An agent’s client installs solar paneling and equipment to his house. Although the solar equipment is permanently attached to the dwelling, the homeowners carrier refuses to add its value to the HO policy on the basis that the energy which isn’t consumed is sold by the electric company on the market.

Q: “I’m pretty sure this ordinary homeowner hasn’t entered the utility marketplace, nor is he engaged in any business. Why would the insurer refuse to include this new home improvement on the HO policy? Why is this situation any different than if the insured upgraded his boiler to a newer, more energy-efficient model to save on home heating costs?"

A: “Assuming we’re talking about an ISO HO-3, even if the insured uses the solar panels to generate income, there is no exclusion under Coverage A for business property. Therefore, there is coverage for damage to the solar equipment. The policy might only cover equipment for actual cash value if the HO 04 90 replacement cost endorsement is not attached, but if it's brand-new equipment, actual cash value and replacement cost are probably very similar.

I don't know that you can force the insurer to increase the limit, but if they think that's justified on the basis that there's no coverage, they're wrong—again assuming it’s an ISO form. The equitable and customer-focused thing to do is increase the limit as requested. Then, if they don't like the exposure, they can non-renew.”

UPDATE: The next day, the agent responded, "The underwriter has just agreed to endorse the policy to include the value of the new solar panels. Thanks for all your help!"

Bill Wilson is director of the Big “I” Virtual University.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.