Ask An Expert Briefs

Big "I" Virtual University VUpoint Newsletter
Vol. 19, No. 25 - Issue #462 - December 7, 2018
Copyright © 2018 by the Independent Insurance Agents & Brokers of America, Inc.

The Virtual University’s Ask An Expert (AAE) service may be our best known member benefit. Daily we receive questions from members wanting help with denied claims, coverage and procedural issues, and agency management concerns. Our faculty includes some of the nation's foremost experts in the insurance industry. These volunteer faculty members generally charge for the time they give to our members. Think about that, the insight you get through our AAE service costs nonmembers THOUSANDS!

For the next two weeks, VUpoint subscribers have access to a few of these incredible insights right here. When the next edition of VUpoint is published, this AAE content go back into the members-only vault. And remember, beyond having access to all of our valuable Ask An Expert content, only members are allowed to ask the questions.

The HO & Coverage for Lost/Stolen Gift Cards


We had a staff meeting this morning, and the subject of holiday gift cards came up. Since they are increasingly popular at Christmas, as well as other gift-giving occasions, is there any coverage under the Homeowners Policy if they are lost or stolen, etc.? These days, a person could easily have several hundred dollars’ worth of cards after Christmas, and possibly much more than that as wedding gifts.


The ISO Homeowners Policy (both 2011 and 2000 editions) treats gift cards the same as cash, providing just $200 in the aggregate — meaning that's the total amount of coverage for all items in that category (see excerpt below), no matter how many cards an insured had. In addition, cards that are “lost" would not be covered at all, since the perils that apply to Coverage C are named perils only, unless an insured has the HO 00 05. Note also that while cash and every other type of property in that category is subject to the Section I deductible, the deductible is subtracted from the loss to covered property, and never to an internal limit (such as the $200 cash limit).

While gift cards have been around for several years, it wasn't until the HO-2000 edition of the Homeowners Policy that ISO included language addressing how they were covered under the policy. In the HO-2011 and HO-2000 editions, they are referred to as “stored value cards," and not “gift cards" – see excerpt below.

However, in the previous 1991 edition, since gift cards were not specifically mentioned, there was some confusion between coverage for gift cards vs. credit cards, which were covered for $500, with no deductible. While most authorities assumed that gift cards should be treated as cash, the HO 00 03 04 91 edition policy provided no specific guidance on that point.

Here is the relevant excerpt from the HO-2011 and HO-2000 editions of the HO 00 03:

C. Coverage C – Personal Property
 3. Special Limits Of Liability
 The special limit for each category shown below is the total limit for each loss for all property in that category. These special limits do not increase the Coverage C limit of liability.
 a. $200 on money, bank notes, bullion, gold other than goldware, silver other than silverware, platinum other than platinumware, coins, medals, scrip, stored value cards and smart cards.

Lastly, under ISO rules, the $200 limit on cash and similar items of property (including stored value cards) can be increased up to $1,000 on the HO-3, using endorsement HO 04 65 Coverage C Increased Special Limits of Liability. (Use the HO 04 66 with the HO-5.) Also, check with your individual markets to see if they adopted this optional coverage. The cost is typically around $6 per $100 of coverage.

Social Service Agencies & Sponsored Residential


In my state, social service agencies can offer a service called Sponsored Residential. Sponsored Residential is where an adult with intellectual or developmental disabilities (I/DD) lives with a “foster parent" who is called the Sponsor. The disabled individual is enrolled in Medicaid and becomes a client of a social services agency (the agency). The agency receives the money from Medicaid and distributes it to the Sponsor per an agreement. Evidently, the Sponsor is responsible for budgeting these funds monthly. From time to time the sponsor needs time to run errands and handle other personal affairs and will hire someone (a respite worker) to come in for a few hours here and there to care of the client. Both the sponsor and the respite worker must be interviewed, submit to background checks and be deemed qualified by the agency.

It is my understanding that no money changes hands between agency and sponsor through a traditional payroll system. The monies paid to the sponsor are tax free (foster care exemption) and are paid on a set per diem fee schedule. Here are my questions:

  1. I am told that the Sponsor is not deemed to be an employee because they are “carved out under the Foster Care rule." What is their recourse if they are injured on the job?
  1. Are the Respite Workers considered employees? If so, an employee of which entity – Agency or Sponsor?

[WARNING: As you will see in the answers from our experts, agents risk much trouble when they take on responsibilities or answer questions outside their training and licensing.]


Faculty responses:

This is a legal question. The sponsor needs to check with the agency and/or attorney to determine legal obligations.


Unless you are a lawyer, I recommend you not answer a legal question of who is and is not an employee. Even though there appears to be no employer/employee relationship in any of the described relationships – only a legal opinion can tell you for sure.


These are legal questions. If you're a lawyer, go ahead and provide your client with an answer. If not, explain to your clients that they need legal advice and they need to obtain it from their attorney because you are not permitted to give such advice.


I think these are legal questions that go beyond insurance and should not be definitively answered by an insurance agent. You should strongly recommend to your client that they seek the help of a qualified attorney with experience in, and current knowledge of, your state's workers' compensation statutes. Document your recommendation in your files.


Those are good questions that should be asked of the corporate legal counsel. 

Adding Language to a COI

We insure a small commercial GC that is entertaining the possibility of performing work for a large local school system. The school system is asking for some language on the COI that I have concerns about.

First, the school system is asking for the following clause to be inserted into the COI:

"The insurance company is prohibited from pleading government function in the absence of any specified written authority from the Board of Education of (withheld) County"

I am not sure that this one is an issue. However, the second clause they are requiring reads, "

The policy(s) will automatically include and cover all phases of work, equipment, persons, et cetera which are normally covered while performing work under the above contract, whether specifically written therein or not."

This language bothers me because of the "whether specifically written therein or not" statement. It seems to be asking the insurance agents to effectively amend the policy(ies) to include coverage for whatever the owner darn well wants the policy(ies) to cover. I fear that this sort of request violates state law, in that it is asking me - as the licensed agent - to insert language that changes the policy, and thus I as the agent has violated state law. If I am coerced by this requirement, then the owner is a participant in the insurance fraud, no?

Now, I would not commit insurance fraud, so I wish to approach the owner/school board and advise them that their language is tantamount - in some way, shape, or form - to insurance fraud.

Does my argument hold water?

AnswerFaculty responses:

An agent should never add any language such as this to a COI. You would need to check with your Department of Insurance. If the change is absolutely necessary, you should seek an endorsement to the policy from the carrier, though the request is likely to be rejected as this language is overly broad and potentially troublesome.


I would send this to the carrier. You don't want to misrepresent coverage. I had a situation where one state department said they were not subject to the Department of Insurance regulations. Don't put yourself in the middle. These requirements apply to your insured. You can only certify applicable coverage. That's why the COI makes so many references to the policy.


Crazy language. Don't do it.


It's not insurance fraud, it's a misguided attempt to use the COI to create certainty that cannot be created. A COI can only be used to report what is in the insurance policy and since this language is not in the insurance policy (I can only assume), you can't put it on the COI.

You may want to mention to the school that if they are getting this wording on other COIs that such wording IS fraudulent unless the agent can show proof of such language in the insurance policy. Point out that the COI is nothing but information. They need to know that any agent putting such wording on a COI without showing proof that this language is included in the policy are guilty of material misrepresentation and ultimately lying (though that is not a legal term).


I have no idea what the first requested COI statement means. In the second statement, what does “normally covered" mean? That is not language found in any insurance policy I've ever seen.


You are agent of the carrier, you need to be talking with the carrier on what wording they will and won't allow. You are smart not to do anything without direction from the carrier.

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