personal Property at Other Residences p7 The answer is B. The limit of liability for Coverage C – Personal Property Coverage C 2. Limit for Property at Other Residences doesn’t apply when personal property is moved to another residence because the principal residence is unfit to live in, or when the personal property is in the process of being moved to a new principal residence. S5 - Personal Property at Other Residences p8

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Calculate the Exposure The Calamity’s mountain bikes alone have an actual cash value of $4000. A major theft or fire at the beach house could easily “add up” to a personal property loss which would exceed the limit of liability available under the unendorsed policy. Also, if the insured has endorsed his Homeowners Policy for replacement cost loss settlement for some of the items of personal property used at the beach house, this limit of liability might be “used up” even more quickly. To demonstrate this, enter 15,000 (without the comma) as the limit of liability available for personal property at another residence, then press enter. _______ Limit of liability for personal property at another residence - $4000 ACV mountain bikes - $9000 Miscellaneous other personal property - $3000 Computers and golf clubs _____________________________________________________________________ = ______ Out of pocket expense Note: If HO 04 90 Endorsement is attached to the Homeowners Policy, the replacement cost settlement valuation applies. S5 - Personal Property at Other Residences p9 HO 04 50 Personal Property at Other Residences Increased Limit The endorsement simply increases the limit available to insure personal property at the secondary residence. All other policy provisions apply. S5 - Personal Property at Other Residences p10 Triggering Coverage The Calamity’s have decided that they would like to increase the limit of liability for the personal property located at the lake house to $1000 over the amount normally available under the Homeowners Policy. (Assume HO 00 03 Special Form) Coverage is triggered on the endorsement schedule by describing the location of the secondary residence, the increase to the limit of liability for personal property at this residence, and the total limit of liability for personal property at this residence. S5 - Personal Property at Other Residences p11

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Tell Your Customer The HO 04 50 Personal Property at Other Residences - Increased Limit Endorsement does not change any of the loss settlement provisions for personal property. Any loss to an item covered under this endorsement will be settled at the lesser of actual cash value, the cost to repair or replace or the available limits of liability. If HO 04 90 Replacement Cost Settlement Endorsement is attached, loss settlement is based on replacement cost basis. S5 - Personal Property at Other Residences p12 Key Points: Section 5 - Personal Property at Other Residences How do you calculate the limit of liability available under the Homeowners Policy for personal property, ordinarily kept at the primary residence, taken to another residence by the insured? When can the insured take Personal Property to a secondary residence and still be covered up to the full limits of Coverage C? How is loss settlement handled for personal property under HO 04 50 Personal Property at Other Residences? S5 - Personal Property at Other Residences p13

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