1. Insurance Community University Homeowners Insurance: The key issues you need to know. 1  The webinar will begin shortly.  There is no audio at this time.  This presentation is being recorded for your viewing pleasure at a future date.  The attendance and proctor forms are available under ‘Materials’ in the Webinar’s Console to the right.  The PowerPoint presentation is also available under ‘Materials’.  You will receive the course number for your state near the end of class.  Use the ‘chat’ window for questions on the content.  100% Participation in Polling Questions is required to receive credit for this class. Even if you do not intend to receive credit, please participate in the polls.

2. Insurance Community University Disclaimer Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions; and state jurisdiction. This instructional materials provided by Insight is intended as a general guideline and any interpretations provided by Insight do not modify or revise insurance policy language. The authors of these materials, Insight Insurance Consultants is a division of Insight Consulting and Management Inc. In providing these materials, Insight assumes neither liability nor responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials provided. Copyright 2010 – 2012 All Rights Reserved www.insurancecommunitycenter.com Laurie: 714.803.5830 laurie@insurancecommunitycenter.comlaurie@insurancecommunitycenter.com Marjorie: 714.206.9583 Marjorie@insurancecommunitycenter.com Marjorie@insurancecommunitycenter.com 2

3. Insurance Community University Your Instructor Today Casey Roberts, CIC, AFIS, ACSR Principal, Laurus Insurance Consulting, LLC

4. Insurance Community University Objectives 1.Who is the insured on the policy and how to name trusts 2.Seasonal, Rental, Vacancy 3.Valuation / Building Ordinance Insurance 4.Loss Assessment and the HO Association 5.Key Homeowners Endorsements 4

5. Insurance Community University HO Program Eligible Properties 5 Single Family Dwelling Multiple Family Dwelling (1-4 units) Townhouse UnitCondominiumRenters

6. Insurance Community University Who Is The Insured On The Policy 6

7. Insurance Community University HO Ownership 7 Individuals Joint Owners Always Name Both Husband and wife As Joint Tenants As Community Property Trustees of Family Trust Unmarried individuals

8. Insurance Community University Homeowners Definition 05/11 In this policy, “you” and “your refer to the “named insured” shown in the Declarations and the spouse if a resident of the same household. 8

9. Insurance Community University Question Dick and Mary got married and Mary moved into a home Dick owned in his own name. Mary moved out and while golfing hit a fellow golfer in the head with her club resulting in BI. Is Mary covered on Dick’s homeowners policy? 9

10. Insurance Community University Solution to “wandering wife” Name the spouse as a Named Insured. Add the spouse as an Additional Insured using HO 04 41 10

11. Insurance Community University Definition of “Insured” You and residents of your household who are: 1.Your relatives; or 2.Other persons under the age of 21 and in your care or the care of a resident of your household who is your relative 11

12. Insurance Community University Question Your insured runs a day care center in her garage and has 15 children in her care. One of the children injures the other. Is there coverage on the Homeowners Policy? 12

13. Insurance Community University Definition of “Insured” 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: 1.24 and your relative, or 2.21 and in your care or the care of a resident of your household who is your relative. 13

14. Insurance Community University Who Else is Covered? Resident relatives, including foster childrenChildren At school under age 24 Relative in Care Facility Property / Liability – endorsement For Liability Only Person or organization taking care of animals or boats Persons using covered motor vehicle on premises 14

15. Insurance Community University Definition of “Insured” NOTE: There will be liability exclusions that related to “the insured” or “the named insured” as opposed to “an” insured. 15

16. Insurance Community University Definition of “Insured” This category of insured are not “named insured” but rather “an insured” under the policy. There are exclusions that apply to “an insured” such as the intentional acts exclusion. Therefore an intentional act of a child also excludes coverage for the parents. Coverage E - Personal Liability and Coverage F - Medical Payments to Others do not apply to “bodily injury” or “property damage”: a.Which is expected or intended by “ an insured”; 16

17. Insurance Community University Including The Family Trust Named Insured Individual Husband and Wife Additional Insured H & W Family Trust 17

18. Insurance Community University Title of Property Name of Husband and Name of Wife as Joint Tenants. For example: John Smith and Jennifer Smith as Joint Tenants. Name of Husband and Name of Wife as Community Property. For example: John Smith and Jennifer Smith as Community Property Name of Husband and Name of Wife, Trustees of the Family Trust. For example: John Smith and Jennifer Smith, Trustees of the Smith Family Trust 18

19. Insurance Community University The Family Trust How should the Insurance Agent Issue the Homeowners Insurance? The Named Insured should be: Name of Husband and Name of Wife. For example: John Smith and Jennifer Smith The Insurance Agent must add the following Additional Insured: The Smith Family Trust 19

20. Insurance Community University The Family Trust HO 06 15 05 22 Trust Endorsement Includes Trust Name; Trustee Names and addresses See article on Family Trusts on Community site. www.insurancecommunitycenter.com www.insurancecommunitycenter.com 20

21. Insurance Community University Seasonal, Rental, Vacancy Property & Liability 21

22. Insurance Community University Seasonal Rental to Others Primary Residence Occasionally Rented Occupy home/condo but rent in season Homeowners Coverage Applies— Liability for Renters Extended Theft Coverage of Residence Premises Occasionally Rented to Others HO 0541 10 00 22

23. Insurance Community University Seasonal / Rental Property Dwelling is covered Other structure is not covered Exception if it is a garage Exclusion does not apply to liability Personal Property usually located at another residence 10% of Contents Limit / $1,000 whichever is greater Theft restricted – only when in residence 23

24. Insurance Community University Polling Question Your insured has a guest house that they rent out on an annual basis. They live in the home on the same property. Is the rented guest house covered on the homeowners policy? 24

25. Insurance Community University Rental of Other Structures We do not cover Other Structures rented or held for rental to any person not a tenant of the dwelling... Problem: – Rental Property OFF the premises in the named insured ownership. – Rental Property ON the residence premise 25

26. Insurance Community University Rental of Other Structures Solution: – Add Dwelling Property Form to cover the Other rental property and extend the Liability on this policy by use of HO 24 70 Additional Residence Rented To Others 1, 2, 3, or 4 Families. – Add HO 04 40 Structures Rented To Others Residence Premises. 26

27. Insurance Community University Full Time Rental Does not qualify for Homeowners Policy 27

28. Insurance Community University While at School Property Coverage Property of student away at school Theft covered as long as student has been at school within 60 days prior to loss 28

29. Insurance Community University Polling Question Your insured has filed for bankruptcy and is in default on their home loan. The bank is going to foreclose on the home but has not yet. Your insured is still living there and will until they get kicked out. They want you to cancel their homeowners policy. Is this OK to do from your perspective? 29

30. Insurance Community University Vacancy, What Happened? It’s a Complex Question Crisis for both the “homeowner” and business. – Homeowners losing their homes – Homeowners filing personal bankruptcy – Businesses going bankrupt and foreclosing on properties – Property owners supporting vacant buildings – Banks foreclosing and taking on liabilities or NOT foreclosing 30

31. Insurance Community University 31 Insurance Don’t Pay for Coverage Cancel CoverageBank Must Place Coverage Homeowner Vacates Home Strip Their HomeJingle MailCash for Keys Homeowner Defaults Payments to the Bank Short Sales or Bank Forecloses or Not Forecloses Homeowner may declare Bankruptcy May vacate OR may stay (Squat) OR may burn it down

32. Insurance Community University New Realities Cash for Keys – Done by some banks for homeowners to receive cash in exchange for surrendering the keys and vacating with the stipulation that the home will be left in good condition and cleaned. Jingle Keys – Jingle mail is a phrase used to describe the envelopes containing house keys, which are mailed by homeowners to mortgage lenders, without authorization from the lender. Home owners decide to mail the house keys to the lender because the owners believe their home is no longer worth keeping, and they want to give the home to the lender. 32

33. Insurance Community University Who is occupying the foreclosed homes? Homeowners squatting in their own home Homeless moving into vacant homes Renters whose landlords were foreclosed on Gang members, using empty houses as crash pads and for drug stashes New term: Rent Skimmers 33

34. Insurance Community University Renting becomes a reality The number of renters in America is on the rise as foreclosures continue to take out homeowners everyday. In fact, a staggering 37.1 million housing units were occupied by renters in the second quarter, up from 34.3 million units in 2006, per Census Bureau data. 34

35. Insurance Community University Vacancy - All Covered Property If vacant, more than 60 days Glass breakage Vandalism Malicious Mischief Any ensuing loss 35

36. Insurance Community University Homeowners Insurance and Vacancy or Un-Occupancy Intended for an owner who is in residence Typically the coverage requires they occupy within 30 days of the inception of the policy. If an insured does not occupy then coverage would be jeopardized. 36

37. Insurance Community University Homeowners Insurance and Vacancy or Un-Occupancy CRUCIAL: If the home is NOT occupied the insurance company must be made aware – Reluctance because company might cancel – Reluctance because policy might cost more – Reluctance because might lose the client – Reluctance because don’t have a market 37

38. Insurance Community University Solutions ISO has no endorsement for vacancy on a homeowners policy Insurance companies may have an endorsement such as State Farm – “However, by purchasing an endorsement, homeowners "buy back" that exclusion for a cost for such an endorsement is usually under $100, and coverage lasts for the duration of the policy period” (State Farm Web Site) 38

39. Insurance Community University Vacancy - All Covered Property NOTE: Review Archived Community Webinar on Vacancy, Un-occupancy and Foreclosure 39

40. Insurance Community University Valuation / Building Ordinance Insurance 40

41. Insurance Community University Valuation Replacement Cost Dwelling / Other Structures that are buildings 80% to value clause applies 41

42. Insurance Community University Valuation Actual Cash Value Personal Property Awnings, carpeting, household appliances, outdoor antennas and outdoor equipment, whether or not attached to buildings Other structures that are not buildings Fences Pools Grave markers, including mausoleums 42

43. Insurance Community University Personal Property Replacement Cost Can be added by endorsement Some companies automatically include Personal Property Replacement Cost Check the coverage carefully for limitations. 43

44. Insurance Community University 44 Section I Conditions Form Problem: – HO 04 90 Personal Property Replacement Cost adds replacement cost evaluation coverage for the personal property and outdoor items, but does not add replacement cost coverage to non building structures, such as fences, pools, etc. Solution: – No available amendatory endorsement. – Discuss thoroughly with insured.

45. Insurance Community University Problem is Building Ordinance This is true for BOTH old and new construction Especially significant in a CAT loss Not covered even with Extended RC or Guaranteed RC 45

46. Insurance Community University 46 Section I Exclusions A.We do not insure for loss caused directly or indirectly by any of the following (a) Ordinance or Law, meaning enforcement of any ordinance or law regulating the construction, repair or demolition of a building or other construction, unless specifically provided under this policy.

47. Insurance Community University 47 Section I Exclusions Problems: – Municipalities have building ordinances that can affect a dwelling of any age. – Should the insured sustain a loss that triggers the enactment of building ordinances they can face the following costs: Demolition of the undamaged portion of the dwelling or other structure. Debris Removal of that portion. Increased Costs of Construction to comply with ordinance that have changed since the dwelling or other structure was originally constructed.

48. Insurance Community University 48 Section I Exclusions Solution: – HO 04 77 Ordinance or Law. – This endorsement allows the policy to respond to the construction costs, repair or demolition if the loss that triggers the enactment of the building ordinance is a covered peril. – Increase the coverage limit for the dwelling and/or the other structure to allow for the increase in construction costs caused by the building ordinance.

49. Insurance Community University Building Ordinance Differs from Company to Company – Some companies absolutely exclude – Some companies give sub limits – Some companies include 49

50. Insurance Community University Loss Assessment and the Association 50

51. Insurance Community University Polling Question #6 Your insured is in a homeowners community with an association. There is a malfunction to the pump in the main swimming pool and it has to be drained, pump replaced, and the pool refilled. Each homeowner is being assessed $2500.00 for the repairs. Would this be covered under Loss Assessment Coverage? 51

52. Insurance Community University Loss Assessment Applies to Homeowners, Condominiums, Coops, Townhouses, Mobile Home/Motor Home Parks Normal assessment—paid monthly Loss assessment in this context refers to assessments by the community due to damage to common areas. 52

53. Insurance Community University Loss Assessment Could be due to a “covered” situation – Loss Assessment is available Could be due to a “special” situation like Earthquake – Available by endorsement Could be due to the deductible on the association policy – Policies will respond with a cap 53

54. Insurance Community University Loss Assessment Could be caused by an “uncovered” loss. – No coverage for the “unit/homeowner” on their loss assessment coverage as it is peril driven. – For example, wear and tear; flood; boiler explosion 54

55. Insurance Community University Loss Assessment – Property Loss $1,000 Additional Limit – Original loss does not have to occur during the policy period Applies to all covered causes of loss except – Earthquake – Earth movement Loss Assessment Endorsements are available 55

56. Insurance Community University Loss Assessment - Liability $1,000 maximum for the policy period – Assessment arising out of Covered Bodily Injury Covered Property Damage Acts as director or officer – Loss does not have to occur during the policy period – The limit is the maximum paid for any one accident 56

57. Insurance Community University Key Endorsements 57

58. Insurance Community University Additional Interest / Trust Two endorsements Additional Interest endorsement broader in scope than the Trust Endorsement 58

59. Insurance Community University Assisted Living Facility Relative is no longer a resident of the insured’s household Coverage is extended to include this location for personal property as well as liability coverage – Scheduled limit for personal property 59

60. Insurance Community University Increased Personal Property Used to increase 10% limit for property usually located at another residence 60

61. Insurance Community University Extended Theft Provides coverage for theft of personal property in a residence occasionally rented to others 61

62. Insurance Community University Structures Rented to Others Endorsement provides coverage for damage to an Other Structure rented to others 62

63. Insurance Community University Ordinance or Law Endorsement Used to increase the 10% automatic coverage to a different percentage 63

64. Insurance Community University Supplemental Loss Assessment Provides an increased loss assessment limit applies to both – Property – Liability 64

65. Insurance Community University Summary Writing coverage correctly for your personal lines client is fairly complex It requires persistence and a lot of information Renewing year after year without speaking to the insured could result in an E & O claim Reduce that potential and build a relationship with your clients 65