Your insured’s toilets, sinks and tubs won’t drain. The plumber discovers a blockage in the main sewer line running from the house to the street caused by tree roots. Does the HO policy cover the cost to repair or replace the sewer line?

Unlike the ISO building and personal property commercial coverage form, the homeowners forms do not exclude damage to underground pipes and similar equipment. An all-risk or named-exclusions policy that does not specifically exclude the actions of tree roots would cover such losses as long as they are fortuitous (i.e., not subject to the neglect exclusion). Some insurers reportedly have specific tree root exclusions, but the ISO-standard HO-3 does not.

The key issue is whether the sewer line has actually been damaged. It’s possible for roots to penetrate joints without damaging them, but even then, there could be enough separation in the joint to constitute damage. If there’s no damage, then there’s no coverage; otherwise, there is not an exclusion.

For more information, including a discussion of the wear-and-tear exclusion,  click here.

Is Theft “Property Damage” Under the CGL?

Property was stolen from a guest’s auto in the insured hotel’s self-parking garage. The guest made a negligence claim against the hotel. The adjuster denied the claim on the basis that, under state law, the definition of “property damage” does not include theft. If the guest sues, the adjuster says no coverage, no defense. Is this correct?

When a claim is denied citing state law, the first thing to do is ask for a copy of the law. In this particular claim, the Big “I” Virtual University faculty members did and were provided with a court case that had nothing to do with the claim. Even if there was a law that included a definition of “property damage,” that doesn’t necessarily mean it applies to a defined term in a mutually agreed to contract like an insurance policy.

Just because the law defines a term to mean something within the context of that law, it doesn’t mean that the definition can be translated to everything else. An insurance policy is a contract. Contracts can define terms just about any way they want to as long as they don’t violate public policy.
For example, one insurance policy defines the term “auto” as: “‘Auto’ means a land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment.”

Many state laws also may define “auto,” but an adjuster cannot deny a claim because the policy definition of “auto” does not match perfectly with a state law defining the term relative to licensing or some other purpose. The parties to the contract are free to define the meaning of terms within that contract any way they see fit. The definition of “property damage” in the CGL is clear and unambiguously applies to the theft of property.

For more information, including a legal opinion and several CGL articles,  click here.

Replacement Cost and Unscheduled Property

According to the ISO HO replacement cost endorsement, “Personal Property Replacement Cost coverage will also apply to the following articles or classes of property if they are separately described and specifically insured in this policy...Golfer’s equipment meaning golf clubs, golf clothing
and golf equipment.” Does this mean, as one adjuster claims, that replacement cost coverage does not apply if golf clubs are not scheduled?

The endorsement doesn’t say that RC applies “to the following articles or classes of property only if they are separately described and specifically insured.” There is no special limit in the HO policy nor any requirement that golf clubs be scheduled. Insureds may schedule golf clubs if they want broader coverage than what is provided on the rest of their personal property and don’t want a deductible, but they certainly don’t have to.

The RC endorsement applies to all personal property unless indicated otherwise. The wording the adjuster is citing simply clarifies that RC coverage also extends to scheduled personal property otherwise covered for ACV.

For additional commentary,  click here.

Bill Wilson (bill.wilson@iiaba.net) is Big "I" director of the Virtual University, an online learning center for agents and brokers.