| Q&A of the Week |
Coinsurance on Other Structures
An Ohio subscriber recently asked the following question:
I have a loss to other structures on the homeowners policy. Is coverage and coinsurance determined by taking the value of ALL other structures and adding them together? How does coinsurance work when the damage is to only one of multiple other structures?
ANSWER: Coverage for other structures is 10 percent of coverage of the dwelling; this applies to all the other structures. If the insured has a number of other structures, the ISO HO 04 48 can be added to increase available coverage for other structures. As far as coinsurance goes, the damaged property must be insured to 80 percent of its value. For example, the insured has a dwelling worth $200,000 but has four other structures valued at $10,000, $20,000, $40,000, and $55,000, and the $40,000 structure is the one damaged with damage being $15,000. The calculation of the limit will be the $20,000 of coverage divided by the $40,000 of value; this is a 50 percent proportion, so the insured is underinsured for the loss. Therefore payment will be the lesser of the actual cash value of the damaged portion of the building or the proportion of the cost to repair or replace the damaged property to the 80 percent of the replacement cost. The calculation is ($20,000/$40,000) × $15,000= $7,500. So $7,500 is what is paid out.
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| What's New This Week in FC&S |
Exclusion—Unmanned Aircraft
In December 2014 ISO filed a number of forms that apply specifically to drones, also known and unmanned aircraft. These forms become effective June 1, 2015. This article discusses the exclusion endorsements CG 21 09 06 15 and CG 21 10 06 15. Read More |
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| Litigation Watch |
Professional Services Exclusion
The insurer brought an action seeking a declaration that it had no duty to defend or indemnify the insured engineering firm based on a professional services exclusion in the general liability policy. This case is General Cas. Co. of Wisconsin v. Nelson Engineering Consulting, LLC, No. CIV.13-4075-KES, 2015 WL 631996 (D. S. D. Feb. 13, 2015).
South Dakota Oilseed Processors (SDOP) entered into a contract with Nelson Engineering Construction for Nelson to act as the general contractor on a construction project to build a seed oil processing facility. The construction was completed and shortly thereafter, SDOP alleges it experienced ongoing problems with the electrical service. An arcing event occurred and caused damage to the facility and as a result, production was interrupted and SDOP had to eventually begin bankruptcy proceedings.
SDOP brought an action against Nelson based on the contention that Nelson was the general contractor for the project. General Casualty was the insurer for the general liability policy issued to Nelson. The policy contained a number of exclusions, including one for professional services. The insurer filed this declaratory judgment action seeking a declaration that it had no duty to defend or indemnify Nelson based on the professional services exclusion.
The United States District Court, South Dakota, noted that the professional services exclusion stated that the policy did not apply to property damage due to the rendering or failure to render any professional service. The policy also stated that the professional services exclusion included, but was not limited to, preparing, approving, or failure to prepare or approve maps, drawings, opinions, reports, surveys, change orders, designs, or specifications, and supervisory, inspection, or engineering services. Read More
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