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Ask An Expert Briefs

Big "I" Virtual University VUpoint Newsletter
February 14, 2020 Edition
Copyright  2020 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.


HO Coverage for Water Pipe Leak

Scen
ario - insured reported water pipe leak (sudden), causing water damage to wall and floor. Pipe is concealed at this point, so it is unclear if it is a rupture, joint, etc. Carrier response is resultant damage, and cost to access the pipe would be covered, but not the repair to the pipe, regardless of cause (freezing, spontaneous rupture, pinhole leak).

Should coverage be afforded for the cost of repair of the pipe as well?

Answers

No, in ISO's homeowners' policy there is no coverage for the pipe, only for the damage caused by the burst pipe.

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No. Damage to the pipe is not covered but the damage and cost to tear out and repair the walls and floors is covered. The cost of the pipe would probably be insignificant and probably below the deductible. The policy says, We do not cover loss to the system or appliance from which this 'water' or steam escaped".

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The language in subsection ii on page 10 of the policy, We do not cover loss to the system or appliance from which this water" or steam escaped," seems to support the insurer's position in the situation you describe.

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Insurance policies, personal or commercial, do not pay to replace the item that leaked. Therefore, I agree with the carrier.

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The loss to the pipe itself is only covered if the cause of loss to it is not excluded. Typically loss to the pipe is due to wear and tear, mechanical breakdown or some other excluded cause of loss.

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May I politely request that you re-read the insuring agreement.

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Try looking at the policy:

Exception To c.(6)

Unless the loss is otherwise excluded, we cover loss to property covered under Coverage A or B resulting from an accidental discharge or overflow of water or steam from within a:

 (i) Storm drain, or water, steam or sewer pipe, off the "residence premises"; or

 (ii) Plumbing, heating, air conditioning or automatic fire protective sprinkler system or household appliance on the "residence premises". This includes the cost to tear out and replace any part of a building, or other structure, on the "residence premises", but only when necessary to repair the system or appliance. However, such tear out and replacement coverage only applies to other structures if the water or steam causes actual damage to a building on the "residence premises".

We do not cover loss to the system or appliance from which this water or steam escaped.

For purposes of this provision, a plumbing system or household appliance does not include a sump, sump pump or related equipment or a roof drain, gutter, down spout or similar fixtures or equipment.

Section I Exclusion A.3. Water Damage, Paragraphs a. and c. that apply to surface water and water below the surface of the ground do not apply to loss by water covered under c.(5) and (6) above.

Under 2.b. and c. above, any ensuing loss to property described in Coverages A and B not precluded by any other provision in this policy is covered.

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Only if the pipe was damaged by a covered cause of loss.

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If the damage to the pipe was caused by freezing, the policy will provide coverage for that damage. If the pipe simply ruptured or sprung a leak, the carrier is correct only resulting damage is covered.

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I disagree with the "regardless of cause" part of the company's statement. Pipe damage by some causes clearly are covered. If a truck runs off the highway, smashes through a wall, breaks a pipe and causes water damage, the whole works is covered, including repair of the pipe. Same is true for freezing, as long as all the proper precautions were taken. But if the pipe rusts out, the pipe repair is excluded because damage by rust is excluded. The question is, what caused the leak. Since this is an open perils policy, the burden of proof is on the insurance company. If they can prove that the pipe damage was caused by an excluded cause, they can exclude. But if the cause of the loss is unknown, they have to pay.



Coverage for Tree Removal

Our insured suffered a loss when a very large tree fell on the dwelling due to wind. The cost to remove the tree was approximately $4,500 and the insurance carrier is limiting the amount of recovery to $1,000 due to Section III Additional Coverages, A. Removal of Fallen Trees. I contend that the removal of the tree from the dwelling should be paid as part of the claim. The additional coverage, Removal of Fallen Trees, is specifically for "removing any fallen tree from the grounds appurtenant to your principal residence." Thank you and we look forward to hearing from you.

Answers

The carrier is nuts. To only pay $1,000 to remove the tree from the house would violate its own policy saying that it will pay all costs to make reasonable repairs to protect property from further damage. You can't make repairs without removing the tree. The policy pays whatever it takes to get the tree off the roof and the $1,000 is the most that will be paid to remove from the premises.

Move this up the line to a supervisor.

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I agree with you. The carrier would have to remove the tree from the house in order to repair it. That is part of the direct loss. The cost of removing the tree from the premises once on the ground would be subject to the $1,000 removal limit.

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Agree. If removal of tree is required to fix building it hit.

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The cost to remove the tree from the house should not be subject to the tree debris removal limitation, only the cost to remove the dropped tree from the property. Although the policy language is a little different than standard ISO, it also talks about limiting the cost to "removing the tree from the grounds", not the cost to remove the tree from the house. The reason the full cost of removing the tree from the house should be paid is that it's a necessary part of the cost to repair the damaged home. Another Additional Coverage that can apply is "Reasonable Repairs." The cost to remove the tree from the house is a reasonable temporary measure to prevent further loss to the home from having the tree on it. This question has been litigated. If the insurer subscribes to Property Loss Research Bureau, request they submit the question to them. The last PLRB opinion I saw confirmed the case law supports this interpretation.

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I agree with your interpretation. Especially telling, I think, is the provision regarding fallen trees that block driveways or handicapped access, which illuminate the intent that ground or land, and not buildings, are the intended object of the coverage extension. Could the dwelling be repaired without the removal of the tree? I'm thinking not! And if it's not done right, additional damage could add to the costs incurred through the claim.

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The removal of the tree is part of the repair of the house and should fall under the Coverage A limit, subject to "coinsurance" issues.

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Very interesting non-ISO policy wording.

The policy limits to $500 for any one tree ($1,000 maximum) for the removal from the grounds appurtenant to your principal residence. The cost to remove the tree is covered under Coverage A; that's part of the cost to repair the dwelling.

This is a very common, and incorrect for adjusters to use.

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If you searched the VU for trees" you'd find this article:

https://www.independentagent.com/vu/Insurance/Personal-Lines/Homeowners/Property-Coverages/FacultyDebrisTrees.aspx

The adjuster doesn't appear to understand how the policy works.

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I agree with you. If the tree actually fell on the roof, the cost to access the damage roof and make repairs to the damaged roof requires that the tree be moved off the roof first. We call this the lift and drop." That is not an Additional Coverage, it is and expense related to repairing the covered roof. Most tree removal firms know enough to break down their bill into two parts: 1) lift & drop and 2) cut up and haul away. The cut up and haul away" is subject to the Additional Coverage limit. The lift and drop" is not subject to a limit.

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Reach out to the manager of the claim department. The carrier is obligated to remove the tree from the damaged structure along with the repairs to the structure and then may impose the limitation for removal. 



Unlicensed Individuals Issuing COIs

Can an unlicensed agent issue certificates of insurance? Is this permissible and/or advisable? 

Answers

It is NEVER advisable to have the least experienced person issue COIs unless there is no wording required anywhere. If the agency is going to have an unlicensed person generate them for the agent to review and sign, that's one thing (again, if there is no special wording). But if I'm the agent, I certainly don't want anyone attaching my name to anything I don't see and have the opportunity to approve.

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No. Not only that, you're likely in Breach of Contract with your insurance company.

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Certificates require an Authorized Representative" to sign, which I would take to mean that the person needs to be an agent. Plus, it is not advisable from an E&O standpoint and in my view would be indefensible in an E&O claim.

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This is a REALLY, REALLY bad idea!!!! Certificates are not a clerical function. A COI should be issued by a knowledgeable person. BTW - What is an "unlicensed agent"? An unlicensed person is not an agent.

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