(Every Tuesday, we will discuss elements of insurance through the lens of Terms & Conditions. In this article, we go into Bill Wilson’s book, When Words Collide to look at the deeper and more profound elements of policy wording and implications for coverage and claims disputes)
More on Policy Form Edition Dates
Aside from distinguishing between ISO and non-ISO policy forms, what is the importance of policy form edition dates? The obvious one is that each new edition of a form indicates changes of some kind. These changes may seem minor when comparing before-and-after contract language that may involve simply changing one word, but they can be the difference between coverage and noncoverage to the tune of hundreds of thousands of dollars or more….
…coverage or claim examples from ISO’s Homeowners (HO) program come to mind to illustrate this.
ISO has a liability exclusion for most “motor vehicles” since they are more appropriately insured under policy forms designed for that exposure, especially use on public roads. It makes exceptions for certain vehicles used in certain ways, one being riding lawn mowers. The following are the exceptions from the “motor vehicle” exclusion in each policy form edition applicable to our coverage question. Covered are “motor vehicles” [emphasis added]:
HO 00 03 04 91
“Used to service an ‘insured’s residence”
HO 00 03 10 00
“Used solely to service an ‘insured’s residence”
HO 00 03 05 11
“Used solely to service a residence”
Here are three potential claim scenarios and whether there would be liability coverage under the policy editions above:
I mow my neighbors’ yard as a favor while they’re on vacation:
- 1991: As long as I ever use the mower to service my residence, I’m covered on or off my premises in the coverage territory.
- 2000: Not Covered. The mower is no longer used to “solely” service MY residence. (And since I have now used it off my residence premises, it’s arguably not covered in the future because it will not have been solely used to service just my residence. I’ll leave it up to discussion about whether coverage is reinstated if I buy a new riding mower.)
- 2011: Since both of our yards are part of our “residences,” I’m covered.
I’m using my riding mower to pull a small flatbed trailer packed full of young children around the neighborhood on Halloween:
- 1991: As long as I ever use the mower to service my residence, I’m covered on or off my premises in the coverage territory.
- 2000: Not Covered. The mower is no longer used to “solely” service MY residence.
- 2011: Not Covered. The mower is not being used to service “a” residence.
I mow the lawn of my church right behind me, including the parsonage yard:
- 1991: As long as I ever use the mower to service my residence, I’m covered on or off my premises in the coverage territory.
- 2000: Not Covered. The mower is no longer used to “solely” service MY residence.
- 2011: It depends. If I mow the parsonage first, I have coverage since I’ve used it solely to service “a” residence. But when I start mowing the church property, my coverage vanishes, arguably forever, at least for that mower. However, if I mow the church property first, I have no coverage and continue to have no coverage if I mow the parsonage next since the vehicle has not been used solely to service “a” residence.
You can imagine many more scenarios. For example, I borrow my neighbor’s riding mower to finish mowing my lawn when my mower stops running. He never uses his mower off his premises, so he would normally have coverage under any of the three policy editions. However, now that he has let me use his mower on my residence, if he has the 2000 edition policy, he arguably no longer has any coverage. If he has the 2011 edition policy, he would continue to have coverage if I use the mower only on my property, BUT if I use it while I have it for any nonresidential purpose, his coverage arguably vanishes.
Now, imagine explaining this to the average homeowner. THEN try to explain the rationale for these variations in coverage. And those of us in the industry wonder why consumers don’t like us or trust us. As explained later in this book, insurers usually provide very broad insuring agreements to make sure coverage is available, then use exclusions to whittle away the coverage to make sure it’s affordable, then sometimes add exceptions to the exclusions to tweak the risk and premium. However, the process can be taken to the extreme, as this exercise demonstrates, to the point that the logic in the form language is close to nonsensical and the coverage variations do not consistently reflect the variations in risk of loss.
So, what is the point of these three illustrations other than demonstrating the fact that different policy form editions result in different claim outcomes? Keep in mind that ISO subscribing insurers may be using different form editions. My prior personal lines insurer used the 1991 ISO homeowners program while my current insurer uses the 2011 ISO homeowners program. Other ISO companies use the 2000 edition. Knowing the difference between edition dates can make a difference, if one is so inclined, in the choice of insurers, depending on whether you have a lot of auto equipment in your garage, have property in storage, or how you use a riding lawn mower, not to mention many dozens of other factors. Insurance is NOT a commodity. Some policies (and insurers and agents) are better for some insureds than others.
<excerpt from When Words Collide – Resolving Insurance Coverage and Claims Disputes p58-64)
(for discounts on bulk book orders, contact me here: nick@insnerds.com)
About Nicholas Lamparelli
Nick Lamparelli is a 20+ year veteran of the insurance wars. He has a unique vantage point on the insurance industry. From selling home & auto insurance, helping companies with commercial insurance, to being an underwriter with an excess & surplus lines wholesaler to catastrophe modeling Nick has wide experience in the industry. Over past 10 years, Nick has been focused on the insurance analytics of natural catastrophes and big data. Nick serves as our Chief Evangelist.
Nick Lamparelli is a 20+ year veteran of the insurance wars. He has a unique vantage point on the insurance industry. From selling home & auto insurance, helping companies with commercial insurance, to being an underwriter with an excess & surplus lines wholesaler to catastrophe modeling Nick has wide experience in the industry. Over past 10 years, Nick has been focused on the insurance analytics of natural catastrophes and big data. Nick serves as our Chief Evangelist.
