Potpourri - massagent.com

Q&A

Potpourri

10/22/2012

Q&A
POTOURRI

This program is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the
understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert
assistance is required, the services of a competent professional person should be sought.

With special thanks to the Insurance Services Office, Inc. for advance information, continued support, and permission to use their forms and
information.

1

Condo …of course

I have a question regarding the new Fannie
Mae Certificate of Insurance requirements.
They request the wording ALL" In" coverage on
the Certificate.
If the policy is follow form to the condo docs
and the agent has "interpreted" the condo
docs to read as requiring "All IN" coverage,
can you out the words
“ALL IN” on the certificate
or
should you state the policy follows form to
condo docs attached?

2

1

10/22/2012

Condo …of course

What "fannie mae" wants and what it "gets"
are TWO different things.

Some agents HAVE sent me endorsements

that are COMPANY specific that are "all in" ...

that they cover the building "regardless of

ownership" ...

and do NOT state the ISO wording of ...

whatever the condominium association

agreement states … they just cover the

building ... 3

Condo …of course

if you have a "normal" policy with
"normal" ISO or company wording that
tracks with condo documents/bylaws

then you CANNOT ...or SHOULD NOT

state “all in” on the certificate.

4

2

10/22/2012

Condo …of course

This just merely passes the buck to the
personal lines agent ...

The MA DOI has pretty much sent a
bulletin reminding us that we cannot
state on a cert/binder/evidence what is
NOT in the policy.

5

Condo …of course

MA is a file...
APPROVE ...
and use state ...

and typing something on the cert that is
NOT in the policy ...
is somewhat ...illegal...not that the DOI
has pressed this but ...

6

3

Condo …of course 10/22/2012
Condo …of course
7

8

4

10/22/2012

Condo …of course

The April 2009 CPM (Condo Project Manager Release notes of
what commercial agents should say

9

Condo …of course

I have a client who is
refinancing his condo,
and the bank
is requiring that he increases
his personal contents coverage
to 20% of the appraised value.
Can they do that?

10

5

10/22/2012

Condo …of course

OR…

I have a client purchasing a condo. They are

financing through WellsFargo.

The bank appraised the property at

860,000(incl. land market value etc.)

They are requiring the unit owner to

purchase 20% of the appraised value at

$174,000 .

The master policy insures the building at

$765,000(3units) on a replacement cost

basis with “All In” coverage.

11

Condo …of course

OR…They want me to state on our policy that he has
“replacement cost on improvements and
betterments”
but isn’t that was is covered on the all in?
I did send them the MGL chapter 183 sec.66 as
they were not attorneys or familiar with Mass Law
as they stated.
Is there something I am missing? They want to
hold up his closing today unless we provide this
for them….
Can you give me some insight on what else I can
fire at them?

12

6

10/22/2012

Condo …of course

Per a fannie mae guideline of April 2009 ...

If the commercial agent doesn't state on the
certificate that the commercial coverage is
100% Replacement Cost –
INCLUDING unitowners improvements and
betterments
then the mortgage broker can ask for an

HO-6 binder at a MINIMUM of 20% unit
appraisal value.

13

Condo …of course

The April 2009 CPM (Condo Project Manager Release notes of
what commercial agents should say

14

7

10/22/2012

Condo …of course

I would hope that NO commercial
agent would state something like
that on a certificate

since I have NEVER seen THAT
language in a commercial policy.

15

Condo …of course

Send the binder for HO-6 at the 20% and attach a
copy of the policy showing the definition of
"coverage A" ...

A. Coverage A – Dwelling
1. We cover:
a. The alterations, appliances,
fixtures and improvements which
are part of the building contained
within the "residence premises";

16

8

10/22/2012

Condo …of course

Please REVIEW THE FOLLOWING NOTE RECEIVED
FROM AN ATTORNEY FOR SPECIFIC LANGUAGE A BANK
WANTS ON A BINDER HOR AN HO6 POLICY.

According to Cambridge Savings Bank,
the specific language Fannie Mae requires
in all H06 binders is

"the insurance coverage is sufficient to
cover the borrower in case of a loss or
claim."

17

Condo …of course

This is the new Fannie Mae language
that needs to be in all their binders.

Walls-in or All-in or 20% of appraised value
won't cut it anymore.

18

9

10/22/2012

Condo …of course

In a Fannie Mae publication:

Why is Fannie Mae requiring the coverage required
under the new HO-6 insurance requirements to be
“determined by the insurer”? Can it be determined by
some other entity or method?

Yes, it can be determined by another entity or method. 19
When an HO-6 policy is required, Fannie Mae requires
that the seller/servicer ensure that the policy provides
coverage in an amount that is determined from the
best known/available information to the
seller/servicer, including existing information from the
borrower in collaboration with the insurer and the
condominium association.

Condo …of course

Dec 2011 Fannie Mae

20

10

10/22/2012

Homeowners

I have an insured who is purchasing a home that is
located on the river bank locally in South Hadley Ma.
The local Holyoke Gas and Electric has an easement on
the property relating to their ownership of a certain
portion of the riverbank. The easement includes rental of
a two slip dock that extends from the Gas and electric
property.

The property has a lease agreement which requires
$1,000,000 limit of liability and the listing of the Holyoke
Gas & Electric as an additional insured.

21

Homeowners

Understanding that listing the H G & E as an additional
insured would create a claims issue relating to the
insured Dwelling, other structures, and property as
well as liability.
Is the only option to purchase a CGL policy for
the easement exposure

22

11

10/22/2012

Homeowners

The following is the HO-2000 ...but HO-91 similar

F. Coverage E – Personal Liability
Coverage E does not apply to:
1. Liability:
a. For any loss assessment charged against you as a member of an
association, corporation or community of property owners, except as
provided in D. Loss Assessment under Section II – Additional Coverages;
b. Under any contract or agreement entered into by an "insured". However,
this exclusion does not apply to written contracts:
(1) That directly relate to the ownership, maintenance or use of an "insured
location"; or
(2) Where the liability of others is assumed by you prior to an "occurrence";
unless excluded in a. above or elsewhere in this policy;

So the lease agreement if in writing is honored ...
but a commercial policy is the only one that will
most probably provide additional insured status 23

Homeowners

Sorry to bug you but I just want to
confirm if a client puts personal items in
a storage unit they will only have 10% of
coverage C to protect them correct?

24

12

10/22/2012

Homeowners ….or

I am totally confused as to how this insured
would have coverage under his
homeowner’s policy, so here is the scenario:

The insured has an HO 03 04 91

He is selling his home as of 5/31/2012
and will no longer have an insurable
interest

100% of his belongings are going in

storage indefinitely 25

Homeowners ….or 26

He will be on a hiatus for 90 days
While he searches for a home in DC

He will not be coming back

Where in the homeowner’s policy does it
show that his items would be covered at

100% while in storage
vs.
10% for 30 days –
HOW ?????

13

10/22/2012

Homeowners ….or HO-2000

HO-91

27

Homeowners ….or

Coverage C is WORLDWIDE ...

it is ONLY limited when at an insured's residence...

there are special limitations of coverage for
CERTAIN items ...like money, etc.

There are Personal property exclusions ...like
animals birds fish ..

stuff in storage is NOT limited. 28

14

10/22/2012

WHomheeownnerosn…e.orsells the house under the HO-3
there is NO coverage A ...as there is no residence
premises...

no coverage B as no residence premises ...

he could have some worldwide liability ..

29

Homeowners ….or

I would have the company issue legal notice of
cancellation if he does not willingly submit for
cancellation.

This is beyond the scope of what we want to do.

I'd feel more comfortable if he was in an
apartment ...had most of his stuff in storage ...
listing coverage C enough for that …

30

15

10/22/2012

Homeowners ….or

but he is a vagabond ...
with no real residence ...
and that is really MORE exposure than what your
agency REALLY wants.
Remember ...Section II is WORLD WIDE ...
just what is this individual doing for the next 3
months or so ...???

31

Homeowners ….or

HO-2011 …
will be a problem…adds to the previously
discussed language

32

16

10/22/2012

Homeowners ….

A client is moving into a rental at Concord Mews
and needs an HO4.

The kicker is that Concord Mews wants to be listed
as "a person of interest".

Now I know add'l insured and I know named
insured but somehow have missed person of
interest. How do I show this?

33

Homeowners ….

They are being quite rude telling me that
other agents don't have a problem with it.

Guess I'm having a senior day but they don't want
either named or add'l insured(luckily since they
don't have any interest in my clients couch)

Concord Mews insists upon “person of interest”
and I haven't a clue how to show it or for that
matter what endorsement to order

34

17

10/22/2012

Homeowners …OR.

There is an apartment complex that is requiring to
be listed as “Interested Party” on a client’s HO4.

They are telling the renters that either the complex
be listed as “Interested Party”

or

the renter must purchase an additional policy
from them showing $100,000 liability.

Have you ever heard of this? How should it be 35
addressed? Thanks,

Homeowners …OR.

I’m hearing this request more and more

There must be some sort of "association" for
landlords ...

The HO 04 10 seems to be acceptable ...
assuming the company allows it ...
at least they are NOT an insured ...

it just lets them know your insured HAS an HO-4 ...

and they get a cancellation notice if policy 36
cancelled.

18

10/22/2012

Homeowners

Not an
Insured
Get cancel
Notice

37

Homeowners

We have an insured with an HO3 and DP3.

She holds a mortgage in her name only on DP3. She
gave her son the house and added him to the
deed. He is a Tenant in Common. He is not on the
mortgage. This policy is mortgagee billed.

MPIUA writes this because it’s near the water.
They have agreed to rewrite as an HO3 with the son
as the named insured and the mother as additional
insured.

38

19

10/22/2012

Homeowners

She has a financial interest, so it makes the most
sense.
But, since the mortgage is in her name, should
she be a named insured?
We are a little concerned about it being
mortgagee billed and having the payment get to
the correct account, especially with MPIUA.
What are your thoughts?

39

Homeowners

Technically from an ISO standpoint ...if the
individual does not LIVE in the house they should
NOT be on the declarations page ...and that is one
of the reasons for the additional insured
endorsement. The bank shouldn't care as long as
it is on the dec page as mortgagee - but given
some banks the named insured will just have to
make sure that the bill gets paid.

40

20

10/22/2012

Homeowners

In reviewing the motor vehicle liability exclusion
last week I thought you mentioned that there is
no coverage for golf carts in a campground.

Please advise whether or not there is coverage for
golf carts on a campground.

41

Homeowners

Regarding OWNED golf carts in a campground ...
I believe that one can NOT rely on the HO policy ...
whether it be the ISO HO-91 or HO-2000 or
HO-2011

HO-91

Only covered on

“insured location”

0r

playing golf 42

21

10/22/2012

Homeowners

HO-2000

Only covered on CERTAIN
“insured locations”
Playing golf
Or use at private
residential community

43

Homeowners

HO-2011 – same as HO-2000

Only covered on CERTAIN
“insured locations”

Playing golf
Or use at private
residential community

44

22

10/22/2012

HomeoIwnnserus red location definition …all ISO editions

HO-91 covers on ALL
insured locations
HO-2000/HO-2011 only
covers on CERTAIN
insured locations (a, b,
d, e, h)
I don’t see campground
as an
“insured location”

45

Homeowners

However, if one asks the insurance company and
they say "yes" ...great ...
follow up in writing ...

I think a large liability claim would be defended at
best under a reservation of rights letter ...
and ultimately ...denied.
But, I'm not a lawyer.

I like to take a strict view of a policy and be
"pleasantly surprised".

46

23

10/22/2012

Homeowners

I have a situation where an HO-3 is being canceled
for underwriting reasons.

The Co. was notified by the mortgage
co. that said property was vacant.

We were notified of this and attempted to contact

the insured by phone but the number was

disconnected. We sent a letter to them to contact

us.

Meanwhile, the Co. issued legal notice. The

insured contacted when they received the legal

notice. 47

Homeowners

We explained why they got it. We were told the
property is for sale, and that the insured has
rented another home in anticipation of the sale.

The property still has furniture and things there
and the insured stays in both locations.

The insured sent a letter to that effect to me and I
forwarded it to the underwriter for consideration
to rescind the cancellation, but it was denied.

48

24

10/22/2012

Homeowners

I want to know if the Co. is correct in doing so.

Can this policy be cancelled for "Non-owner
occupied" reasons? Please advise.

Homeowners 49

In MA ...
if it is within the first
60 days of a policy
renewal date or
original policy
inception date ...
the company can
cancel for ANY
reason.

50

25

10/22/2012

Business Auto

Our client’s commercial vehicle damaged an
overhead fiber optic cable.

The business Auto insurer’s offer is ACV not RC.
There is a 10% difference.

The overhead fiber optic cable is 6 years old and
the new cable when installed will come with a 3
year warranty.

Is the insurer’s offer of ACV not RC correct?

51

Business Auto

The answer is the same for the BAP as it is for the
MAP

Both policies pay for damage to someone else’s
property.

The BAP …written by ISO defines property
damage:

52

26

10/22/2012

Business Auto

The definition doesn’t really tell us … ACV or R/C
The insuring agreement states:

53

Business Auto

The BAP pays “property damage” that an insured
“legally must pay”

Am I obligated to “better you” … or
Put you back to where you were immediately
before the accident???

54

27

10/22/2012

Business Auto

Replacement cost is really “betterment”
On a first party basis we can buy “betterment”
coverage …to be “better off” after a loss …than
before it …
But …general concept …
I am only legally obligated to restore
you to where you were before loss

55

Business Auto

We do that in PD claims to other autos …
Same theory for other types of property

56

28

10/22/2012

Business Auto

We do that in PD claims to other autos …

Same theory for other types of property.

The "victim" can go to court and TRY for that add'l
amount ...but ...
it will take a COURT order to pay more than ACV.
That is why first party insurance is so important. I
get paid more than my company can recover in
subrogation.

57

Business Auto

Our insured had 25 yds of loam delivered to his
home.

The driver backed over his driveway, turning at the
end which caused damage to a portion of his
driveway.

The driveway is old and would 58
have needed to be replaced in
the next couple years however
it was not broken up like it is now.

29

10/22/2012

Business Auto

The trucking company states that they have a
signed form releasing them of liability(which has
not yet been produced).

Of course they also stated that were instructed to
drive over the driveway. Our insured denies this.

59

Business Auto

The insured made the decision to file a 3rd party
property damage claim on the trucking companies
business auto policy.

An adjuster came out to view the damage.

The insured got 3 estimates ranging from $5700 to
$9000 to replace the driveway. Approximately 1/3
of the driveway was damaged. The appraiser wrote
up the damages at about $900.

60

30

10/22/2012

Business Auto

Couple questions:

1)What does the BAP contract state about
how this loss is settled?

As just discussed …legal liability

61

Business Auto

Couple questions:

2)If the insured made a homeowners claim
instead of a 3rd party PD claim would the
settlement be handled differently?

Problem here …too …

62

31

10/22/2012

Business Auto ISO HO policy
Business Auto only pays
ACV
For
“structures
that are not
buildings”

63

The ISO
HO-2000 and
HO-2011 filings
have the
HO 03 43 RC
loss settlement
for certain non-
building items
endorsement -
HO-91 does not

64

32

10/22/2012

Business Auto

Couple questions:

3)The insurance company told me if they get
the signed form (according to our insured
this does not exist) releasing them of
liability they will deny the claim. It seems
to me that this would never hold up –
Can you comment on this?

65

Business Auto

I am not a lawyer ...
but if an adult signs something ...
a contract... it could be used against them ... it
certainly WILL be by the BAP company.

Can the HO company use this to deny paying
claim???? NO NO NO

66

33

10/22/2012

Business Auto

Since this is a motor vehicle claim ...your insured
can go to small claims court where he/she doesn't
need a lawyer and there is no $$ limit...
and see what judge says .

I cannot believe any judge is going to make the
driver's BAP pay for an entirely new driveway.

67

Business Auto

But ...
judge could make them pay more than $900.
Perhaps when bap driver gets court papers and
sends to insurance company ...
insurance company might be willing to pay more
without going to court.

68

34

10/22/2012

Business Auto

I have a commercial insured who just purchased 5 brand
new vehicles from a dealer (no prev. commercial auto policy
as new company).

The Registry is making up special vanity plates for him and
the plates will not be ready until next week.

The dealer is telling the insured that he is responsible for
insuring them now while they are sitting in the dealer's
yard.

My underwriter is telling me we can't insure them until they

are registered. 69

Business Auto

The titles have been signed over by both parties, but no
binders have been issued to the bank, nor the RMV1's
stamped.

Who is correct in this situation?

I'm not sure at what point the insured is actually
responsible for insuring these un-registered vehicles

70

35

Business Auto 10/22/2012
The BAP states:
With most probability you
Business Auto have symbol 7 activating
The BAP states: ALL the coverages on the
BAP ...
so ...
a newly ACQUIRED
additional auto IS
covered for 30 days from
the date of acquisition ...
the issue is ...for WHAT

71

symbol 7 states that a newly
acquired ADDITIONAL auto
ONLY receives the coverage
IF ALL CURRENTLY OWNED
AUTOS HAVE that coverage.

If all currently owned autos
have collision .. then a newly
acquired one will ...same for
comprehensive ... BI/PD ...
etc.

72

36

Business Auto 10/22/2012
The BAP states:
NOWHERE does it
say the newly
acquired vehicles
must be "registered".

73

Business Auto
The BAP states:

If any of the 5 are
replacement vehicles ...
it is specifically stated
that a replacement
vehicle gets the
coverage of the vehicle
it replaces.

74

37

10/22/2012

Business Auto

But my problem here is that this will be a 75
new auto policy.

The insured’s company is new and we need
to write a new symbol 7 auto policy
and
the underwriter won’t issue it until the
vehicles are registered.

The insured currently does not have a
commercial auto policy

Business Auto

Then that IS a problem.

Technically the second the application is
completed (and hopefully down payment
made) the policy IS in force.

But on the original policy one must conform
to company underwriting guidelines.

I might want to talk to a supervisor.

76

38

10/22/2012

Business Auto

Our belief in MA that a vehicle must be
registered to be covered is foolish....
and incorrect since nowhere in the policy
does it require registration.

77

Business Auto

What we CAN say is that compulsory auto ...
the whopping 20/40 BI and PIP will not
apply until vehicle is registered - great ...
who cares.

In the "rest of the real world" ...underwriters
don't get involved in registration ....

78

39

10/22/2012

Business Auto

We have an insured who travels frequently to
Europe on business and rent a car.

The client has a personal umbrella and Mass
auto policy.

Since there is no auto coverage in Europe, we
advise them to purchase liability coverage to
cover the gap up to the umbrella.

This runs into money for all their trips.

79

Business Auto

Is there a way or is there a policy out there that
can cover this gap on an annual basis without
having to buy the coverage on every trip?

Maybe surplus lines, etc.

80

40

Business Auto 10/22/2012

The BAP could cover 81
this exposure
The policy territory 82
of the 2006/2010 BAP
41
Employer’s BAP needs
proper “symbols” to
grant coverage

Business Auto

symbol activating liability …
must be

or

or

10/22/2012

Business Auto

If vehicle rented in employee’s name …symbol 9
only covers employer …would also need
CA 99 33 Employees as insureds

83

Business Auto

SO A BAP with symbol 1, 8 or 9 would cover the
named insured or employee who rents a vehicle
without a driver for less than 30 days.
Any ISO policy will have the language that
settlement must be "agreed" to ... or the suit
brought in normal policy territory.
This is the best that I know of ..

84

42

10/22/2012

Business Auto

Even if there is no current BAP because no
owned commercial auto …

BAP could be issued for just symbols 8 and 9…

And SHOULD be … because employees using
autos on its behalf can get employer sued ….

85

Business Auto

If the individual wants his/her OWN policy

Anything is possible in surplus lines ... I would
ask a surplus lines broker that I normally do
business with
Or, you can see if either of these websites help
www.insurancemarketplace.com
or
www.mynewmarkets.com

But ... you will then have to discuss with PUP 86
carrier ...if IT will sit over the policy.

43

10/22/2012

Business Auto

But ...
you will then have to discuss with PUP carrier ...
if IT will sit over the policy (BAP or surplus lines)

87

MAP

It’s that lovely time again with kids returning to
college, and the age old question of excluding
drivers is coming up.
I want to confirm how it generally works as a co-
worker and I are in disagreement as to what you
lose when you exclude.

88

44

10/22/2012

MAP

Scenario: Suzy is going away to Richmond VA
and mom wants to exclude her.
If Suzy drives someone’s car down there
(Richard) and is in accident down there,
Richard’s coverage would be primary as she is a
permissive user of that car (we can only hope)
and would be considered an insured operator for
that loss on his policy.
Say Suzy is hit by an underinsured operator and
wants to go back to her mom’s policy (where 89

f

MAP

Say Suzy is hit by an underinsured operator and
wants to go back to her mom’s policy (where
she’s an excluded op) for Underinsured
benefits.
I say she can; my co-worker says she cannot.

90

45

10/22/2012

MAP

If Suzie doesn't drive Richard's car "regularly" ...
she could get back to mom/dad's policy for
Parts 4,5,6,7,8,9...
as she IS a household member ...and the policy
applies to her ..

91

MAP

92

46

10/22/2012

MAP

93

MAP

As long as the regular use exclusion does not
apply …which IS found in Parts 4,5,6,7,8,9…
Then the MAP can follow a “household member”

94

47

10/22/2012

MAP

Does using the operator exclusion endorsement
preclude ALL coverage for a named individual?

95

MAP

NO …not as written by AIB …

If the excluded individual is driving a car he/she
doesn’t own …
and doesn’t drive it regularly …
Can he/she still get back to parents’ MAP?

YES …

96

48

10/22/2012

MAP

Endorsement
excludes
NAMED
individual
From
SPECIFIED
Vehicle(s)

97

MAP

If when she comes home ...

mom/dad ...call up and add her back ...

and are doing the "right" thing when she is home ...
assuming she is driving ...

then they have given all the information and are
not misrepresenting
or giving "incomplete" info
and policy follows "household members”

98

49