Understanding Homeowner Policy Exclusions & Endorsements
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Understanding Homeowner Policy
Exclusions & Endorsements
Introduction
Many homeowners feel that when they purchase a homeowner insurance policy it automatically
provides coverage for all risks of physical loss.
The purpose of this course is to determine how companies use exclusions, limitations, and
endorsements to control the exposure that is being accepted. We want to develop a better
understanding of what the standard policy covers and the use of some of the available
endorsements to modify the coverage for an exposure of the client.
Companies also use some limitations to control the amount of exposure they are willing to
accept. We want to develop an understanding of these as well.
This is important to the agent because he or she serves as the risk manager for the insured. It
also is important to the adjuster because this is the way he or she determines if the loss is
covered.
Eligibility
Homeowner policies may only be issued to cover premises which are principally used for
private residential purposes such as the following:
1. Owner-occupants of one, two, three or four family structures which do not contain more
than 4 families nor more than two boarders or roomers per family. So a single family
dwelling, a duplex, a triplex and a 4 unit building are eligible as long as the owner is the
occupant of the structure or at least one of the units in the structure. Companies will use
forms HO-2, HO-3, HO-5, and HO-8 to cover these residential dwellings.
2. Tenants in non-owned buildings used primarily for residential purposes (HO-4);
3. Owner-occupants of condominiums are eligible for coverage for their interest in the
condominium as well as contents (HO-6);
4. Dwellings under construction;
5. Dwellings purchased under installment contracts and/or land contracts when purchaser is
occupant of the dwelling.
6. An occupant of a dwelling under a life estate; or where the property is deeded to a trust
7. Seasonal dwellings when the insured is covered under a Homeowner Policy for their
primary dwelling.
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8. Mobile homes are eligible with the attachment of the mobile home endorsement. These
risks are usually subject to individual company underwriting guidelines.
9. The dwelling must be used exclusively as a residence, except for certain incidental
occupancies such as offices, professional or private schools or studios.
Note: Except for incidental farm liability, farm property is not eligible under any of the
homeowner forms. A separate farm insurance program is available for these types of risks.
Definitions
The homeowner policy contains several definitions. The following are very important for this
discussion:
1. “Insured” means:
a. You and residents of your household who are:


Your relatives; or
Other persons under the age of 21 and in the care of any person named above.
b. A student enrolled in school full time, as defined by the school, who was a resident
of your household before moving out to attend school, provided the student is under
the age of:


24 and your relative; or
21 and in your care or the care of a person described in a. above.
c. Under Section II (personal liability):


With respect to animals or watercraft to which this policy applies, any person or
organization legally responsible for these animals or watercrafts which are
owned by you or any person included in a. or b. above. “Insured” does not
mean a person or organization using or having custody of these animals or
watercraft in the course of any “business” or without consent of the owner; or
With respect to a “motor vehicle” to which this policy applies:
•
•
Persons while engaged in your employ or that of any person included in
a. or b. above; or
Other persons using the vehicle on an “insured location” with your
consent.
2. “Insured Location” means:
a. The “residence premises”.
b. The part of other premises, other structures and grounds used by the insured as a
residence; and
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(1) Which is shown in the Declarations; or
(2) Which is acquired by the insured during the policy period for the insured’s use
as a residence;
c. Any premises used by the insured in connection with the premises described in a.
and b. above.
d. Any part of a premises:
(1) Not owned by an “insured”; and
(2) Where an “insured” is temporarily residing;
e. Under Section II Liability Vacant land, other than farm land, owned by or rented to
an “insured” is an insured location;
f. Land owned by or rented to an “insured” on which a one, two, three or four family
dwelling is being built as a residence for an “insured’.
g. Individual or family cemetery plots or burial vaults of an “insured”; or
h. Any part of a premise occasionally rented to an “insured” for other than “business”
use.
3. “Business” means:
a. A trade, profession or occupation engaged in on a full-time, part-time or occasional
basis, or any other activity engaged in for money or other compensation where an
“insured” receives more then $2,000 in total compensation for the 12 months
before the beginning of the policy period.
This definition does not apply to:
(1) Volunteer activities for which no money is received other than payment for
expenses incurred to perform the activity
(2) Providing home day care services for which no compensation is received other
than the mutual exchange of such services or the rendering of home day care
services to a relative of an “insured”.
4. “Residence employee” means:
a. An employee of an “insured” or an employee leased to an “insured” by a labor
leasing firm, under an agreement between an “insured” and the labor leasing firm
whose duties are related to the maintenance or use of the “residence premises”
including household and domestic services or one who performs similar duties
elsewhere not related to the “business” of an “insured”.
This definition does not apply to:
(1) A temporary employee who is furnished to an “insured” to substitute for a
permanent “residence employee” on leave or to meet seasonal or shortterm workload conditions.
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5. “Residence premises” means:
a. The one family dwelling where you reside
b. The two, three, or four family dwelling where you reside in at least one of the family
units; or
c. That part of any other building where you reside
And which is shown as the “residence premises” in the declarations. “Residence
also includes other structures and the grounds at that location
premises”
Under both Sections I and II, when the word “an” immediately precedes the word “insured,”
the words together mean one or more insureds.
Homeowner Policy Forms
The named peril policy covers losses caused to covered property by the perils listed and
“named” in the policy. Exclusions spell out what is not covered. In some cases, a peril might be
listed as “covered” but certain situations can trigger and exclusion of coverage. For example:
Fire is a covered peril but damage caused by a “hostile” fire not a “friendly” fire. A “friendly”
fire is one that is intentionally set and in its intended area such as a fire in a fireplace. The policy
would not cover the damage to the chimney liner caused by the repeated use of the fireplace.
That is damage done by a friendly fire. The moment fire, flame or sparks leave the intended
area and damage property; this is now a “hostile” fire and covered by the policy. In a named
peril policy the insured is responsible to prove the peril that did the damage is listed on the
policy and prove the value of the damaged property. The open peril policy is different in that it
covers direct damage caused by all risk of physical loss to covered property. These policies also
contain a list of exclusions that are not covered. It is the adjuster who determines coverage
based on these policy exclusions. So, just as the perils are important to know it is also
imperative for us to understand what is excluded from coverage under the policy. With
endorsements, some of the exclusions can be “bought back” for an additional premium to
coincide with the specific needs of the insured.
Broad Form Peril Form – HO-2
The broad form HO-2: This is a named peril form. All the perils that form the property
insuring agreement are named. As you can see by reviewing the following chart the perils are:






Fire
Lightning
Windstorm or hail (interior damage from windstorm or hail is only covered if the wind
or hail first makes an opening in the building. Watercraft, outboard motors and related
equipment are covered for these perils only while inside fully enclosed buildings).
Explosion (both inside or outside the covered property)
Riot and civil commotion
Aircraft damage
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











Vehicle damage (except damage to fences, driveways and walks when caused by a vehicle
owned or operated by a member of the household).
Smoke (except smoke from agricultural smudging or industrial operations). Also covers
puff back - the release of soot, smoke vapor, or fumes from a furnace, boiler or similar
equipment.
Vandalism or malicious mischief (unless the premises has been vacant - i.e. no people and
no contents - for 60 or more consecutive days. Pre-2000 homeowner policies allow for
only 30 days of vacancy.)
Theft - The theft peril includes loss of property from a known place when it is likely that
the property has been stolen. It also includes attempted theft. It does not cover theft
from a dwelling under construction. A mysterious disappearance (losing something) may
be covered if it apparent that the item may have been stolen.
Volcanic eruption - Excludes earthquake damage, land shock waves or tremors
Falling objects that damages the covered property. (a tree falls on the house) (damage to
contents is also covered if the falling object makes an opening in the roof or outside wall)
Weight of ice and snow or sleet that damages the covered property. (does not cover
damage to an awning, fence, patio, pavement, swimming pool, foundations, retaining walls,
piers or docks)
Accidental discharge of water or steam from a heating, air conditioning or plumbing
system. (A water pipes bursts or a water pump on a dishwater suddenly leaks)
Sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water
heating system, air conditioning system, sprinkler system or an appliance for heating
water.
Freezing of plumbing, heating, air conditioning systems, household appliances or sprinkler
systems provided the insured maintains heat in the building or shuts off the water and
drains all systems of water.
Sudden and accidental damage from artificially generated electrical current. Does not
cover damage to tubes, transistors, electronic components or circuitry. Note: Lightning
would cover these items.
Collapse - An abrupt falling down or caving in of the structure or a part of the structure
caused by:
1.
2.
3.
4.
5.
6.
The perils insured against;
Hidden decay;
Hidden insect or vermin damage;
Weight of contents, equipment, animals or people;
Weight of rain which collects on a roof; or
Use of defective material or methods in construction or remodeling or
renovation if the collapse occurs during the course of the construction or
renovation.
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The Perils of the Different Homeowner Forms at a Glance
Perils Covered
HO-2
HO-3
Dwelling
Fire
X
Lightning
Windstorm or
Hail
Explosion
Riot or Civil
Commotion
Aircraft
Vehicles
Smoke
Vandalism &
Malicious
Mischief
Theft
Volcanic
Eruption
Falling Objects
Weight of Ice,
Snow, or Sleet
Discharge of
Water or Steam
Sudden,
Accidental
Rupture
Freezing of
Plumbing and
Related Systems
Artificially
Generated
Electrical
Current
X
X
Open
Peril
HO-4
Personal
Property
HO-5
Dwelling
Open
Peril
Personal
Property
Open
Peril
HO-6
HO-8
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Collapse: This is covered under the additional coverages. It is found in the HO-2, HO-3, HO4, HO-5 and the HO-6. The coverage is not included in the HO-8 which is the most limited
Homeowner form. The collapse must be as a result of an abrupt falling down or caving in of the
structure or a part of the structure.
Special Form – HO-3
This form is a combination of the broad perils discussed above and the “open peril” approach.
All of the structures are covered on an “open peril” basis. This means that if a cause of loss is
not excluded, then coverage would apply. The burden of proof is up to the insurance company
to prove that the loss is excluded. Contents coverage applies on a broad peril basis.
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Comprehensive Form - HO-5
This is the broadest homeowner form. It provides “open peril” coverage on both buildings and
their contents.
Note: The HO-2, HO-3 and the HO-5 provide replacement cost coverage on the structures
provided the insured carries at least 80% of the replacement cost value of the structure.
Contents coverage under all of the homeowner forms provide actual cash value coverage on
contents unless a separate replacement cost endorsement is purchased.
Contents Broad Form – HO-4
This form is designed to cover the contents of a tenant living in a non-owned structure. This
could be an apartment or a dwelling. Since the tenant does not own the structure the form
does not provide coverage except for the improvements and betterments that the tenant may
have made to the structure at his or her expense. This form provides the named “broad perils”.
Unit-Owners Broad Form – HO-6
This form is designed for the condominium owner. It covers the structural portion of the
condo owned by the insured as well as his or her contents plus any improvements and
betterments. Like the HO-4 form, property is covered by the “broad perils”.
Modified Coverage Form – HO-8
This form is the most limited HO form. It provides very basic peril coverage (refer to the
chart) and was designed to cover dwellings in which replacement cost value is much greater
than the “market value”. Market value being what the property would sell for.
If the property was insured for the replacement cost or at least 80% of the replacement cost
which most policies require under the loss settlement provisions, an insured could receive a
much larger amount if the property was damaged then they could get if they sold the property.
The potential for fraudulent claims is much greater if that situation exists. This form will write
the coverage on the dwelling at the “market value’ which eliminates the potential for fraud
claims since the insured would not receive any more if the house was damaged then if it was
sold. However, claims for coverage on both buildings and contents are considered on an actual
cash value basis only.
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Additional Coverages of the HO Forms
Additional Coverage
Debris Removal
Reasonable Repairs
Trees, Shrubs and Other
Plants
Fire Department Service
Charge
Property Removed
Credit Card, Fund
Transfer Card, Forgery,
and Counterfeit Money
Loss Assessment
Glass or Safety Glazing
Material
Collapse
Landlord’s Furnishings
Building Additions and
Alterations
Ordinance or Law
Grave markers
HO-2
HO-3
HO-4
HO-5
HO-6
HO-8
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Limits of Section I – Property Coverage
Section I of the Homeowner policy provides four major property coverages. You will note that
three of the coverages are based on a percentage of the dwelling limit. These will also vary by
the number of residential units in the dwelling structure. If these percentages provide
inadequate limits, some can be increased by endorsement and the payment of an additional
premium.

Coverage A – Dwelling – Full replacement cost as long as the insured carries 80% to
value. The insured selects a limit for Coverage A. The minimum amount is subject to
each individual company’s underwriting rules.

Coverage B – Other Structures – 10% of Coverage A for one or two family dwellings
and 5% of Coverage A for three or four family dwellings.

Coverage C – Personal Property – 50% of Coverage A for one or two family dwellings,
30% for three family and 25% for a four family dwelling.

Coverage D – Loss of Use – 30% of Coverage A on HO-2, HO-3 and HO-5; 30% of
Coverage C on HO-4; 50% of Coverage C HO-6; 10% of Coverage A on HO-8.
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General Exclusions
Exclusions are used because a homeowner policy is not designed to cover every risk the
insured faces. The following general exclusions apply to all homeowner policies. Covering
some perils may cause financial catastrophe for the insurer so the coverage is excluded under
the policy. This section will list out the seven common Section 1 exclusions in detail for
discussion.
War - Losses that are a result of war, insurrection, rebellion or revolution are not covered
because they are considered to be catastrophic in nature and therefore uninsurable.
Nuclear Hazard - Under the terms of the policy, nuclear hazard means any nuclear reaction,
radiation or radioactive contamination, all whether controlled or uncontrolled or however
caused, or any consequence of any of these. Like war this is considered catastrophic in nature
and therefore also uninsurable.
Water Damage – Including the following:
a.
b.
c.
Flood, surface water, waves, tidal waves and overflow of streams and other bodies of
water;
Water backed up from sewers or drains;
Water below the surface of the ground, including seepage of leaks through sidewalks,
walls, basements, floors or windows. (Direct loss by fire or explosion resulting from water
damage is covered.)
The water damage exclusion was modified under the 2002 forms to exclude water-borne
material. It also excludes water or water-borne material that is discharged from a sump-pump
or related equipment. The perils listed under this exclusion apply when caused by or resulting
from humans, animals, or any act of nature.
Earth Movement - Which means:
a.
b.
c.
d.
Earthquakes including land shock, waves or tremors, before, during, or after a volcanic
eruption;
Landslide, mudslide, or mudflow;
Subsidence or sinkhole;
Any other earth movement including earth sinking, rising or shifting caused by or resulting
from human or animal forces or any act of nature direct loss by fire or explosion ensues
then payment will be made only for the ensuing loss.
Power Failure - Any power or other utility service occurring off the residence premises that
causes a loss is excluded unless a peril that is insured against follows on the premises. In that
case, only damage caused by the covered peril applies.
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Neglect - The insured must make every attempt to safeguard his/her property during and after
a covered loss. If the insured fails to use all reasonable means to protect the property during
and after a loss then no coverage applies for the subsequent damage.
Intentional Loss - Any loss arising out of any act committed:
a.
b.
By or at the direction of the named insured or any person or organization named as an
additional insured;
With the intent to cause a loss.
Ordinance or Law (Applies only to the homeowner form HO-08) - The laws in some
jurisdictions hold that a substantially damaged dwelling cannot be repaired or replaced but need
to be improved to current building codes. The homeowner form HO-08 excludes loss resulting
either directly or indirectly from laws that regulate the construction, repair or demolition of a
building or other structure.
(Homeowner forms HO-02, 03, 05 also exclude these damages but will include 10% of the
dwelling limit in the additional coverage section.)
Exclusions Applying to Open Peril Coverage
There is a separate set of exclusions applying to the open peril homeowner forms HO-03, and
05.
The homeowner Special Form HO-03 provides coverage as follows:
 Open peril coverage on real property (dwelling or other structures.)
 Named perils coverage on personal property. These covered perils are the same as
those provided on the Broad Form HO-02.
The homeowner Deluxe Form HO-05 provides coverage as follows:
 Open peril coverage on building and contents.
The following exclusions apply only to building on the Form HO-03 and building and contents
on the Form HO-05.
1. Losses excluded by the general exclusions previously discussed.
2. Gradual and expected losses such as:
a.
b.
c.
d.
e.
Wear and tear, marring, deterioration, rust, mold, rot and contamination;
Inherent vice(a characteristic of a given piece of property that causes it to self
destruct) and latent defect;
Smoke from agricultural smudging or industrial operations;
Smog;
Mechanical breakdown.
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3. Settling, cracking shrinking, bulging or expansion of pavements, patios, foundations,
walls, floors roofs or ceilings.
4. Loss caused by birds, vermin, rodents, insects, or domestic animals.
5. Wind, hail, ice, snow or sleet damage to antennas, lawns, plants, shrubs and trees.
6. Freezing, thawing or damage caused by weight of ice, snow or sleet to awnings,
fences, pavements, patios, swimming pools, foundations, retaining walls, bulkheads,
piers, wharf and docks.
7. Theft of property not actually part of the dwelling or to a dwelling under
construction. The theft peril includes loss of property from a known place when it is
likely that the property has been stolen. It also includes attempted theft. Theft of
watercraft of all types and their furnishings, equipment and outboard engines or
motors occurring off the premises is also not covered. Property while at any other
residence owned by, rented to, or occupied by an “insured” is excluded except
while the “insured” is temporarily living there.
8. Vandalism and malicious mischief, burglary damage and glass breakage if the
dwelling has been vacant for more than 60 consecutive days.
9. Any loss involving collapse, other than as provided under the additional coverage for
collapse provided in the policy.
10. Discharge, dispersal, seepage, mitigation release or escape of pollutants, meaning any
solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor,
soot, fumes, acids, alkalis, chemicals and waste.
This displays how the insurer is able to control what exposures are acceptable and insurable.
As discussed, the first set of exclusions is the general exclusions on all homeowner policies.
The second set of exclusions affects only the open peril homeowner forms. The reason for the
second set is that all perils of physical loss are covered unless specifically excluded. So the
second sets of exclusions are important because without these exclusions, those perils would
be covered if they caused damage to covered property. When the policy tells the insured that
all risk of physical loss is covered, the insured takes that literally and the courts would rule in
the insured’s favor in any coverage dispute. So it is imperative that the insurer specifically list
what is not covered so as to not cause any ambiguities in the interpretation of coverage.
Excluded Personal Property
Now we will discuss some excluded personal property under the homeowner policy forms.
The following are all excluded for personal property:
a.
b.
c.
Animals, birds, and fish.
Automobiles and other motorized vehicles (except motorized vehicles
pertaining to service of the premises or for use of the disabled, such as a
wheelchair).
Electronic apparatus (including accessories, antennas or tapes, wires,
records, discs or other media for use with any electronic apparatus)
designed to be used with a motorized vehicle’s electrical system and or
upon the vehicle. Note: $1,500 coverage is provided when such items are
not in or upon a vehicle.
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d.
e.
f.
g.
h.
Aircraft and parts including hovercrafts (hobby aircraft is covered)
Property of roomers/boarders not related to the insured.
Property located in an apartment regularly rented by an insured other than
the insured premises.
Property rented or held for rental to others off the “residence premises”.
Business data, including data stored in:


i.
j.
k.
Books of account, drawings or other paper records.
Computers and related equipment including electronic data processing
tapes, wires records, discs or other software media. The cost of blank
recording or storage media and of prerecorded computer programs
available on the retail market is covered.
Credit cards or fund transfer cards Except as provided in “Additional
Coverage”
Property scheduled elsewhere. Note: If a piece of jewelry is separately
insured under a personal article floater, coverage is then taken completely
taken out of the homeowner policy.
Loss of water or steam.
Coverage C (Personal Property) uses limitations of certain property instead of exclusions.
Limitations are way the insurer can limit their exposure without totally removing coverage.
These are provided for by the “Special Limits of Liability” which are listed below.
NOTE: Some property is only limited for loss caused by the peril of theft. If those items were
destroyed by another peril covered under the policy, they would be covered for their full value.
 $200 - money, bank notes, bullion, gold (other then gold ware) silver, (other then
silverware) platinum (other then platinum ware) coins, medals, scrip, stored value
cards and smart cards.
 $1,500 - securities, accounts, deeds, evidences of debt, letters of credit notes (other
then bank notes) manuscripts, personal records, passports, tickets and stamps. This
dollar limit applies to these categories regardless of the medium (such as paper or
computer software) on which material exist. This limit includes the cost to research,
replace or restore information from the lost or damaged material
 $1,500 – watercraft of all types, including their trailers, furnishings, equipment and
outboard engines or motors.
 $1,500 – for trailers and semi-trailers not used with watercraft of all types
 $1,500 – for loss by theft of jewelry, watches, furs, precious and semiprecious stones
 $2,500 – for loss by theft of firearms and related equipment
 $2,500 – for loss by theft of silverware, silver plated ware, gold ware, gold plated ware,
platinum ware, platinum-plated ware and pewter ware. This includes flatware, hollowware, tea sets, trays trophies made of or including silver, gold or pewter
 $2,500 - property, on the residence premises used at any time or in any manner for
any business purpose
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 $1,500 - for property, away from the residence premises, used for business purposes.
The pre-2005 forms limited this exposure to $500.
 $1,500 on electronic apparatus and accessories, while in or upon a “motor vehicle” but
only if the apparatus is equipped to be operated by power from the “motor vehicle’s”
electrical system while still capable of being operated by other power sources.
Accessories include antennas, tapes, wires, records, discs or other media that can be
used with any apparatus described in this category
 $1,500 on electronic apparatus and accessories used primarily for “business” while
away from the “residence premises” and not in or upon a “motor vehicle”. The
apparatus must be equipped to be operated by power from the “motor vehicle’s”
electrical system while still being capable of being operated by other power sources.
Accessories include antennas, tapes, wires, records, discs or other media that can be
used with any apparatus described in this category.
 Personal Property usually located at an “insured’s” residence other than the
“residence premises” is 10% of the limit of liability for Coverage C, contents, or
$1,000 whichever is greater. However this limitation does not apply to personal
property moved from the residence premises because the premises is being repaired,
renovated or rebuilt and is not fit to live in or store property in. The limitation also
does not apply if the personal property is in a newly acquired principal residence for
30 days from the time you begin to move the property there.
 Personal Property located in self storage facilities is 10% of the limit of liability for
Coverage C, contents, or $1,000 whichever is greater.
Deductible – Section I
A deductible will apply on all Section I property losses. The standard deductible is $500 which
can be reduced for additional premium and increased for a premium reduction. The deductible
is per occurrence not per piece of damaged property.
Section II – Personal Liability
Introduction
Section II of the homeowner policy includes Coverage E – Personal Liability which pays on
behalf of the insured all sums he/she is legally obligated to pay others because of bodily injury
and property damage to others, caused by an “occurrence.” The minimum limit is $100,000
per occurrence.
Coverage E will also pay legal defense expenses for the insured, even if the claim against the
insured is groundless, false or fraudulent. These expenses are without limitation and not out of
the insured’s Coverage E limit of liability. The insurer may investigate and settle any claim or
suit as it deems necessary, but the insurer's duty to defend ends when the limit of liability has
been exhausted.
Liability is third party coverage that takes care of medical bills, property damage, lost wages,
pain and suffering, inconvenience, etc. that is incurred by a third party in an “occurrence” and
caused by or is allegedly the fault of an insured and members of the insured’s household.
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Occurrence – an accident, including repeated or continuous exposure to similar harmful
conditions.
Bodily injury includes bodily harm, sickness, disease, and death.
Property damage means physical damage to tangible property including loss of use.
Coverage E – Personal Liability
Coverage E – Personal liability covers insureds for claims of others due to bodily injury or
property damage caused by an occurrence arising from:
1.
2.
3.
4.
5.
The premises shown in the Declarations section of the policy as well as any location the
insured occasionally rents. For example, a community building that the insured rented to
hold a party.
Personal activities such as sports, social, etc., anywhere in the world.
Acts of residence employees acting within the scope of their duties;
Vacant land;
Individual or family cemetery plots or burial vaults of any insured.
Covers both “on premises” and “off premises” activities.
Coverage F – Medical Payments to Others
Coverage F is "good will" coverage that pays the medical bills incurred by others in an accident,
regardless of the fault or liability of the insured. The minimum limit is $1,000 per person per
occurrence. Coverage F will pay for the following as long as they are claimed within three
years of the date of the accident, and the loss occurs to a guest, other individuals, or residence
employees while they are working:
1.
2.
3.
4.
5.
Medical and surgical care
X-rays
Dental services
Ambulance, hospital and professional services
Funeral services
Liability Coverage Exclusions
Under Section II - Liability Coverage exclusions are also used to limit or remove the exposure
of the insurer. The liability exclusions come in three sets. The first are the excluded coverage
for personal liability and the second set are the exclusions for medical payment of others
coverage and the third set is the general Section II exclusions.
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Set 1: The following are exclusions applying to both Coverage E - Personal Liability
and Coverage F -Medical Payments to Others:
1. Losses that are expected or intended; even if the resulting bodily injury or property damage
is of a different kind, quality or degree than initially expected or intended or is sustained by
a different person, entity, real or personal property than initially expected or intended.
However this exclusion does not apply to bodily injury resulting from the use of reasonable
force by an “insured” to protect persons or property.
2. Business pursuits of an insured; whether or not conducted from an insured location or
engaged in by an insured or whether or not the business is owned or operated by an
“insured” or employs an “insured”. The exclusion does not apply to the rental or holding
for rental of an “insured location” on an occasional basis; or a regular basis as long as the
rental unit does not contain more then one family or more then two roomers or boarders
or if the “residence premises” is used in part as an office, school, studio or private garage.
This exclusion also does not apply to an “insured” under the age of 21 and involved in a
part-time or occasional, self-employed “business” with no employees.
3. Losses for the insured's failure to render professional services.
4. The ownership, maintenance, use, loading or unloading of motor vehicles. Liability coverage
is provided, however, for the following:


A trailer not towed by or carried on a motorized land conveyance;
A motorized land conveyance designed for recreational use off public roads, not subject
to motor vehicle registration which is:
a.
b.
c.
d.
Not owned by an insured;
Owned by an insured and on an insured location;
A motorized golf cart when used to play golf on a golf course;
A vehicle or conveyance not subject to motor vehicle registration which is:
 Used to service an insured's residence;
 Designed for assisting the handicapped;
 In dead storage on an insured location.
5. The ownership, maintenance, use, loading or unloading of watercrafts listed below:
a. With inboard or inboard-outdrive motor power owned by an insured;
b. With inboard or inboard-outdrive motor power of more than 50 horsepower
rented to an insured;
c. A sailing vessel, with or without auxiliary power, 26 feet or more in length owned
by or rented by an insured;
d. Powered by one or more outboard motors with more than 25 total horsepower if
the outboard motor is owned by the insured. Therefore an outboard motor of 25
HP or less is covered. Outboard motors of more than 25 horsepower are covered
for the policy period if:
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 The insured acquires them prior to the policy period and declares them
at policy inception or reports to the insurer, in writing, within 45 days
after insured acquires the outboard motors;
 The insured acquires them during the policy period. (This exclusion does
not apply while the watercraft is stored.)
6. Ownership, maintenance, use, loading or unloading of an aircraft or hovercraft (doesn't
include model or hobby aircraft as long as they are not designed to carry people or cargo).
7. War including accidental discharge of nuclear weapons;
8. The transmission of a communicable disease by an insured;
9. Sexual molestation, corporal punishment or physical or mental abuse;
10. The use, sale, manufacture, delivery, transfer or possession by any person of a controlled
substance.
Set 2: The following exclusions apply only to Coverage E (Personal Liability):
1. Property damage to property rented to, occupied by, used by or in the care, custody or
control of an insured except property damage which is caused by
a. Fire
b. Smoke
c. Explosion
However, the insurer will pay, at replacement cost, up to $1,000 per occurrence for
property damage to the property of others caused by an “insured” as long as:






It is not recoverable under the property section of a policy;
Is not caused intentionally by an insured age 13 or older;
The property is not owned by an “insured”
The property is not owned by or rented to a tenant of the “insured” or a resident of
the insured’s household;
It is not involving the ownership, maintenance, occupancy, operation, use, loading or
unloading of aircraft, hovercraft, watercraft or motor vehicles designed for use on public
roads
It is not arising out of a “business” engaged in by an “insured” including off premises
rental properties
2. Bodily injury to people covered by workers' compensation, disability insurance, or nuclear
energy liability insurance or would be an insured under any such policies but are not
covered due to the exhaustion of its limit of liability
3. Bodily injury or property damage to an insured.
4. Contractual liability except:


That which relates to ownership, maintenance or use of an insured location;
Where the liability of others has been assumed by the insured prior to an occurrence.
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Set 3: The following exclusions apply only to Coverage F: (Medical Payments to
Others):
1. To a residence employee not sustained in the course of employment or occurring offpremises.
2. To any person eligible to receive workers compensation or disability coverage.
3. From any nuclear reaction.
4. To anyone regularly residing on the insured premises.
Endorsements
Now we will discuss the use of endorsements to add back some of the coverage taken away by
the exclusions. Endorsements can also be used to add to one of the internal limits in the policy
as well. (Note: Flood cannot be added by endorsement because of the catastrophic nature but
can be acquired by purchase a flood insurance policy from the Federal Flood Insurance
Corporation.)
The items that cannot be added by endorsement are typically items of a catastrophic nature
(such as flood) that could provide for the ruin of an insurer. The items that can be added by
endorsement are items acceptable to the insurer for an additional premium for the exposure
basis. This is the reason some coverage can be purchased back through the endorsement
process or built in limits can be increased so they can collect the proper premium for the
exposure.
Actual Cash Value Loss Settlement (HO 04 81 10 00)
This endorsement may be used with forms HO 00 02, HO 00 03, or HO 00 05 if at the policy
inception the insured selects less than 80% insurance to value. It provides that covered
property losses will be settled at actual cash value, but not more than the amount required to
repair or replace the damaged or lost property. It was once used primarily with the HO 00 08;
that form now has its own loss settlement provisions.
Actual Cash Value Loss Settlement Windstorm or Hail Losses to Roof Surfacing
(HO 04 93 10 00)
This endorsement is used with all forms except HO 00 04. It coverts the loss settlement
provision to an actual cash value (ACV) basis when the forces of winds or hail cause direct
damage to a roof’s surface materials.
Additional Insured (Residence Premises) (HO 04 41 10 00)
An individual or group other than the named insured may have an ownership interest in the
dwelling. For example, when two persons buy a two-family dwelling, each intending to inhabit
one unit, one insured buys a homeowner policy with building coverage, while the other buys
contents and liability coverage under the HO 00 04 form. The HO 00 04 insured can protect
his interest in the building and other structures, plus receive Section II coverage (but only with
respect to the residence premises) by having this endorsement added to the other insured's
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policy. No additional premium is charged. The endorsement may also be used for a
nonoccupant co-owner of the insured dwelling. The additional insured named in the
endorsement will be notified in writing of the insurer's decision to cancel or not renew.
However, there is no time limit for notification, such as that given to the named insured and
mortgagee.
Additional Insured - Student Living Away from the Residence Premises
(HO 05 27 10 00)
This endorsement is new in the 2000 homeowner program. The new homeowner forms
include a student under age 24 away at school within the definition of "insured." This
endorsement may be used to broaden that definition by removing the age and full-time student
restrictions. The name, address, and school attended should be scheduled on the endorsement.
It will only apply if the student prior to school residency was either an insured or resident
relative of the base policy insured’s household.
Additional Interests (Residence Premises) (HO 04 10 10 00)
This endorsement is used if persons or organizations with an interest in the property must be
notified in the event that the insurer decides to cancel or non-renew the policy. In that case,
the insurer notifies the specified parties in writing. However, there is no time limit for
notification, such as that given to the named insured and mortgagee. Often the additional
insured and additional interest endorsements are confused; the first provides limited property
and liability coverage, but the second does not.
Additional Residence Rented to Others (1-4 Families) (HO 24 70 10 00)
This endorsement provides personal liability and medical payments coverage with respect to
the insured's liability arising out of the ownership of one or two, three or four family residence
regularly rented to others. The mechanism for providing this coverage is a definition on the
endorsement naming the listed premises an "insured location."
Assisted Living Care Coverage (HO 04 59 10 00)
An endorsement new to the 2000 homeowner program is one that may be attached to an
insured’s homeowner policy to provide coverage for a person related by blood, marriage, or
adoption to an insured. The relative must regularly reside in the facility, but need not have been
a member of the insured’s household prior to moving to the facility. The insured agrees to act
as the covered person’s representative in matters pertaining to the insurance. The name of the
relative, the name and location of the facility, and the amount of Coverages C contents and E
personal liability (the only options) are scheduled. As one might expect, the special limits of
liability are expanded to include such things as eyeglasses and contact lenses ($100), hearing
aids ($250), dentures or false teeth ($500), Medi-alert devices ($500), Wheelchairs ($500),
walking aids such as walkers and/or canes($250). A limited amount of additional living expense
is included: $500 per month for a maximum of twelve months. If an order of civil authority
results in a claim for additional living expense, the maximum is $50 per day for a two-week
period. The applicable deductible is that on the policy to which this endorsement is attached.
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Building Additions and Alterations (Other Residence) (HO 04 49 10 00)
This endorsement covers the insured’s interest in additions, alterations, and improvements in a
residence rented to the insured. The earlier (04 91) edition of this endorsement stated the one
or two other residences, and the amount of insurance at each location, could be specifically
designated. The current edition (10 00) appears to refer only to one "other residence."
Coverage is provided for direct physical loss caused by a peril insured against. So, for example,
if attached to an HO 00 02, named peril coverage applies. The HO 04 51 endorsement is
available for the HO 04 (tenant form) and would provide coverage for the building additions
and alterations that a tenant made to their living area that would become the property of the
landlord upon moving out. If a loss occurs while the tenant is still living there the HO 04 51
would provide coverage for the additions and alterations the tenant has a financial interest in.
Business Pursuits (HO 24 71 10 00)
Endorsement HO 24 71 eliminates the homeowner Section II exclusion of coverage for liability
"arising out of or in connection with a “business ... engaged in by an ‘insured’." It applies the
policy's personal liability and medical payments coverages to the insured's business pursuits as
described in the endorsement (essentially sales, clerical, and instructional occupations).
Coverage does not apply with respect to a business owned or financially controlled by the
insured, or in which the insured is a partner. (When coverage cannot be endorsed to the
homeowner policy, as with home business coverage endorsement HO 07 01, the insured
should cover business property and business liability under either a business owners or
commercial policy. For certain types of businesses, the home would also be covered under
either a commercial or business owners policy, and non-business contents would be covered
under an HO 00 04 policy.) The endorsement does not offer coverage for liability arising out of
professional services (for example, architectural, medical, beauty shop, or barber services), but
makes an exception for teaching. An optional coverage is available for bodily injury claims
against teachers arising out of corporal punishment. Bodily injury to a fellow employee of the
insured that occurs in the course of employment is excluded.
When the insured is on the teaching staff of a school or college, an exclusion applies to liability
claims arising out of the maintenance, use, loading, unloading, or entrustment by the insured of
draft or saddle animals (or vehicles used with them); aircraft; hovercraft; motor vehicles or
motorized land conveyances; or watercraft, if owned or operated, hired by or for the insured
or the insured’s employer, or used for instructional purposes.
Canine Liability Exclusion Endorsement (HO 24 77)
This form is a named dog exclusion. Space is provided to enter a name and description of a dog.
When attached, it eliminates bodily injury and property damage caused by the described dog.
The exclusion applies to that dog whether it is owned as well as in the care, custody or control
of an insured.
This is a new endorsement available with the 2011 homeowner edition. The form may be
problematic to apply to non-owned animal situations and enforcement in situations where the
dog’s name is changed or an ambiguous description on the form.
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Coverage B - Other Structures Away from the Residence Premises (Forms HO 00
02, HO 00 03, and HO 00 05 only) (HO 04 91 10 00)
The homeowner forms provide blanket coverage for other structures located on the residence
premises in the amount of 10% of the Coverage A limit. Endorsement HO 04 91 may be used
to extend this blanket coverage to structures that the insured owns and uses in connection
with the residence premises but which are located elsewhere. Coverage is provided within the
policy's Coverage B limit. Before the introduction of this endorsement, insureds were limited
to the more expensive method of covering such property under a fire policy.
The following types of other structures are excluded from coverage under the endorsement:
(1) structures either used as or capable of being used as dwellings; (2) structures used to
conduct a business or to store business property; or (3) structures rented to someone who is
not a "tenant" of the dwelling (so that rental to a roomer, boarder, or a tenant of a multi-family
home would not disqualify the structure from coverage under the endorsement). The
endorsement deletes replacement cost coverage for these other structures and substitutes loss
settlement on an actual cash value basis. If specific, rather than blanket coverage is more
appropriate, insureds can add coverage for other structures under endorsement HO 04 92
specific structures away from the residence premises (discussed later).
Coverage C Increased Special Limits of Liability (HO 04 65 10 00)
Coverage C (personal property) imposes special sub limits with respect to certain categories of
property. This endorsement may be added to increase these limits for some of these categories
- money, precious metals, and coins (to $5,000); securities, accounts, deeds, evidences of debt,
letters of credit, and other valuable papers (to $2,500); jewelry, watches, and furs (to $5,000;
$1,000 per article limit); silverware, gold ware, and pewter ware (to $10,000); and firearms (to
$10,000). The special limits are increased for the last three categories with respect to theft,
since the special limit for such items applies only to theft losses. When Coverage C (personal
property) is written on an open perils basis, the special theft limits for the last three categories
apply to mysterious disappearance or losing as well as to theft. For this reason, a separate
endorsement (HO 04 66, see below) is used to increase these limits when open perils coverage
applies to personal property.
The 1991 homeowner program introduced special limits ($1,000) that apply to electronic
equipment while in a motor vehicle as long as it is adaptable so that it may either run off a car's
electrical system or off of other power sources. The 2000 homeowner edition increased that
to $1,500.The current edition of endorsement HO 04 65 may also be used to increase the
special limits to $5,000. For more information on these special limits, see ISO homeowner
forms Section I. Use of this endorsement does not increase the total limit of liability available
under Coverage C. It merely increases the sublimits that apply to the specified categories of
property.
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Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and
Counterfeit Money Coverage (Increased Limit) (HO 04 53 10 00)
One of the additional coverages (6.) in the homeowner forms pays for loss resulting from the
unauthorized use of an insured's credit card or bank transfer card. The policy's $500 limit for
this coverage may be increased through the use of this endorsement. Coverage is provided for
loss by forgery or alteration of any personal checks or similar written instruments made or
drawn by or upon an insured’s accounts. This coverage also protects the insured for losses
caused by his or her acceptance, in good faith, of counterfeit United States or Canadian paper
currency. In accordance with the wording of the homeowner 2000 forms, note the inclusion of
"access device," which recognizes that modern technology allows access to funds by means
other than a card.
Deferred Premium Payment (HO 04 18 10 00)
This form allows an insured the option to pay the policy premium in installments that are
identified on the declarations. The premium amounts are based upon rates in effect at the time
the installment is due. If a policy is written for a three year term, the policy may be paid in
annual installments and each annual installment amount with the date due will be listed on the
declarations.
Earthquake (HO 04 54 10 00)
There is no coverage for loss resulting from "earth movement" except when endorsed. An
insured may add earthquake as an insured peril for Coverages A (dwelling), B (other
structures), and C (contents) by adding this endorsement. The endorsement defines as a
"single earthquake" all earthquake shocks occurring within a 72-hour period. The peril of
earthquake is defined to include land shock waves or tremors accompanying a volcanic
eruption.
In the endorsement used with the 1991 edition (04 91), the base deductible is 5% of the limit
that applies to all Section I coverages (but not less than $500). The deductible may be increased
for a premium credit. No other deductible applies to earthquake loss. The 06 94 edition of the
endorsement eliminated the application of the deductible to Coverage D and the additional
coverages, which was the case of the earlier edition, and clarified the intent of the application of
the deductible to the limit of insurance, not to the amount of the loss. In the current edition,
the percentage deductible is converted into a dollar deductible by multiplying either the
Coverage A or Coverage C limit of liability, whichever is greater, by the deductible percentage.
Again, $500 is the minimum.
Like other forms of earthquake insurance, the endorsement excludes flood and tidal wave, even
when caused by or contributed to by an earthquake. Masonry veneer coverage is optional; if
excluded, the deductible applies to the applicable limit minus the value of this veneer. Stucco is
not included within the meaning of masonry veneer. Coverage under the endorsement is
provided within the applicable limits of liability and does not include the cost of filling land.
The HO 00 15 (now withdrawn) provided earthquake coverage for personal property. The HO
00 05, however, does not. Insured’s must add the HO 04 54 to obtain this coverage.
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Exclusion of Farm Employees Illegally Employed (HO 24 96 10 00)
This form excludes liability coverage for injury to an insured’s farm employee if that insured
knows the employment is in violation of the law. Examples could include the employing of
children in violation of child labor laws and the employing of non-citizens without appropriate
certifications.
Extended Theft Coverage for Residence Premises Occasionally Rented to Others
(HO 05 41 10 00)
This endorsement is new in the homeowner 2000 program. It cannot be used with the HO 00
05, or HO 00 04 or HO 00 06 with open perils coverage attached. It removes the exclusion of
coverage for theft from the part of a "residence premises" rented to other than an insured. The
coverage does not apply if the part of the "residence premises" is regularly rented, nor does it
apply at any time to money, bank cards and the like, securities, or jewelry, precious or semiprecious stones, watches, or furs.
Farmers Personal Liability (HO 24 73 10 00)
An insured whose principal business or principal occupation is not farming may be insured for
liability arising out of farming by attaching endorsement HO 24 73 to the homeowner policy.
The farm (or farms) must be away from the residence premises. All farm premises that are to
be covered are scheduled; such premises may be owned, rented to others, or rented and
operated by the insured. Any other businesses conducted on an insured farming location must
be noted on the schedule. The definition of "farming" for coverage purposes includes the
operation of roadside stands if used principally for the sale of the insured's farm products.
Coverage E (personal liability) pays for bodily injury or property damage caused by a covered
occurrence. Standard defense coverage is also provided. Coverage F (medical payments)
applies to: (1) persons on the insured location with the insured’s permission; or (2) persons off
of the insured location - if bodily injury arises out of a condition on the premises or ways
immediately adjoining; is caused by the insured’s activities; is caused by residence or farm
employees in the course of their employment; or is caused by animals owned by, or in the care
of, the insured.
Standard homeowner Section II exclusions apply to these coverages. Changes made in the 2000
homeowner Section II provisions have also been made in the current version of this
endorsement. (See homeowner Section II exclusions, for a discussion of those exclusions.) The
endorsement defines a business as business activities other than farming. Generally, provisions
that in the homeowner forms exclude coverage as to "residence employees" also apply to
"insured farm employees" in the endorsement. Several exclusions that are not found in the
homeowner policies apply to personal liability coverage under the endorsement. These exclude
coverage for: (1) bodily injury to farm employees who are not "insured farm employees" that
arises out of employment for the insured; (2) property damage relating to products
manufactured, sold, handled, or distributed by an insured, or work performed by or for an
insured; (3) bodily injury or property damage resulting from pollution unless the pollution is
sudden and accidental; or (4) property damage from any substance released or discharged from
any aircraft (pesticides, for example). The exclusion of property damage relating to the
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insured’s products does not affect coverage for bodily injury, if, for example, a customer of the
insured’s roadside stand falls ill from eating the produce. However, coverage for property
damage suffered by someone who purchases used farming equipment from the insured is
excluded.
On the other hand, there is coverage not found in the unendorsed homeowner forms. For
example, endorsement HO 24 73 gives coverage for the insured’s liability arising out of a
warranty by stating that the exclusion of coverage for liability under any contract or agreement
"does not apply to a warranty of goods or products." Medical payments coverage does not
apply to bodily injury to any farm employee or to other persons while they are performing farm
work on the insured location. However, coverage does apply if the person is injured while
engaged in "a neighborly exchange of assistance" for which the insured is not obligated to pay
money. If the insured pays money out of a sense of gratitude, rather than by agreement, the
exclusion does not apply. Formerly, first party coverage for "livestock collision" could be
purchased under the endorsement. Now, this coverage is available as a separate endorsement,
HO 04 52 (See the description later in this section).
The endorsement provides for the insurer’s right to inspect and audit the farming property and
operations during the policy term or within three years of termination.
Fire Department Clause (HO 04 85 10 00)
This endorsement is attached when the insured has a contract with a privately owned fire
department. It stipulates that maintaining the contract is a condition of the policy.
Functional Replacement Cost Loss Settlement (Forms HO 00 02, HO 00 03, and
HO 00 05 only) (HO 05 30 10 00)
This endorsement may be used when broader coverages are desired than those provided by
the HO 00 08, but the insured or insurer does not wish to insure to full replacement cost. This
might be the case with an older, ornate home that incorporates stone-, wood-, or plasterwork
not readily available. Replacement cost may so far outstrip market value that to insure based
on replacement would do a disservice to the insured, since it is unlikely that the home could be
replaced exactly as it stands. Therefore, use of this endorsement provides the insured with the
broad range of coverages available in the ISO program, yet allows a more realistic amount of
insurance to be selected.
The Coverage A limit of liability is chosen based on "functional replacement cost," that is, the
amount it would cost to repair or replace using materials that are functionally equivalent to
obsolete, antique, or custom methods and materials. For example, plaster walls would be
replaced with dry wall, pocket doors with plain doors. The loss settlement provisions substitute
"functional replacement cost" anywhere "full replacement cost" appears.
Modified functional replacement cost loss settlement endorsement, HO 05 31, is virtually
identical except that if the necessary amount actually spent to repair or replace is less than the
actual cash value of the part of the damaged building then the loss is settled on an actual cash
value basis.
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Home Business Insurance Coverage (HO 07 01 10 00)
This endorsement has been renumbered in the 2000 homeowner program. Previously it was
HO 05 90. It provides both business property and liability coverage for a variety of home
businesses. The business must be owned by the named insured, or by a partnership, joint
venture, or organization comprised solely of the named insured and resident relatives.
Coverage is provided for business property, property of others in the insured's care because of
the business, and business property leased by the insured so long as there is a contractual
responsibility to insure it. There is coverage for accounts receivable $5,000 on the premises
and $2,500 off and valuable papers and records up to a maximum of $2,500. Fraudulent use of
credit and/or debit cards used in the business are covered up to $1,000.
Time element coverages include business income, extended business income, extra expense,
and loss of business income because of the action of civil authority (subject to a 72-hour time
deductible).Ordinary payroll expenses are covered up to 60 days. Normal property exclusions
include dishonest acts of the insured and employees, loss to property voluntarily surrendered
under false pretense, programming errors, omissions or mistakes causing loss to Valuable
Papers and records and Accounts Receivable. Losses that can only be proven with an inventory
calculation are also excluded. Liability coverage is on an aggregate basis, and includes coverage
for premises operations, advertising injury, and personal injury. Coverage for the
products/completed operations hazard is limited to the amount shown for Coverage E; all
other business liability is limited to twice the combined limits of Coverages E and F. The
exclusion of liability arising out of or in connection with a "business" (2.a.) has been changed so
that the exclusion does not apply to "your product" or "your work" - both defined terms.
There is, however, no coverage for professional services, many of which are listed in the
endorsement.
Property and liability coverage for a home day care business is available to a homeowner under
endorsement HO 04 97. (Not all insurers will write coverage. Check with the company.) If the
business is conducted in another structure, it still must be on the insured’s described location
and a limit of liability for that structure is scheduled on the endorsement. The premium charged
for the endorsement is based on the number of children being care for not including the
insured’s own children. The endorsement protects personal property of the described business
under the total Coverage C limit.
As to the Section II personal liability and medical payments coverage, bodily injury or property
damage arising from the following are excluded: ownership, maintenance, use, loading,
unloading, negligent supervision, or entrustment by the insured to others of draft or saddle
animals, or vehicles used with them, aircraft, hovercraft, all motorized land conveyances, or
watercraft, whether owned, operated, or hired by or for the insured or employee, or used by
the insured for instruction in their use. Excluded also is injury to any employee of an insured
(other than a residence employee), arising out of the day care operation. All other Section II
exclusions apply.
The endorsement also imposes a policy year aggregate limit for liability and medical payments
combined. The limit corresponds to the Coverage E limit shown in the declarations, with a
further per person per accident sublimit for day care related medical payments equal to the
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Coverage F limit. The sublimit applies within the aggregate limit of liability. Limits described on
the endorsement apply even if they are not those contained in the policy or declarations. The
severability of insurance clause specifies that coverage applies separately to insureds except
with respect to the aggregate limit, so the aggregate limit remains unaffected by the number of
insureds.
Identity Fraud Expense Coverage (HO 04 55)
Introduced in 2003, this endorsement provides reimbursement of expenses incurred as a result
of identity theft or fraud. Identity Fraud essentially refers to another entity’s deliberate and
unauthorized use of another party’s identity. The misappropriated information must be used
illegally and in violation of federal, state or local law. Covered expenses, up to the $15,000 limit,
include reasonable attorney fees to defend suits brought by merchants, financial institutions, or
collection agencies, costs incurred to re-apply for any loans rejected solely because of incorrect
credit information, lost income for time taken to meet with law enforcement officials or
complete affidavits (maximum $200 per day; $5,000 total), certified mailing fees, costs to
notarizing documents and charges for long distance calls to report or discuss an actual identity
fraud. A deductible of $500 applies. The insured must send receipts, bills, etc., documenting the
claim to the insurer within 60 days of the insurer’s requesting these.
Incidental Farming Personal Liability (HO 24 72 10 00)
If an insured engages in farming on the residence premises, the policy may be endorsed to
provide coverage for liability and medical payments with respect to that activity. The general
rules specify that the endorsement may be added only if the farming activity is incidental to use
of the property for dwelling purposes, and the insured does not depend on farming as a
primary source of income. The endorsement may not be added if the premises are used for
racing. Coverage for incidental farming activities at specified locations away from the residence
premises, including boarding and grazing the insured's animals, and using land for gardening may
be included but the exact location must be listed on the endorsement declarations. Coverage is
much less extensive than that provided under farmers personal liability HO 24 73, although the
HO 24 73 does not allow farming on the residence premises.
Incidental Low Power Recreational Motor Vehicle (HO 24 13 10 00)
This endorsement's 1991 title was "incidental motorized land conveyances." With a few
exceptions, Section II exclusion A.2 precludes liability coverage relating to motor vehicles and
motorized land conveyances, including negligent supervision and vicarious parental liability. See
homeowner Section II exclusions for more information. Endorsement HO 24 13 broadens
liability coverage in connection with certain types of motorized land conveyances. The vehicle
must have a maximum attainable speed of no more than 15 miles per hour (which eliminates
the endorsement’s use for most snowmobiles), must not be subject to motor vehicle
registration, may not be rented to others or used for other business purposes (including
carrying paying passengers), and may not be operated in a prearranged competition.
Mopeds, motorized bicycles, and motorized golf carts are specifically excluded, although the
2000 homeowner forms have broadened the liability coverage for golf carts. These vehicles may
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endorsement PP 03 23 01 05. With respect to vehicles that meet the rather narrow definition
of "incidental low power land conveyances" (miniature battery powered automobiles intended
to be toys and driven by children, for example), coverage applies to liability arising out of
ownership, maintenance, use, loading or unloading, negligent supervision or entrustment, and to
vicarious parental liability, whether or not statutorily imposed, for the actions of a minor child.
Since the unendorsed homeowner policy includes liability coverage for motorized land
conveyances designed for recreational use off of public roads that are not subject to motor
vehicle registration - but only while they are on an insured location - this endorsement is useful
chiefly in broadening coverage to include coverage away from an insured location.
Increased Amount of Insurance for Personal Property Located In A Self-Storage
Facility (HO 06 14)
The 2011 edition of the homeowner policy contains a limitation for property in a self-storage
facility. This form changes the limit for items in a self storage facility from 10% of the Coverage
C limit or $1,000 whichever is less to whatever limit is entered on the endorsement schedule.
The perils covering the property under Coverage C also apply to the property in the selfstorage facility. This endorsement increases the coverage amount only.
Increased Limits on Business Property (HO 04 12 10 00)
The special limits applicable to business property insured under the homeowner form ($2,500
on-premises, $1,500 off-premises) may be increased by means of this endorsement. Increases in
these special limits do not increase the Coverage C limit. The on-premises limit may be
increased up to an amount in accordance with each company’s underwriting guidelines. The
2011 edition increases the off-premises limit to an amount that is 60% of the total on-premises
limit. The 2000 edition provided a 20% increase whereas the 1991 edition provided a 10%
increase for off-premises property. The endorsement cannot be used to increase coverage
above the $2,500 special limit for several categories of property: business property in storage
or held as a sample; business property for sale or delivery after sale; or to business property
pertaining to a business actually conducted on the residence premises. The exposure of
business property that is part of a business actually conducted on the residence premises may
be covered by in endorsement HO 04 42, permitted incidental occupancies, or in HO 07 01
home business insurance coverage.
The endorsement also states that the special limit applicable to business property off the
residence premises does not apply to electronic apparatus described under items 3.j. and 3.k. of
the 2000 forms’ special limits (i.e., the kind that may be run off of a car’s electrical system). The
special limits for this type of electronic equipment remain $1,500. For business property limits
and special limits on adaptable electronic equipment, see ISO Homeowner Section I.
Inflation Guard Endorsement (HO 04 46 10 00)
This endorsement provides for automatic increases in the limits of liability for all Section I
property coverages in order to avoid underinsurance due to inflation. The specified percentage
increase applies on a pro rata basis during the policy period. A 4% annual increase will generate
an additional annual charge to the base premium of 1.02; a 6% annual increase will generate a
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1.03 surcharge and an 8% annual increase will surcharge the base premium with a 1.04 factor.
Additional factors apply to increases above 8% and vary by company.
Landlord's Furnishings (Forms HO 00 02, HO 00 03, and HO 00 05 Only)
(HO 05 46 10 00)
This endorsement was introduced in 2000. Coverage may be increased beyond the $2,500
additional coverage (10.) for landlord’s furnishings in the homeowner forms. Coverage may be
increased in increments of $500 up to $10,000. Remember that the additional coverage is for
rental apartments on the "residence premises" as defined, so the endorsement could be used,
for example, where an insured owns a four-unit building and resides in one of the units, but
owns furnishings in the other apartments. The amount insured under this endorsement is in
addition to the $2,500 provided by the base policy. If there is a total loss, however, the
insured’s Coverage C limit of liability is the most that will be paid. The Coverage C perils,
except for theft, apply.
Remember that a structure separate from the insured dwelling rented to anyone not a tenant
of the dwelling is not covered unless used solely as a private garage. This endorsement cannot
be used, therefore, to cover an insured’s property in that situation; other coverage, such as a
dwelling fire policy, should be arranged.
Limited Fungi, Wet or Dry Rot, or Bacteria Coverage (HO 04 26 04 02,HO 04 27
04 02, and HO 04 28 04 02)
These endorsements were introduced in 2002 as a response to insurers wishing to limit their
exposure to wet rot and mold. The first endorsement, HO 04 26, may be used with all forms
except HO 00 03 and HO 00 05. Form HO 04 27 is intended to be used with forms HO 00 03
and HO 00 05. If open perils coverage is added to form HO 00 04 or HO 00 06, then form HO
04 28 is attached.
The endorsements add a definition of fungi: "any type or form of fungus, including mold or
mildew, and any mycotoxins, spores, scents or by-products produced or released by fungi."
They then go on to amend the additional coverages by adding a new coverage for loss caused
by fungi, which is limited to the amount indicated in the schedule for Section I (usually $10,000).
Included in this amount is the cost to remove the fungi or wet rot, the cost to tear out and
replace any part of the building as needed to gain access to the fungi or wet rot, and the cost to
test the air to confirm that fungi are present. Coverage under this endorsement only applies
when the fungi or wet rot results from a covered cause of loss.
Section II liability for property damage or bodily injury resulting from an "occurrence" involving
fungi, bacteria, or wet or dry rot is also scheduled on the endorsement. Liability is a sublimit
(usually $50,000) within the total Coverage E limit of liability, and is on an aggregate basis.
Livestock Collision Coverage (HO 04 52 10 00)
Formerly a part of the farmers personal liability endorsement as an optional coverage, coverage
for livestock collision may now be purchased separately. The insurer pays up to the limit shown
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on the endorsement declarations for death to certain types of animals if caused by collision or
overturn of the vehicle in which they are being transported. There is also coverage if the
livestock runs into, or is struck by, a vehicle while on a public road.
Coverage is excluded if a vehicle owned by or operated by an insured or an insured’s employee
causes the loss. Coverage applies to cattle, sheep, swine, goats, horses, mules, or donkeys
owned by an insured. The limit per animal is $400 for one “head” of livestock. A “head” of
livestock is an adult animal one year of age or older; horses, mules, or cattle under one year old
at the time of loss are counted as 1/2 head and covered up to $200 maximum per animal
Loss Assessment Coverage (HO 04 35 10 00)
Loss assessment coverage is provided under all homeowner forms as Sections I and II additional
coverages. Coverage is provided for loss assessments charged by a property owners’
association against the insured in connection with a direct loss to the residence premises or
liability relating to the residence premises. The amount of coverage is limited to a total amount
of $1,000 for all assessments arising from one property or liability occurrence. Endorsement
HO 04 35 may be used to increase the amount of each of these coverages - either Section I or
Section II, or both I and II - up to the limit specified in the endorsement. The endorsement
does not cover loss assessments arising from earthquakes, or land shock waves or tremors
pertaining to a volcanic eruption. Loss assessment coverage charged as a result of those perils is
available under endorsement HO 04 36 (see later in this article).
When an assessment is imposed to collect the amount of the deductible in the condominium
association’s own policy, the endorsement specifies that a $1,000 limit is the maximum amount
of coverage that applies.
Loss assessments on scheduled additional locations may also be covered by this endorsement,
for an amount of coverage specified on the endorsement. No more than two other locations
may be scheduled. Excluded are assessments charged to an individual, corporation or a
property-owner association by a municipality or other government unit.
Mobile Home Endorsement
Mobile homes may be covered by the H0-2, H0-3 or HO-5 form when the mobile home
endorsement MH 0401 is attached to the policy. Coverage is subject to all the applicable
provisions of the homeowner forms except:
1. Definition of Residence Premises – Refers to the mobile home and other structures on land
owned or leased by the insured. The mobile home must be designed for year-round living
and not less than 10 feet in width and 40 feet in length. This is replaced on the homeowner
forms by the definition of a mobile home. A structure used as a permanent dwelling usually
connected to utilities and designed without permanent foundation.
2. Dwelling - Coverage A that applies to the mobile home on the residence premises shown in
the Declarations. This includes structures and utility tanks attached to the mobile home and
items installed on a permanent basis, including floor coverings, appliances, dressers and
cabinets.
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3. Other Structures - Which is Coverage B, provides 10% of Coverage A, or minimum of
$2,000 if less.
4. Property Removed - If the insured mobile home is endangered by an insured peril and
removal of personal property is necessary to avoid damage, the policy will pay up to $500
(can be increased for additional premium) for expenses to remove and return the covered
property.
5. Section I - Conditions - If the 80% to value is carried, replacement cost applies to all
property under Coverage A, which includes replacement cost for carpeting and household
appliances, but, does not include:
a. Awnings
b. Outdoor antennas and outdoor equipment whether or not attached to the buildings,
which are settled on an ACV basis.
The "pair and set clause" is different in the mobile home policy and states "pair, set or
panels". In case of a loss involving part of a series of pieces or panels, the policy will pay
either the reasonable cost of repairing or replacing the damaged part to match the
remainder as closely as possible or the reasonable cost of providing an acceptable
decorative effect or utilization as circumstances may warrant.
The policy will not guarantee the availability of replacements nor will it be liable for the
value, repair or replacement of the entire series of pieces or panels in the event of damage
to or loss of a part.
6. Settlement Options - by paying an additional premium, the insured can purchase an
endorsement MH 04 02 which give the insurer the option to settle covered property losses
in the following ways:
a. Pay the cost of repairing the damage.
b. Replace the damaged property with similar property, but not necessarily from the same
manufacturer.
c. Pay the insured the lower of the difference between:
•
•
•
The actual cash value of the property before and after the loss.
Pay with cost of replacing the damaged property with similar property.
Pay the cost to repair the damaged property.
Multiple Company Insurance (HO 04 78 10 00)
Homeowner Section I coverages may be divided between two or more insurers if all agree to
such an arrangement. This is usually done only in the case of unusually large risks. The HO 04
78 endorsement is attached to the policy of each company participating in the shared coverage.
It specifies the percentage of the total amount of insurance that the insurer will pay (subject to
the limit shown in the declarations), the total limits of liability, and the name of the insurer
providing Section II coverage (since only one insurer may provide Section II protection). The
endorsement may be used only if the same form, deductibles, and property endorsements apply
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to all participating policies. The sole exception to this last rule is scheduled personal property
coverage that may or may not be subject to division as the participating insurers choose. In
fulfilling the replacement cost condition under forms HO 00 02, HO 00 03, and HO 00 05, the
total amount of insurance from all carriers must be 80% or more of the building's full
replacement cost immediately before the loss.
Ordinance or Law Increased Amount of Coverage (HO 04 77 10 00)
With the special provisions filed beginning in 1994, ordinance or law coverage was added as an
additional coverage providing coverage for the costs to bring the building up to code after a
covered loss up to 10% of the dwelling Coverage A amount. This applied to all forms but form
HO 00 08. This coverage responds to loss resulting from the operation of laws regulating the
construction, repair, or demolition of a structure following a covered loss. Coverage may be
increased in 25% increments up to 100% of the Coverage A limit with additional amounts
available depending upon the insurer.
The endorsement does not respond to costs to comply with any ordinance or law regulating or
enforcing clean up or removal of pollutants or any costs of compliance that should have been
taken care of prior to the loss but was not done so by the insured.
Other Members of Your Household (HO 04 58 10 00)
This endorsement is new in the 2000 program, and reflects the variations of today’s living
arrangements. A person, who would normally not have "insured" status by virtue of being
unrelated by marriage, blood, or adoption, may be given that status when listed on the
endorsement. The named insured agrees to represent the person so named in all matters
pertaining to the insurance, pay any additional required premium, and notify the insurer of any
change in residence or status. The person so named then has personal property coverage,
additional living expense, and liability coverage. A person under age 21, in the legal custody of
and living with the person named in the endorsement, also has coverage.
Other Structures on the Residence Premises (Increased Limits)
(HO 04 48 10 00)
Homeowner Coverage B provides a blanket amount of insurance on "other structures"
(structures on the residence premises that are not the described dwelling). For situations
where that amount provides insufficient coverage, individual structures may be scheduled on
this endorsement with a designated amount of insurance applying to each. Use of the
endorsement does not increase the Coverage B amount of the policy; instead, the endorsement
makes available an additional amount of coverage for each described structure. For example, if
the Coverage B amount is $5,000, and $10,000 is needed for adequate coverage on a particular
structure, the HO 04 48 is used to write the additional $5,000 insurance on that building. If two
or more eligible structures are on the premises, thought should be given to the risk of their
simultaneous destruction when considering the adequacy of Coverage B.
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Owned Motorized Golf Cart Physical Loss Coverage (HO 05 28 10 00)
This endorsement is new in the 2000 program. It provides open perils coverage for owned golf
carts, but allows the insured to select or decline coverage for collision. ("Collision" means the
physical contact of the golf cart with another object, or the upset of the golf cart without
contact with another object.) Accessories and equipment are also covered if, at the time of the
loss, the accessories and equipment are at an insured's residence or in or upon a golf cart off
the insured's residence. The limit for this property is 10% of the highest limit of liability shown
in the schedule for any one cart.
Certain restrictions apply, among them: the cart must have been designed to carry no more
than four persons, and not built or modified to exceed 25 miles per hour on level ground. As
might be expected, there is no coverage for electrical or mechanical breakdown, overheating,
freezing, and similar "wear and tear" perils. There is also no coverage for any loss that is:
1.
2.
Excluded under Section I – Exclusions in the policy form;
If, at the time of loss, the "golf cart" is being:
a. Operated in, or practicing for, any prearranged or organized race, speed contest
or other similar competition;
b. Rented to others;
c. Used to carry persons or cargo for a charge; or
d. Used for any "business" purpose except while on a golfing facility;
3.
4.
5.
6.
To tires or wheels caused by contact with the road or ground, or tires punctured by
an object lying on the ground;
To the electrical system or equipment caused by artificial electricity;
Caused by or resulting from any work being done on the "golf cart", unless fire or
explosion ensues and then only for the loss by such ensuing fire or explosion;
Caused by or resulting from:
a. Vandalism or Malicious Mischief if the place where the "golf cart" is kept or
stored has
b. been unoccupied, closed for the season or is not in operation for any reason, for
more
c. than 60 consecutive days immediately before the loss;
d. Animals, birds, vermin, insects or rodents. (If, however, collision applies, this
exclusion (6.b.) does not apply to collision with an animal or bird.)
A deductible applies separately to each scheduled cart, and separately to equipment and
accessories if not in or upon a golf cart at the time of loss.
Owned Snowmobile (HO 24 64 10 00)
Liability coverage for use of an owned snowmobile away from an "insured location" as defined
in the policy may be purchased. The endorsement used with the 1991 forms appears
considerably different from that used with the 2000 forms; this is because much of the
exclusionary language of the earlier endorsement has been incorporated into the 2000
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homeowner forms (Section II "Motor Vehicle Liability"). For example, the 1991 endorsement
states that the coverage does not apply to any snowmobile subject to motor vehicle
registration. The 2000 endorsement refers to exclusion A.1., which states that there is no
coverage if the "motor vehicle" is required by law or a governmental agency to be registered
for use on public roads or property. Also excluded is if the snowmobile is held out for rental
by the insured. It is important, therefore, to read both the policy itself and the endorsement.
The endorsement also expands the definition of "insured" so that any person or organization
legally responsible for the snowmobile is covered.
Permitted Incidental Occupancies (Residence Premises) (HO 04 42 10 00)
Many homeowner exclusions apply to business activities of an insured. This endorsement
deletes these exclusions as they pertain to a business conducted on the residence premises.
Because Coverage B of the homeowner form does not apply to any structures used for
business purposes, the endorsement provides for scheduling a specified amount of coverage for
an "other structure" on the residence premises that is used in a business. The homeowner
forms limit the amount of coverage for on-premises property used primarily for business to
$2,500. This endorsement increases coverage for on-premises business "furnishings, supplies,
and equipment" to the Coverage C limit.
A question that sometimes arises in connection with this endorsement is the type of property
that is covered as "supplies." Office supplies, such as paper clips, pads of paper, etc., are
covered, but so is the stock of goods held for sale. The definition of "supplies" found in
Webster’s Collegiate Dictionary (Tenth Edition) includes "provisions, stores," and "the
quantities of goods or services offered for sale at a particular time or at one price." For this
reason, it is important to consider the value of such supplies when setting the amount of
Coverage C.
The Section II exclusion for liability and medical payments coverages in connection with
business pursuits of an insured is likewise modified so that Section II coverage applies to the
"necessary and incidental use of the premises" for the business described on the endorsement.
The liability coverage provided under the endorsement does not include coverage for bodily
injury to any employee of the insured, except residence employees in the course of their
employment. The endorsement used with the 1991 forms includes the wording that bodily
injury to a pupil arising out of corporal punishment administered by or at the direction of the
insured is not covered (since private schools and other instructional businesses may be covered
by this endorsement). But the 2000 homeowner forms exclude coverage for sexual
molestation, corporal punishment or physical or mental abuse, so there is no need to repeat
the exclusion. As noted in the owned snowmobile endorsement description, above,
endorsements used with the 2000 forms must be carefully read along with the homeowner
forms themselves, since much of the language that previously appeared in the endorsements has
been moved to the homeowner forms.
Because the ISO rules manual does not state the types of incidental businesses that are
acceptable, insurers have the right to make their own determinations. Few insurers, for
example, will wish to insure a fireworks operation carried out in a shed on the residence
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premises. Remember as well that "incidental" means that the business should be subordinate to
the use of the dwelling as a residence.
Permitted Incidental Occupancies - Other Residence (HO 24 43 10 00)
This endorsement may be used to cover the premises liability exposures of a homeowner
insured engaged in the business described on the endorsement that is conducted at a residence
other than the insured residence premises. The liability coverage provided by the endorsement
does not apply to bodily injury to an employee of the insured, except for residence employees
in the course of their employment.
This endorsement differs significantly from permitted incidental occupancies (residence
premises) HO 04 42 in that liability coverage only is provided. There is no coverage for
property used in business other than the $1,500 in the 2011 form; $500 in the 2000 form and
$250 in the 1991 form for property used primarily in business ("at any time or in any manner"
in the 1991 forms) that is away from the residence premises.
Personal Injury (HO 24 82 10 00)
Homeowner liability coverage does not apply to what is termed "personal injury"; that is,
injuries arising out of libel, slander, malicious prosecution, invasion of privacy, wrongful eviction,
or wrongful entry. These injuries do not involve the "bodily harm, sickness or disease" required
by the policy’s definition of "bodily injury." In the endorsement used with the 1991 homeowner
forms, the personal injury endorsement modifies the "bodily injury" definition to include such
injury. The endorsement used with the 2000 forms adds a new definition of "personal injury"
altogether, and adds provisions, exclusions, and conditions not found in the earlier edition.
"Personal injury" in the 2000 edition expands "libel" and "slander" to include oral or written
publication of material.
In some ways the endorsement’s coverage is broadened (the 2000 endorsement contains an
additional coverage for loss assessment, charged against the insured as a member of a property
owners association, for loss arising out of personal injury); in other ways it is decreased. For
example, the 2000 edition expands the term "invasion of privacy" to "oral or written publication
of material that violates a person’s right of privacy." This does not take into account other
aspects "invasion of privacy" may take, such as videotaping someone surreptitiously. Also, an
exclusion in the 2000 edition precludes coverage for "personal injury caused by... an insured
with the knowledge that the act would violate the rights of another and would inflict personal
injury." Given that it is difficult to be unintentionally malicious (malicious prosecution); it is hard
to see where coverage exists.
While the endorsement used with the 1991 forms protects the insured for liability arising from
covered "occurrences," the 2000 endorsement refers to "offenses," and specifies that to be
covered the offense must take place during the policy period. The 2000 endorsement adds
exclusions not found in the earlier endorsement. For example, the form excludes coverage for
any pollution-related costs, reflecting some courts’ ability to find coverage for pollution under
personal injury - invasion of privacy.
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The endorsement’s coverage for personal injury does not apply to: (1) contractual liability,
unless it is an indemnity obligation assumed under written contract and relating to the
ownership, maintenance, or use of the insured premises; (2) injury caused by conscious
violation of criminal law (by or with the insured's knowledge or consent); (3) injury resulting
from an offense related to the injured person's employment by an insured; (4) injury related to
a business engaged in by an insured; (5) civic or public activities for which an insured is paid; or
(6) liability arising out of disputes between insureds.
Personal Property at Other Residences (Increased Limit) (HO 04 50 10 00)
Under the homeowner forms, the full amount of Coverage C applies to the insured's personal
property at any location except for property usually located at an insured’s residence other
than the "residence premises." Coverage on the latter is limited to the greater of $1,000 or
10% of the Coverage C amount. (In form HO 00 08, this sublimit applies to all property that is
not actually on the residence premises). Endorsement HO 04 50 provides for an increased
amount of coverage at one or two other residences. The amount of coverage is specified for
each location.
Note that the homeowner forms exclude theft coverage at the other residence unless the
insured is "temporarily living there," and endorsement HO 04 50 does not delete this exclusion.
For substantial values at another residence that an insured rents, it may be preferable to
provide Section I coverage under form HO 00 04 (contents broad form). Form HO 00 04
contains the standard exclusion of coverage for theft while the unit is rented to others, but this
exposure may be covered by extended theft coverage for residence premises occasionally
rented to others (HO 05 41) if the rental is on an occasional basis. If the insured owns the
second residence, the insured would be best served by a separate homeowner policy or a
dwellings form endorsed for theft.
Personal Property Replacement Cost Loss Settlement (HO 04 90 10 00)
This endorsement is used to provide homeowner replacement cost coverage (otherwise
available only for buildings) for personal property, awnings, carpeting, household appliances, and
outdoor equipment (including antennas). Certain items of property that are separately
described and specifically insured in the policy also receive replacement cost treatment under
the endorsement. Items in this second category are limited to: jewelry; furs and fur-trimmed or
fur garments; cameras, projection machines, films, and related equipment; musical equipment
and related items; silverware, silver plated ware, gold ware, gold plated ware, platinum and
platinum plated ware, and pewter ware (but not pens, pencils, flasks, smoking implements, or
jewelry); golf clubs, golf clothing, and golf equipment. However, reflecting the 2000 scheduled
personal property endorsement HO 04 60, that allows an insured to choose agreed value
coverage, these items do not have replacement cost coverage if agreed value applies.
Recovery for all property insured under the endorsement is limited to the smallest of five
amounts: (1) replacement cost at the time of loss; (2) the full repair cost; (3) the Coverage C
limit, if applicable; (4) any applicable special limits; or (5) the limit that applies to any item
separately described and specifically insured in the policy. Four categories of property are not
eligible for replacement cost coverage: (1) antiques, fine arts, and similar property; (2)
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memorabilia, souvenirs, collector’s items, and the like; (3) property not kept in good or
workable condition; and (4) obsolete articles that are stored or not being used. The first two
categories represent types of property for which an accurate replacement value cannot be
determined. (Fine arts and antiques are often scheduled for agreed value coverage under a fine
arts floater. If allowed to remain under the homeowner policy’s actual cash value provisions,
such property is covered for its market value.) The last two categories comprise property for
which replacement cost recovery would violate the indemnity principle and perhaps invite a
moral hazard on the part of the insured.
For losses with a replacement value of more than $500, actual repair or replacement must be
made before the replacement cost provisions apply. An actual cash value claim can be made at
the time of loss and amended to replacement cost within 180 days. The 2000 edition clarifies
that an insured need only notify the insurer of the intent to seek replacement cost; the 1991
edition was misleading in that some thought that the property had to be replaced within 180
days because the language stated that the insured had to make a claim for the difference. But
"making a claim for" replacement and actually "replacing" are two separate things.
Specific company underwriting guidelines will apply to the use of this endorsement. Some
companies will require a specified percentage increase in Coverage C limits and a substantially
increased minimum amount of insurance for Forms HO 00 04 and HO 00 06 in order to
include the endorsement.
Premises Alarm or Fire Protection Systems (HO 04 16 10 00)
The insured can receive a premium credit for installing an insurer-approved alarm system or
automatic sprinkler system. The endorsement is written acknowledgment by the insurer that
such a system is in place. It also creates an obligation on the insured's part to maintain the
system in working order, and to let the insurer know "promptly" if any changes are made to the
system or it is removed.
Property Remediation for Escaped Liquid Fuel and Limited Lead and Escaped
Liquid Fuel Liability Coverages (HO 05 80)
This endorsement is used with all forms except HO 00 04 and HO 00 06. Endorsement HO 05
81 is used with HO 00 04 and endorsement HO 05 82 is used with form HO 00 06. The
endorsement provides limited property and liability protection against losses caused by
exposure to lead and by liquid fuel that escapes from its intended receptacle. The endorsement
also extends coverage for loss assessments made against the insured for damages arising from
lead exposure or escaped liquid fuel. The definition of “residence premises” is broadened to
include any location scheduled on the form.
The definition of “fuel system” in the form refers to one or more containers of liquid fuel with
an aggregate capacity of at least 100 U.S. gallons. It also refers to piping and other apparatus
related and connected to the containers, including pumps. It includes boilers, furnaces, heaters
and the fuel stored in the defined fuel system as well as the structure designed to house fuel
containers. However it does NOT include tanks, or containers that are permanently attached
to or are components of a motorized vehicle or watercraft.
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Under the property portion of the endorsement, real property normally insured under
Coverage A and B is covered including land but not farm land. Personal property normally
covered under Coverage C is also covered by the form subject to all of the standard policy sub
limits. Coverage for real and personal property is limited to the amount scheduled in the
endorsement. The limit is an aggregate over all locations for all damage incurred in a single
policy year.
The added liability (and third party medical payments) coverage is protection against either
bodily injury or property damage liability that is caused by the escape of liquid fuel from a “fuel
system” or by lead contamination. The liability has to be as a result of conditions on the
residence premises. The amount of coverage on the form is an aggregate limit which is reduced
by each occurrence.
Refrigerated Property Coverage (HO 04 98 10 00)
Many homeowner insurers in recent years have introduced coverage that is similar to the ISO
endorsement for loss to refrigerated property. Endorsement HO 04 98 provides $500
coverage (with a $100 deductible) for property in freezers and refrigerators for loss caused by:
(1) interruption of electrical service to the refrigerator or freezer caused by damage to the
generating or transmitting equipment (whether on- or off-premises), or (2) the unit’s
mechanical failure.
"Loss of power" means the complete or partial interruption of electric power due to conditions
beyond an "insured's" control. Protection is included within the Coverage C limit. The
endorsement states that the power failure exclusion does not apply to the coverage. Coverage
will apply only if you have maintained the refrigeration unit in proper working condition
immediately prior to the loss.
Replacement Cost Loss Settlement for Certain Non-Building Structures on the
Residence Premises (HO 04 43 10 00)
This endorsement is new in the 2000 homeowner program. The unendorsed homeowner
forms provide that loss to Coverage B structures that are not buildings be adjusted on an actual
cash value basis. Attaching this endorsement allows certain structures on the residence
premises to be adjusted on a replacement cost basis. These structures include: reinforcedmasonry walls; metal or fiberglass fences; fences made of plastic/resin materials; patios or walks
not made of wood; and driveways. If the cost to repair or replace exceeds $2,500, settlement is
on an ACV basis until repair or replacement is complete. The insured may elect an ACV basis,
and then make claim for any additional payment if the insurer is notified of this intent within
180 days after the date of loss.
Residence Held in Trust (HO 06 15 06 11)
Reflecting a growing trend in ways of holding property, new endorsement HO 06 15 residence
held in trust allows a trust to be shown as named insured along with the trustee on the
homeowner form declarations so long as one of these regularly resides in the residence: the
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trustee named insured, the grantor, or the beneficiary. For example, if a bank is named trustee
of a piece of rental property inhabited by tenants who are neither grantors nor beneficiaries of
the trust, the endorsement may not be used.
If the trustee does not reside on the residence premises, but the grantor and beneficiary do,
they must be named in the endorsement to have "insured" status for contents, additional living
expense, and liability. With respect to Section I property coverages, the trust has Coverage A
dwelling, Coverage B other structures, and Coverage D loss of use fair rental value. A trustee
not residing on the residence premises has Coverage E personal liability and Coverage F
medical payments to others only for bodily injury or property damage arising out of the
ownership, maintenance, or use of the residence premises. Any situations that involve the
trustee’s professional liability would be excluded as would coverage for bodily injury sustained
by the trustee or any party identified in the endorsement schedule. Also, if the trustee does not
reside on the residence premises, there is no coverage for any resident relative of the trustee’s
household.
Residence Rental Theft (HO 04 80 04 91)
This endorsement has been withdrawn with the 2000 homeowner program. It has been
replaced by endorsement HO 05 41, extended theft coverage for residence premises
occasionally rented to others.
The major difference is that the HO 04 80 does not cover theft from that part of the rented
premises if the loss is caused by a tenant, roomer or boarder, member of the tenant's
household, or their employee. The HO 05 41 provides theft coverage from any part of the
residence premises, even the rented part, and even if caused by the tenant, roomer or boarder,
member of the tenant’s household, or their employee.
Scheduled Personal Property Endorsement (HO 04 60 10 00 or HO 04 61 10 00)
Personal articles insurance may be written in conjunction with a homeowner policy by using
endorsement HO 04 61. This makes it convenient for a homeowner insured who wishes to
broaden the scope of coverage on personal property by writing the coverage on an open perils
basis, or who has value in excess of the limits specified in the homeowner form for certain
categories of property - jewelry, furs, silverware, postage stamps, and coins. Additionally, an
insured may have a fine arts collection in excess of the Coverage C limit of liability, and if a total
loss to the residence premises occurred, there would not be enough coverage for both
personal belongings and the collection.
It is important to remember the Coverage C exclusion for "articles separately described and
specifically insured in this or any other insurance" when deciding on amounts of insurance to be
inserted in the endorsement. The Coverage C amount will not contribute in case of loss to any
property specifically insured in the endorsement, so it is important that each item is scheduled
for an adequate amount of coverage.
The full effect of the "other insurance" provision can be avoided if an insured chooses not to
schedule blanket items (such as "silverware") in the endorsement, but instead lists only the
more valuable items specifically, for example, "four piece service for eight of ABC brand
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silverware, ‘XYZ’ pattern." Other silverware items in the household thus escape the "other
insurance" provision and continue to have the protection of Coverage C, subject to any
deductible.
Despite its appearance as a mere endorsement attached to the homeowner policy, the personal
articles floater remains a separate contract. For provisions of the endorsement and how it
interacts with the requirements of the personal inland marine program, see the personal
articles form.
The 2000 program offers a new version of this endorsement: scheduled personal property
endorsement (with agreed value loss settlement) HO 04 60. Endorsement HO 04 61 offers
agreed value loss settlement only for fine arts; the HO 04 60 offers agreed value loss
settlement for all articles scheduled. For example, an insured may have scheduled under an HO
04 61 a $75,000 grand piano that is damaged in a tornado. If the insurer elects the repair
option, the insured could wind up with a shoddily-repaired instrument. But with the agreed
value option, the insured is simply paid for the loss.
An important change in the HO 04 61, and incorporated into the new HO 04 60, is that the
territorial restriction for fine arts to within the United States and Canada has been removed.
The endorsement now provides worldwide coverage for all scheduled property. It states:
A. Newly Acquired Property – Jewelry, Furs, Cameras and Musical Instruments Only
1. We cover newly acquired property of a class of property already insured. The lesser of
the following limits applies:
a. 25% of the amount of insurance for that class of property; or
b. $10,000.
2. When you acquire new property you must:
a. Report these objects to us within 30 days; and
b. Pay the additional premium from the date acquired.
B. Newly Acquired Fine Arts
When Fine Arts are scheduled, we cover objects of art acquired during the policy period for
their actual cash value. However, we will pay no more than 25% of the amount of insurance for
fine arts scheduled. For coverage to apply for newly acquired fine arts you must:
1. Report these objects to us within 90 days; and
2. Pay the additional premium from the date acquired
Sinkhole Collapse (HO 04 99 10 00)
This endorsement provides coverage for direct physical loss to insured property caused by
"sudden settlement or collapse of the earth supporting such property and only when such
settlement or collapse results from subterranean voids created by the action of water on
limestone or similar rock formations." In conjunction with this coverage agreement, the
endorsement removes sinkhole collapse from the earth movement exclusion.
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Special Computer Coverage (HO 04 14 10 00)
This endorsement may be used with all homeowner forms except the HO 00 05, HO 00 04
with the HO 05 24 (open perils coverage) attached, or the HO 00 06 with the HO 17 31 (open
perils coverage) attached. It covers computers and computer equipment against additional
covered causes of loss. "Computer equipment" is defined as: (1) electronic data processing
hardware, monitors, disk drives, scanners, printers and modems, and other "related peripheral
equipment and (2) other electronic parts, equipment or systems, disks, tapes, wires, records, or
other software media that are used with or connected to the equipment described in (1).
Subject to certain exclusions, coverage is modified to cover such property on an open perils
basis.
Many of the endorsement's exclusions parallel those applicable to open perils coverage for
personal property in form HO 00 05, such as wear and tear, smoke from agricultural
operations, damage caused by damp atmosphere or extremes in temperature, weather
conditions, collapse, or equipment undergoing refinishing, renovating or repairing. The form
used with the 2000 edition differs from that used with the 1991 homeowner forms in that the
revised definition of "computer equipment" means hardware, software, operating systems or
networks, and other electronic parts, equipment of systems solely designed for use with or
connected to the computer.
Note that the homeowner forms exclude coverage for "business data" stored on software
media but do not apply such an exclusion to personal records. An insured who loses personal
records and has to spend time recreating them may recover for the time spent, although the
amount of recovery will probably be minimal. Endorsement HO 04 14, which applies only to
"equipment" and not to records or data, does not increase the coverage available under the
form for personal data.
Special Loss Settlement (HO 04 56 10 00)
This endorsement may be used with forms HO 00 03, HO 00 03, and HO 00 05 only. The
standard loss adjustment for buildings is on a replacement cost basis when the amount of
insurance on the damaged building at the time of loss is at least 80% of the building’s full
replacement cost. (A notable exception is form HO 00 08, which provides for loss adjustment
on either a repair cost or actual cash value basis).
Endorsement HO 04 56 is used to reduce the percentage of insurance to value that is required
before losses will be adjusted on a replacement cost basis. Manual rules allow a reduction to
50%, 60%, or 70% of the property's replacement cost. This may be necessary when replacement
of a dwelling would cost far more than its market value and the insurer, to avoid the moral
hazard, is unwilling to write a policy for the full 80% of replacement value.
The 2000 edition reflects the revisions made in the 2000 program (such as the inclusion of
grave markers) and adds a new provision: if the dwelling is rebuilt at a new premises, the
replacement cost is limited to the cost that would have been incurred if the insured had built at
the original premises.
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Special Personal Property Coverage (HO 00 03 only) (HO 00 15 10 00)
This endorsement has been withdrawn with the filing of the 2000 edition, since the HO 00 05
has taken its place. When attached to 1991 form HO 00 03, the only form with which it may
be used, this endorsement converts Coverage C (personal property) named perils coverage to
coverage on an open perils basis. The exclusions that apply to the dwelling and other
structures under form HO 00 03 also apply to personal property under the endorsement.
"Misplacing and losing" is added to the theft limit applying to: jewelry, watches, and furs; silver
and gold ware; and firearms. Under this endorsement, personal property is covered for damage
resulting from earth movement, unlike the 2000 HO 00 05.
Special Personal Property Coverage (HO 00 04 Only) (HO 05 24 10 00)
This optional endorsement is new in the 2000 program. It provides open perils coverage (with
certain exclusions) for the personal property for a tenant insured, and changes the special limits
of liability for jewelry, watches and furs, firearms, and silverware, gold ware, etc., by adding
"misplacing or losing" to the loss by theft coverage. Usual exclusions for open perils coverage
apply, such as wear and tear, refinishing, or breakage of fragile items. A change to note in the
open perils endorsements, such as the HO 05 24 and the HO 17 31 (used with the HO 00 06)
is that coverage for breakage resulting from earth movement has been removed in the 2000
editions. The endorsement may not be attached if the residence premises is rented or sublet.
Structures Rented to Others Endorsement (HO 04 40 10 00)
This endorsement provides coverage for structures other than the residence that are located
on the described premises, rented or held for rental to others. Coverage applies only when
such structures are used for residential purposes and are not occupied by more than two
families or more than two roomers or borders per family. Provision is made in the
endorsement for as many as three structures held for rental. Each structure is insured with its
own limit of insurance. The coverage applies only to structures which are either currently
occupied by renters or are being held out for rental. Either the entire structure or just a
portion of the structure may be rented out and the purpose of the rental MUST be for use as a
residence.
Water Back Up and Sump Discharge or Overflow (HO 04 95 10 00)
Coverage is available under this endorsement for direct physical loss, not caused by the
insured's negligence, to property covered under Section I. The loss may be from water or
water-borne material that backs up through sewers or drains, or overflows or is discharged
from a sump, sump pump, or related equipment. The addition of the wording "water-borne
material" is new in the 2000 edition, and acknowledges some court cases which found for the
insured because the water damage exclusion did not specifically exclude sewage. Now, if the
insured purchases this coverage, the water back up endorsement applies to sewage (waterborne material) as well as water itself. A new exclusion in this edition states that if the water
back up or sump overflow has been caused by a flood, there is no coverage. Individual insurers
will determine how much of a coverage limit they are willing to provide under this
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endorsement. Most carriers offer limits from $2,500 up to $50,000 per occurrence for the
appropriate additional premium.
Watercraft (HO 24 75 10 00)
This endorsement is used to remove the homeowner Section II exclusions pertaining to the
ownership, maintenance, or use of certain watercraft. The endorsement provides liability and
medical payments coverage, otherwise excluded, with respect to scheduled and described
watercraft powered by one or more outboard engines or motors of more than 25 total
horsepower; any inboard or inboard-outdrive powered watercraft; and sailing vessels, with or
without auxiliary power, of 26 or more feet in length.
Coverage under the endorsement does not apply to job-connected bodily injury to an insured's
employee whose principal duties involve the maintenance or use of watercraft, nor is there
coverage while the watercraft is used to carry paying passengers or while it is rented to others.
The current edition of the endorsement also excludes coverage for liability arising out of the
operation of watercraft in a prearranged or organized race, speed contest, or similar
competition, unless the competition is for sailing vessels (with or without auxiliary power) or is
a predicted log cruise.
Windstorm or Hail Exclusion (HO 04 94 10 00)
Coverage for the perils of windstorm or hail may be excluded by means of endorsement HO
04 94. Insureds who choose to exclude coverage for these perils receive a premium credit. The
endorsement does not eliminate coverage for loss by fire or explosion that results from
windstorm or hail damage. Loss of use coverage (Coverage D) is not reached by the exclusion.
Other endorsements pertaining to this peril are: 1) windstorm or hail percentage deductible
HO 03 12, which schedules a separate deductible only for loss caused by windstorm or hail;
and 2) windstorm or hail protective devices HO 04 21, which gives a credit if certain protective
devices, such as storm shutters, are in place.
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Review Quiz
1. With homeowner policies, “insured location” is a broad term describing where liability
coverages apply. It includes each of the following, except:
A.
B.
C.
D.
Family cemetery plots
Vacant farm land owned by an insured
A non owned premises used as a temporary residence by an insured
Any newly acquired premises
2. The maximum coverage for theft of jewelry, watches, furs, precious and semi-precious
stones under contents coverage of a homeowner is:
A.
B.
C.
D.
$500
$1,500
$1,000
Contents limit C
3. Which homeowner form is considered to be the broadest form?
A.
B.
C.
D.
HO -3
HO-4
HO-7
HO-5
4. Property damage to the property of others in the care custody or control of the insured is
excluded under Section II Liability unless the damage to the property is caused by:
A.
B.
C.
D.
An insured as defined by the policy
Fire or Explosion
Water damage from a broken pipe
A resident relative damages the property of a roomer
5. If you purchase the optional home day care endorsement on your homeowner policy, your
premium will be based on?
A.
B.
C.
D.
The number of children
Size of the home
Policy limits purchased
Deductible chosen
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Review Answers
1. B. Vacant land is considered an insured location, but vacant farm land is not.
2. B. The 2000 edition increased the maximum coverage to $1,500. In the old forms it was
$1,000.
3. D. The HO-5 is open peril coverage on both buildings and contents.
4. B. The property of others in the care, custody or control of the insured would be covered
under Section II of the policy if the damage to the property was caused by fire or explosion.
5. A. The premium for the endorsement is based on the number of children being cared for.
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