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Wes
USA
62 Posts |
 Posted - 09/08/2003 : 21:52:44
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Certain areas of Florida designated as High Velocity Wind prone have a state requirement that if 25% of a roof is damaged and in need of replacement then the entire 100% of the roof must be replaced and brought up to High Velocity Wind standards. Would this be covered under the HO-3 policy? Would this coverage fall under the codes and improvements language of the policy? Since this is a state mandated law would insurance be responsible for the 100% replacement provided that they are responsible for the 25% even if the insured does not have code improvement included in the policy. Thanks for all responses and I hope you can make sense of this scenario.
P.S. This may be a very pertinent discussion given the storm season is upon us. |
Edited by - Wes on 09/08/2003 22:27:24 |
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dparsons
USA
13 Posts |
Posted - 09/08/2003 : 23:14:26
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| All policies are contracts and all policies have Liberalization Clauses that change them to the latest form, if it adds or increases the coverage. This includes new laws. If the state passes a law that says a roof with 25% damage is really 100% damaged, belly up to the bar. This will make your job a lot easier. In Texas some years ago, the Dept. of Insurance issue an opinion that in the case of mulitple layers of roofing, the carrier had to pay to remove all the layers. Unless the hail was huge, the second layer did not have hail damage but the State Board said tear it off. Actually, this is a case of sweet revenge because for years adjusters were told to tell the insured that that second layer was a lot better and paid to overlay. Then the next time around we were told to tell them, sorry but we don't owe for that first layer. Most of these rulings have a history and the companies have asked for it. We have a lot of older houses with lath or open decks, a layer of #1 cedars with an overlay of comps or shakes. The #1 cedars became the deck, or nailable surface, and we owed for what was exposed. We used to be able to lace in shakes but the building codes changed and due to blowing snow (a real problem in the Texas Panhandle!) no more lacing. Only #1 cedars can go down on spaced decking. So, we tear off to boards and install OSB or 3/4 plywood and whatever was there. Before you rant about how unfair this is, you will probably find out the reason there are 2 layers is because an insurance carrier convinced the insured that was the way to go, and saved $10 a square. What goes around comes around. |
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CCarr
Canada
1200 Posts |
Posted - 09/09/2003 : 08:00:10
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Dave, there is an area of your comments that I have a different view on. It is in regards to your comments on the "Liberalization Clause", which is part of Section I and II - Conditions.
You stated, ".... Liberalization Clauses that change them to the latest form .... this includes new laws ....". I suggest that the last phrase of your comments is incorrect.
I don't agree that a state or municipal new law or ordinance that may affect insurance coverages or insurance claims, is automatically 'assumed' into any wording via the portal of a Liberalization Clause (LC).
The LC in a policy allows the carrier to provide blanket inclusion to all policies in force of any changes "WE make" that "broadens coverage".
The scenario Wes has provided, as it relates to a policy, can only be considered within "Ordinance or Law" applications, and the Liberalization Clause has no applicability to that scenario.
Considering Wes's scenario with the state law for High Velocity wind and the 25/100% threshhold, one must look at the coverage available; specifically "Ordinance or Law" (O/L). This O/L is an exclusion in Section I - Exclusions, unless it has been provided by endorsement.
Looking at Wes's questions within his scenario:
(1) Would this be covered under the HO3?
No, unless O/L had been endorsed as coverage (i.e the exclusion written out) and O/L was specifically provided under the policy. Without that, the HO3 does not insure for any loss caused by the enforcement of any ordinance or law regulating the construction or repair of a building.
Wes's specific example is no different than older homes with 60 amp electrical services (or less) that once damaged must be replaced with 100 amp electrical services, because of site specific (state or municipal) ordinance or law. Without the O/L endorsed (i.e. the exclusion removed) the increased cost of that, or the other 75% of the roof replacement cost can not be paid by the carrier.
(2) Yes, the area of coverage (policy wording) applicable to consider your scenario, is the O/L language of the policy.
(3) It doesn't matter if this is a state mandated law or municipal, insurance coverage is not meant to "float" to legislation regarding construction or repair, and an HO3 would not pick up the other 75% of the roof cost unless the O/L exclusion was endorsed out of the policy prior to the loss. |
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dparsons
USA
13 Posts |
Posted - 09/09/2003 : 08:58:36
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| If the Florida State Board of Insurance mandates this, it is covered by existing policies. If the State Board of Insurance puts out a new mandatory endorsement, it is retroactive because of the LC. "We" didn't do that, "they" did. Case law. |
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TedPasan
82 Posts |
Posted - 09/09/2003 : 11:11:37
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The liberalization clause has nothing to do with state mandates. Reread the liberalization clause and what it says and what it means. The bottom line is the liberalization clause means that if the insurance company decides to make their policies more liberal and cover items or remove exclusions found within a current policy, then that liberalization of the new policy now extends to a current in force older policy as well, as long as the two policy types are the same (for instance a new HO-3 versus an older HO-3).
I agree with Clayton, that the liberalization has nothing, absolutely nothing to do with state, local or municipal laws, codes or mandates, and it purely and simply modifies the policy unilaterally only by an action of the insurance carrier.
And if you would read and understand the liberalization clause, you would understand the point we are making. You really do have it terribly confused. |
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trader
USA
236 Posts |
Posted - 09/09/2003 : 11:21:48
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| Sounds like both hats he wears has damaged his ability to understand contract law! |
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Wes
USA
62 Posts |
Posted - 09/09/2003 : 11:41:11
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| Okay since this is a state mandate (law) and must be followed without exception. If the carrier is going to pull off 25% of the roof are they responsible for and in fact required by law to pull off the remaining 75% regardless of O/L endorsement? I think Clayton has this question answered in his post but I want to be very sure of this as it applies to a current file I am working. Thanks Guys |
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CCarr
Canada
1200 Posts |
Posted - 09/09/2003 : 11:47:21
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| Trader, I can't follow your comment. Who and what are you referring to with your comment, ".... both hats he wears ...."? |
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TedPasan
82 Posts |
Posted - 09/09/2003 : 12:29:27
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Wes, using your example, if the requirement by a new mandate is to replace 100% when only 25% is damaged, then in the absence of the Ordinance of Law endorsement, the carrier would pay for the 25% damaged portion of the roof, and the insured would be responsible for the other 75% of the roof replacement cost mandated.
If the insured has the O/L endorsement, then the carrier would pay for the cost of the replacement mandated by a new law or ordinance. Otherwise, the insured has a self insured retention for all costs beyond 25%.
But in no event, would the liberalization clause have any bearing in your example nor the others outlined above unless a carrier elects to extend coverage beyond that required by policy. It is only through the election or an action of the carrier by which the clause under the liberalization clause of the policy is liberalized.
That is not to say that some states don't allow or cannot mandate changes within the insurance marketplace or within the insurance policy which become binding on carriers, but such mandates are not related or connected in any way to the liberalization clause contained within the policy, which is singularly an electable option by a carrier. |
Edited by - TedPasan on 09/09/2003 12:37:39 |
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CCarr
Canada
1200 Posts |
Posted - 09/09/2003 : 12:29:45
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No Wes, I suggest the carrier (within the scenario you have presented and my approach to it) is not required to pull off the remaining 75% regardless of the O/L exclusion. You used the word "endorsement", remember that the HO3 excludes O/L costs, this O/L exclusion as part of the printed wording can be removed from the policy by "endorsement" or rider.
The 'cost' of your claim (any claim) is determined from the results of your findings for 'cause' and 'coverage'. If you have a peril that is covered that damaged 25% of the roof, and that coverage is subject to an O/L exclusion; the cost is limited to the 25% damaged area.
I smell a potential agency problem here. If an insurance agent is selling policies in an area where this High Velocity wind standard is governed by a state law, he could be held accountable for not being aware of this, or not offering or selling the appropriate endorsement or coverage that would have prevented this situation for the insured (if such is available by the specific carrier); somewhat subject to the insured's or his lawyer's knowledge of this law prior to the loss.
I would want to know if the specific carrier is in the practice of (whether selectively by risk or in the specific area at large) offering an endorsement to avoid this situation. It is somewhat similar to some carriers writing out "same site" rebuilding requirements in their policies when they are aware (for whatever circumstances) of this not being a possible end result after a loss. |
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dparsons
USA
13 Posts |
Posted - 09/15/2003 : 16:16:43
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Texas Fire or Allied Policy - (HO or TDP)
Liberalization Clause. "If the State Board of Insurance adopts a revision which would broaden or extend the coverage under this policy without extra premium within 45 days prior to or during the policy period, the broadened or extended coverage will immediately apply to this policy."
That sounds pretty clear to me. Perhaps your clause might read differently but I know what mine says. |
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tomgriffin56
USA
88 Posts |
Posted - 09/21/2003 : 13:04:28
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| Sounds to me like the determining factor would be who mandated it. Was it the DOI or Code Enforcement folks? Correct me if my thinking hat is skewed and I appear to be a droolin' idiot. |
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High Velocity
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