Strange Claims from the Claims JournalEvery year as the fourth.docx

Strange Claims from the Claims Journal
Every year as the fourth of July nears, Mike Rowe, State Auto
Insurance Co. recalls an auto claim he handled a few years ago.
The case involves an insured infatuated with fireworks. He
loved them so much he spent a couple thousand dollars a year to
shoot them off in his field. One year, the insured loaded the
back of his truck with fireworks and began making his way
home when he decided to smoke a cigarette. Upon finishing, he
tossed the end of the cigarette out the window, but wind blew
the butt into the truck bed igniting the fireworks. The truck
sustained damage, Rowe however did not indicate whether the
driver was injured.
Paul Clark, recalled a situation involving a company paying an
annuity to an individual in India. A fingerprint found on the
back of each check endorsed them. One day, an audit revealed
the check recipient had lived well passed the average life span,
triggering an investigation. To the investigators’ dismay, the
annuity recipient had long since died. The family cut the index
finger off the deceased and kept it conveniently in a jar to
endorse the checks to keep them coming.
Sandi Quezada of Chino Hills, Calif. recalled an applicant
suffering from back pain who became pregnant. The client filed
a claim on the grounds the anti-inflammatory agent in her pain
medication neutralized her birth control, resulting in the
pregnancy. She hired an attorney and asked for all prenatal
visits and delivery charges paid in full, along with daycare
services and child support until the age of 18.
Subsequently all she got was a little bundle of joy by which to
pass on her preeminent ethical dignity.
Retired claims manager for the now defunct General Rent-a-Car

in South Florida, Jay Bach, recalled a claim from the late 1980s
where a driver slid into a wall killing the passenger. Apparently
the driver and passenger worked for the FBI, investigating local
police. The mother of the deceased passenger’s son sued, but
the FBI and local police refused to cooperate. The rental
company’s investigation team discovered the car had even been
bugged. Bach said his team’s investigations lead from South
Florida to the Caribbean Islands, but never uncovered the
details of the accident. He said the discovery documents were
blacked out by the FBI. Despite a local judge in the case
apparently expressing anger at the Bureau’s “deliberate attempt
to thwart the truth,” the case settled out of court for an
undisclosed amount. Bach said the son of the deceased, while
riding his bike the day of the accident, witnessed the crash, but
didn’t know his father was in the car and had passed.
A homeowners customer once requested coverage from Reiner
Maurer, vice president, personal lines, United States Liability
Insurance Group to pay for the loss of his stolen dentures.
Confounded by the idea of someone stealing another person’s
dentures, Maurer investigated further. He learned that not only
had the insured witnessed the theft, but failed to file a police
report. The crime occurred on the beach in Atlantic City where
the insured vacationed. The insured sneezed to such a degree
that he blew his dentures out of his mouth and onto the sand,
triggering a hungry seagull to snatch it up, thinking it to be
food. Maurer ultimately declined the claim and suggested the
insured consider a products liability claim against the adhesive
cream company.
Claims Journal received a strange claim submission reflecting a
kitchen-fire claim. While home-fires commonly initiate claims,
the way this particular fire started might be unusual. The
insureds apparently moved a wall mirror into their kitchen
where they mounted it on an east wall. Then, after the insureds
left for the market, the sun shifted and the mirror began

reflecting sunlight onto a fake plant located on the other side of
the kitchen, igniting it. The fire quickly spread, causing
significant damage. The homeowner carrier paid for the losses.
Peter Crosa of Atlanta, Ga. received an assignment for lightning
damage to an insured’s ceiling and roof. While lightning stikes
on homes in Florida occur with relative regularity, what he
found resembled a science fiction movie set. Two oblong holes,
about 6 inches in diameter, burnt clean through the roof,
ceiling, floors, framing and all with no subsequent debris. Ever
play with a magnifying glass when you were a kid?
The scene conjured images of space aliens with lasers, but
Crosa settled with the insured on the basis of lightning damage.
Consumer advocate and owner of Pinnacle Insurance, Steve
Desino, had an insured call after returning from a week’s
vacation to a ruined living room rug. When Desino inquired as
to the cause of the loss, the insured said, when getting ready to
leave for his vacation, his toddler took his diaper off and
defecated on the rug, then rolled and crawled through it,
tracking it throughout the entire room.
The insured told Desino he had to leave it in the carpet during
the duration of his vacation because his wife was already in the
car, yelling at him to hurry or they would miss their flight.
Subsequently, he, “slapped a diaper on the kid and ran out the
door.”
A week later, the carpet was burned and ruined.
Desino had the insured report the incident as, “a sudden and
accidental discharge.”
The company paid $4,700 to re-carpet the entire first floor of
the residence.
===
Mike Dwyer, president, Sinclair-Dwyer and Co. recounted an
auto-medical payments claim filed by a woman due to injuries
sustained by her left breast.
The insured — apparently endowed enough — got caught in her
car door upon exiting. Making matters worse, the door locked

with her keys safely in her purse — out of reach.
Somehow she managed to flag down a Good Samaritan who got
her keys out of her purse and opened the door. Relishing in her
freedom, she found the strength to drive herself to the hospital.
She took a few stitches, however severe bruising made up the
majority of her injuries.
The carrier paid about $3,800 under auto med pay for the
emergency room visit and treatment.
The winner is, Joan E Quagenti, M.Ed., ITP
training/communications manager, account service and sales
operations, Blue Cross Blue Shield of Massachusetts.
Claims Journal’s strange claims contest culminated Friday with
Quagenti’s submission recounting a claim filed years ago when
she worked as a property/casualty underwriter. As matter of
course, she read a countless aggregate of claims sheets to revise
her on loss activity. In one instance, she read about an auto
repair shop owner who always brought his dog to work. One
day, while at the garage, a door inadvertently crashed down on
one of the dog’s legs. Later, in lieu of veterinary expenses, the
owner submitted a workers’ comp claim on behalf of the
company’s employed watchdog.
FIN 3610 General Insurance
Chapter 22 – Homeowners Insurance, Section I
Chapter 23 – Homeowners Insurance, Section II
Homeowners Insurance
Welcome back to the third portion of our course where we will
cover liability topics and some personal lines property topics as
well. You will note that Chapter 20 covers Section I of the
homeowners’ policy, and Chapter 21 covers Section II of the
homeowners’ policy.
While we are basically going to cover the HO-3 special form
homeowner’s policy, you need to be aware that there are several
other homeowner policies. Examine Exhibit Twenty on page 429

and you will see there are now six different homeowner
policies:
HO-2 basic form covers the dwelling, other structures, and
personal property on a named perils basis.
Homeowner Policy Section I
The homeowners’ policy is a great place to get introduced to
basic insurance terminology and learning your way around the
policies and how to understand the policy. The HO-3 is broken
down into two parts. It's fairly easy to look up specific losses or
specific issues that you may want to read more about. For
example, homeowner policy Section I provides four different
categories of coverages. These four coverages are: A- dwelling
coverage, B- other structures coverage, C- personal property
coverage, D-loss-of-use coverage. There are some other
coverages that will be included in these but those are the four
broad categories of coverages in Section I of the homeowners’
policy.
You will note dwelling coverage today covers the building
itself. Following through on page 432 you will see that the
dwelling includes any structure that is attached to that dwelling.
For example an attached garage would be covered under
coverage. If the garage was not physically attached to the actual
house, then that would be covered under coverage B as other
structures. As a former claims adjuster these sections of the
policy and the definitions within them were very important in
determining whether a loss was covered, and if so to what
extent was their coverage. You will see that under each of those
coverages in Section I, there are limits, as well as additional
special limits of liability. For example there's a $200 limit on
money within the home. This would include a coin collection or
just spare cash that you may hide under your mattress. There is
also a special event for the theft of jewelry up to $1500 on most
homeowner policies. You will also find a section entitled
property not covered and should read through the eleven
categories of property not covered there in this chapter. You
should recall what we said in Chapter 1 about what we need to

insert in a policy to prevent an insured from trying to make a
profit from having a loss. Most of these exclusions or limits are
for that purpose. There are other reasons for exclusions that are
discussed here as well.
Coverage D provides protection when the residence premises
cannot be used because of a covered loss. The amount of
additional insurance under this coverage is 30% of the amount
of insurance on the house itself, Coverage A.
If you keep going through the policy you will find that it's
organized very nicely. You have specific information for
coverage is A through D, then you have a section entitled
additional coverages which specify how much coverage there
would be if the fire department had to come to your home and
charged for that trip, but you would also find additional
coverages for things like trees shrubs and other plants, credit
card, electronic fund transfer card or excess device, forgery,
and counterfeit money. The section more clearly defines the
coverage that would be provided for these types of items.
You want next come to a section that describes the perils
insured. You'll also relate this to what we had in Chapter 1
regarding named peril versus all risk policies. It specifically
states in the section that for the house and other structures,
coverage A and B, the dwelling and other structures, are insured
against "direct physical loss to the property." This means that
direct physical loss is covered except if the loss is specifically
excluded. Thus, if a loss to the dwelling or other structure is not
excluded, the loss is covered under the policy. This is quite
simply the definition of an open peril policy.
A more lengthy discussion is provided on the coverage that
would apply toward personal property that is covered. Personal
property is covered on a named peril basis. The policy
compensates direct physical loss to personal property from this
perils discussed or named in the policy. This indicates that
coverage C is a named peril type of coverage. You will find a
lot of perils listed here under the section including fire,
lightning, wind storm, hail, explosion, aircraft, vehicle, smoke,

and theft. There are many other perils named for coverage C of
this policy.
The next segments of the homeowner policy includes a list of
exclusions and conditions. Keep in mind the homeowner policy
is divided into Section I and Section II. Different conditions
and exclusions will apply to each section. In the condition
section you will find more specific information on things such
as your duties after a loss, how a claim is settled, the appraisal
clause, and your mortgage clause. You might be interested in
reading in this section about how the mortgage clause is
designed to protect the mortgagee’s insurable interest. The
mortgagee is the bank or the holder of the loan on the house.
Many people are not aware that their lender has a key role and
has benefits in their homeowners’ policy. The laws have
changed to protect a mortgagee from the acts of the insured in
some cases.
As in all of these chapters, at the end you will find case
applications. The case applications for Chapter 20 are
exceptionally good! Look on page 448 and go through the
examples given of Jack and Jane and their homeowner policy.
Homeowners Policy Section II
The homeowner policy information is continued in Chapter 21.
While chapter 20 covered Section I of the homeowners’ policy,
Chapter 21 covers Section II, which only includes two
coverages, Coverage E and coverage F. These two coverages are
for personal liability, and medical payments to others. While
different limits might be available, a typical limit is $100,000.
As you will see in this chapter, some very interesting claims
may occur in coverage, as is itemized on page 455. Your
coverage if you would provide personal liability protection to
you, meaning that if I third-party made a claim against you, this
coverage could apply. Suppose your dog bites a small child,
Coverage E may apply. This is a very common type of
homeowner claim under Section II coverage. Also, if you're
burning leaves in your yard and accidentally set your neighbor’s
home on fire, Coverage E would apply. The big question that

always arises in class is what if someone is hurt in your home or
even worse, what if someone is drinking in your home and
leaves and causes an accident. These are the types of things for
which we all need to be very cautious and practice thorough risk
management! Coverage E would generally apply to these types
of situations, with some exclusions that are also noted in his
chapter.
There are numerous exclusions listed for coverage under
Section II and most of these you can see how directly they
result from our concern back in Chapter 1 again that no one
should be able to profit from having an insurance policy. Notice
there are exclusions for watercraft liability, aircraft liability,
and hovercraft liability, which would need to be covered under
their own policy. Most people do not have those types of
properties, therefore the average homeowner would prefer not
having to pay for that coverage when they do not own a
watercraft or an aircraft.
There are some additional coverages in Section II that are
discussed in this chapter as well. Those include coverages for
claims expenses, and one of my favorites, damage to property of
others. When I was a claims adjuster and there had been a small
loss to someone's property who wanted the insured to pay for,
often the insured would not feel it was his or her responsibility
to pay for the loss. I had one claim in which our insured went to
visit his neighbor and the door handle just fell off. Our insured
claimed he did not do anything to cause the damage. He said it
was loose and it already been broken. He did not want to have
to have his insurance company pay for his neighbor’s broken
door when he did not feel responsible for it. This damage to
property of others clause, what I like to call the good neighbor
clause, allowed me to give the neighbor A few hundred dollars
to fix the door with no liability admitted.
As you continue reading the chapter, pay careful attention to
this Section II conditions, many of which we discussed in an
earlier chapter, and typical endorsements that may be added to
the homeowner policy. A homeowner can tailor this policy to fit

his or her needs quite easily.
The final section of Chapter 2 covers the cost of homeowner
insurance. The chapter also provides you hints on what to look
for when purchasing the policy and provides some cost
comparison between different companies. It would be worth
your time to look online and see how prices may vary across
companies for the same amount of coverage.
These two chapters provide a lot of information that I am
confident you will refer to when you purchase a homeowners
policy!
Copyright © 2017 Pearson Education, Inc. All rights reserved.
Homeowners Insurance,
Section II
Chapter 23
*
23-*
AgendaPersonal liability insuranceSection II ExclusionsSection
II Additional CoveragesSection II ConditionsEndorsements to a
Homeowners PolicyCost of Homeowners Insurance

*
23-*
Personal liability insurancePersonal liability insurance protects
the named insured and family members against legal liability
arising out of their personal actsThe insurer pays amount for
which the insured is found legally liable, up to the policy
limitsThe insurer also pays defense costsThe coverage is found
in Section II of the Homeowners policy
*
23-*
Section II CoveragesCoverage E protects the insured when a
claim or suit for damages is brought because of bodily injury or
property damage allegedly caused by an insured’s
negligenceThe coverage is broad and based on legal liabilityThe
policy contains a per-occurrence limitAn occurrence is defined
as an accident which results in bodily injury or property damage
during the policy periodThe insurer provides a legal defense,
even if the suit is frivolous or fraudulent
*

23-*
Section II Coverages (Continued)Coverage F is a mini-accident
policyMedical payments to others pays the reasonable medical
expenses of another person who is accidentally injured while on
an insured location, or by the activities of an insured, resident
employee, or animal owned by or in the care of an insured The
insured is not required to be legally liableCoverage does not
apply to the insured or regular residents of the household, other
than a residence employeeCoverage applies even if the injury
occurs away from an insured location
*
23-*
Section II ExclusionsSome exclusions apply to both Coverage E
and Coverage F, including:Liability arising out of the use of an
auto, certain watercraft, aircraft, or hovercraftExpected or
intentional injuryBusiness activities, with some
exceptionsProfessional servicesLiability arising out of the use
of an uninsured location
*
23-*

Section II Exclusions (Continued)War or other hostile military
actsLiability arising out of the transmission of a communicable
diseaseBodily injury or property damage arising out of sexual
molestation, corporal punishment, or physical or mental
abuseLiability arising out of the use, sale, manufacture,
delivery, transfer, or possession of controlled substances
*
23-*
Section II Exclusions (Continued)Several exclusions apply only
to Coverage E:Contractual liabilityProperty owned by the
insuredProperty in the care of the insured, with some
exceptionsWorkers compensationLiability arising out of nuclear
energyBodily injury to an insured
*
23-*
Section II Exclusions (Continued)Other exclusions apply only
to Coverage F:Injury to a resident employee off an insured
locationWorkers compensationInjuries that result from nuclear
energyPersons regularly residing on the insured location

23-*
Section II Additional CoveragesThe homeowners policy
automatically includes several additional coverages:Claims
expenses (e.g., court costs, attorney fees) are covered in
addition to the policy limits for liability damages The insurer
pays any first-aid expenses incurred for bodily injury covered
under the policyDamage to property of others pays up to $1000
per occurrence for property damage caused by an insured, with
some exclusionsCertain loss assessments are covered up to
$1000
*
23-*
Section II ConditionsLimit of Liability: The insurer’s total
liability under Coverage E for all damages arising from one
occurrence will not be more than the limit shown in the
declarationsThe insurer’s total liability for medical expenses for
bodily injury to one person resulting from an accident will not
exceed the Coverage F limit shown in the declarations
23-*
Section II Conditions (Continued)Duties after an “occurrence”
include:Written notice of the event must be provided to the
insurer, including the time, place, circumstances, and names of
any claimants and witnessesThe injured person (or his/her

representative) must provide written proof of claim and
authorize the insurer to obtain copies of medical records
23-*
Section II Conditions (Continued)An insured may not sue the
insurer unless the insured has complied with the conditions
required in Section IIThe insurance is excess over other valid
and collectible insurance, with some exceptionsNo coverage is
provided to an insured who concealed or misrepresented any
circumstance or material fact or engaged in fraudulent conduct
23-*
Endorsements to the Homeowners PolicyProperty owners with
special needs can purchase a variety of endorsements:An
inflation-guard endorsement provides for an annual pro rata
increase in the limits of insurance in the Section I coveragesAn
earthquake coverage endorsement covers earthquakes,
landslides, volcanic eruption, and earth movementWhen a
personal property replacement cost loss settlement endorsement
is added to the policy, claims are paid on the basis of
replacement cost with no deduction for depreciation
*
Transparency Master 1.2
23-*

Endorsements to the Homeowners Policy (Continued)The
scheduled personal property endorsement (with agreed value
loss settlement) provides additional coverage for nine classes of
property (jewelry, furs, cameras, musical instruments,
silverware, golfer’s equipment, fine arts, postage stamps, and
rare and current coins) and the insurer agrees to pay the stated
amount for a scheduled item if a total loss occursA personal
injury endorsement is used to extend liability coverage to legal
liability arising out of personal injury, e.g., false arrest, slander
*
23-*
Endorsements to the Homeowners Policy (Continued)A
watercraft endorsement provides liability and medical payments
coverage on any inboard or inboard-outdrive powered
watercraft; sailing vessels 26 feet or more in length; and
watercraft powered by one or more outboard motors exceeding
25 total horsepowerA home business insurance coverage
endorsement covers both business property and legal liability
arising out of a home-based businessAn identity theft
endorsement reimburses crime victims for the cost of restoring
their identity and cleaning up their credit report
23-*

Cost of Homeowners InsuranceMajor rating and underwriting
factors include:Type of construction Location of homeFire-
protection class, which depends on the quality of the public fire
department, accessibility to the fire department, water supply,
and fire hydrantsConstruction costsAge of the homeType of
policy and deductible amountInsurance score: a credit-based
score that is highly predictive of future claim costs
*
23-*
Cost of Homeowners Insurance (Continued)Insurers also use
reports that reveal the prior claim history of a homeA
Comprehensive Loss Underwriting Exchange (CLUE) report
shows up to seven years of information on property claims,
including the date of loss, type of loss, and amounts paidThe
use of CLUE reports is controversial
*
23-*
Exhibit 23.1 Tips for Buying a Homeowners Policy
*

Chapter 22
Homeowners Insurance, Section I
22-‹#›
1
Agenda
Homeowners Insurance
Analysis of Homeowners 3 Policy (Special Form)
Section I Coverages
Section I Perils Insured Against
Section I Exclusions
Section I Conditions
Section I and II Conditions
22-‹#›
2

Homeowners Insurance Basics
Homeowners insurance forms, drafted by the Insurance Services
Office (ISO) are widely used in the United States
They are designed for the owner-occupants of family dwellings
A policy can be used to cover the dwelling, other structures,
personal property, additional living expenses, personal liability
claims, and medical payments to others
Six forms are available
22-‹#›
3
Current Homeowners Policies
HO-2 (broad form): covers the dwelling, other structures, and
personal property on a named perils basis
HO-3 (special form): covers the dwelling and other structures
on a risk-of-direct-physical loss basis.
All direct physical losses are covered except those losses
specifically excluded
Personal property is covered on a named perils basis
22-‹#›
4

Current Homeowners Policies (Continued)
HO-4 (contents broad form): covers a tenant’s personal property
on a named perils basis
HO-5 (comprehensive form): provides open perils coverage
(“all-risks coverage”) on the dwelling, other structures and
personal property
All direct physical losses are covered except those losses
specifically excluded
22-‹#›
Current Homeowners Policies (Continued)
HO-6 (unit owners form): covers personal property on a named
perils basis
A minimum of $5,000 of insurance is also provided on the
condominium unit that covers improvements and additions
HO-8 (modified coverage form): designed for older homes
Dwelling and other structures are based on the amount required
to repair or replace using common construction materials and
methods
22-‹#›
Exhibit 22.1 Comparison of ISO Homeowners Coverages

22-‹#›
7
Exhibit 22.1 Comparison of ISO Homeowners Coverages
(Continued)
22-‹#›
8
Analysis of the HO-3 Policy
The following persons are considered “insureds” under the
policy:
Named insured and spouse
Resident relatives
Other persons under age 21
Full-time student away from home
Section II coverage also includes:
Any person legally responsible for covered animals or
watercraft
With respect to a motor vehicle covered by the policy (e.g., a
riding mower), persons employed by the named insured

22-‹#›
9
Section I Coverages
Coverage A covers the dwelling on the residence premises and
any structure attached to the dwelling
Materials intended for construction are included
The coverage specifically excludes land
Coverage B insures other structures on the residence premises
Includes a detached garage, tool shed, etc.
Structures that are rented out or used for a business are
excluded
The amount of coverage is based on the amount of insurance in
Coverage A
22-‹#›
10
Section I Coverages (Continued)
Coverage C insures personal property owned or used by an
insured
Personal property is covered anywhere in the world, both on and

off the premises
The amount of coverage is 50% of Coverage A, but can be
increased if desired
Coverage for personal property at another residence, such as a
vacation home, is limited to 10% of Coverage C or $1000,
whichever is greater
Certain types of personal property have maximum dollar limits
on the amount paid for any loss
22-‹#›
11
Exhibit 22.2 Special Limits of Liability
22-‹#›
12
A schedule can be used to insure certain personal property for a
specific amount
Coverage C also excludes certain types of property, for

example:
Articles separately described and specifically insured
Animals, birds, and fish
Motor vehicles, aircrafts, hovercrafts, and parts
Property of roomers and other tenants
Property in a regularly rented apartment
Property away from the premises that is rented
Business data
Credit cards or electronic fund transfer cards
Water, such as in a swimming pool
22-‹#›
13
Coverage D provides protection when the residence premises
cannot be used because of a covered loss
Coverage is 30% of Coverage A
Additional living expense is the increase in living expenses
actually incurred by the insured to maintain the family’s
standard of living
The policy pays the fair rental value for that part of the
residence that is rented to others, but is not fit to live in
Coverage applies if the home is not damaged, but a civil
authority prohibits the insured from using the premises

22-‹#›
14
Section I Coverages: Additional Coverages
Additional coverages in Section I include:
Removal of debris following an insured peril
Reasonable repairs to protect the property from further damage
Trees, shrubs, and plants, for a limited set of perils
Fire department service charge
Removal of property that is endangered by an insured peril
Unauthorized use of credit card, electronic fund transfer card or
access device, forgery and counterfeit money
22-‹#›
15
Section I Coverages: Additional Coverages (Continued)
Loss assessment charged against the named insured by a
corporation or association of property owners because of the
direct loss of property collectively owned by all members
Collapse of a building, for certain perils
Breakage of glass or safety glazing material
Landlord’s furnishings
Increased costs of construction or repair because of an
ordinance or law
Grave markers

22-‹#›
16
Section I Perils Insured Against
The dwelling and other structures are insured for all direct
physical losses unless specifically excluded
Specific exclusions include:
Collapse
Freezing
Fences, pavement, patio, and similar structures
Dwelling under construction
Vandalism and malicious mischief
Mold, fungus, and dry rot
Wear and tear, mechanical breakdown
22-‹#›
17
Section I Perils Insured Against (Continued)
Personal property is insured for a direct physical loss if it is
caused by one of the perils listed in the policy

The peril must be the proximate cause of the loss
Named perils include fire, windstorm or hail, explosion, riot or
civil commotion, aircraft, vehicles, smoke, vandalism, falling
objects, etc.
Coverage for theft is broad, but there are several exclusions:
Theft by an insured
Theft in or to a dwelling under construction
Theft from any part of the premises rented to someone other
than an insured
22-‹#›
18
Section I Exclusions
The policy excludes the following causes of loss:
Concurrent causation losses
Any loss due to an ordinance or law, except as described in the
Additional Coverages
Losses due to earth movement
Certain water losses
Losses due to neglect, power failure, or faulty design
Losses which are intentional
Losses due to war, government action, failure to act, or nuclear
hazard
Losses due to certain weather conditions

22-‹#›
Section I Conditions
The insurer’s liability for a loss is limited to the insured’s
insurable interest at the time of loss
A deductible of $250 applies to any loss covered by Section I
coverages
Premiums can be reduced by increasing the deductible
In states that are vulnerable to natural catastrophes, insurers can
use percentage deductibles
22-‹#›
20
Section I Conditions (Continued)
The insured must perform certain duties after a loss occurs:
Give prompt notice to insurer
Protect the property from further damage
Prepare an inventory of damaged personal property
Exhibit damaged personal property
File a proof of loss with 60 days after the insurer’s request
22-‹#›

21
Losses to personal property are paid on the basis of actual cash
value
If the insured purchases a replacement cost endorsement, there
is no deduction for depreciation
After giving notice to the insured, the insurer has the right to
repair or replace any part of damaged property with like
property
22-‹#›
Losses to the dwelling and other structures are paid on the basis
of replacement cost with no deduction for depreciation
If the dwelling is insured for at least 80percent of replacement
cost at the time of loss, partial losses are paid in full
Replacement cost is the amount necessary to repair or replace
the dwelling with material of like kind and quality at current
prices
22-‹#›

22-‹#›
24
Some insurers offer an extended replacement cost endorsement,
which pays 20percent or more above the policy limits
Under a guaranteed replacement cost policy, the insurer agrees
to replace the home exactly as it was before the loss even if the
replacement cost exceeds the amount of insurance stated in the
policy
22-‹#›
25
In the event of a loss to a pair or set, the insurer can elect either
repair or replace any part of the pair or set or to pay the
difference between the actual cash value of the property before
and after the loss
The appraisal clause is used when the insured and insurer agree

that the loss is covered, but the amount of loss is in dispute
If other insurance covers a Section I loss, the insurer will only
pay the proportion of the loss that its limit of liability bears to
the total amount of insurance covering the loss
22-‹#›
26
No legal action can be brought against the insurer unless all
policy provisions have been met
The insurer has the right to repair or replace any part of the
damaged property with like property
The insurer is generally required to make a loss payment
directly to the named insured
The insurer is not obligated to accept any property abandoned
by the insured
22-‹#›
The mortgage clause is designed to protect the mortgagee’s
insurable interest
Only losses that occur during the policy period are covered
Concealment or misrepresentation of any material facts,

fraudulent conduct, and false statement relating to the insurance
will void insurance coverage
22-‹#›
Section I and II Conditions
Conditions that apply to both Section I and Section II include:
A liberalization clause to address issues with broadening
coverage
A waiver or change of policy provisions
Terms and conditions for cancellation
Terms for nonrenewal of the policy
Assignment of the policy to another party
A subrogation clause to address recoveries from third parties
Extension of policy terms to a legal representative upon the
death of the named insured or spouse
22-‹#›
29
FIN 3610 Assignment 11
Name_______________________
Chapters 22 and 23

Please remember that you must do your own work. Any
plagiarism will result in a grade of zero for all students
involved. Please use your own words even if you are using the
textbook for answers. Always provide a citation when a
reference is used.
1. The Section 1 property coverages provide different types of
coverages to an insured. For each of the following coverages,
briefly describe the type of coverage provided, and give an
example of a loss that would be covered.
a. Coverage A: Dwelling:
b. Coverage: Other Structures:
c. Coverage C: Personal Property:
d. Coverage D: Loss of Use:
e. Additional Coverages:
2. Briefly describe the special limits of liability that apply to
certain types of personal property. Why are these special limits
used?
3. List the major exclusions that are found in Section I of the
Homeowners 3 Policy.
4. Briefly describe the duties imposed on the insured under a
homeowners policy after a property loss occurs.
5. A home buyer may obtain a mortgage loan to purchase a
house. Explain briefly how the mortgage clause protects the
insurable interest of the lending institution (mortgagee).
6. Briefly explain the personal liability coverage (Coverage E)
in Section II of the homeowners policy and provide an example
of a loss.
7. With regard to medical payments to others (Coverage F) in
Section II of the homeowners policy:

a. Briefly explain the coverage that is provided.
b. Identify the people who are covered for medical payments.
c. Provide an example of a loss under Coverage F.
8. List the major exclusions that apply to personal liability
(Coverage E) and medical payments to others (Coverage F) in
the homeowners policy.
9. Indicate whether the following losses are covered under
Section II of the homeowners policy. Assume there are no
special endorsements. Explain your answers.
a. The named insured’s dog bites a neighbor’s child and also
chews up the neighbor’s coat.
b. A son living at home accidentally injures another player
while playing softball.
c. A guest slips on a waxed kitchen floor and breaks an arm.
d. A neighbor’s child falls off a swing in the named insured’s
yard and breaks an arm.
e. The named insured accidentally falls on an icy sidewalk and
breaks a leg.
f. While driving to the supermarket, the named insured injures
another motorist with the automobile.
g. A ward of the court, age 10, in the care of an insured,
deliberately breaks a neighbor’s window.
h. The named insured paints houses for a living. A can of paint
accidentally spills onto a customer’s roof and discolors it.
i. The named insured falls asleep while smoking a cigarette in a
rented hotel room, and the room is badly damaged by the fire.
j. The named insured borrows a camera, and it is stolen from a
motel room while the insured is on vacation.

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