Last week we entered into a discussion of downed trees, in particular, trees downed by a hurricane. We spent our time dealing with the HO-3 policy and how it responds. If you didn’t catch that, take a look at last week’s post. Oddly enough, when a hurricane blows through, it isn’t just the trees on a homeowner’s property that could be damaged. There could be trees on a business’s property that are damaged as well. Does the commercial property policy provide coverage there?
For this discussion, we’ll be using an ISO CP 00 10 10 12 Building and Personal Property Coverage form with CP 10 30 06 07 Causes of Loss – Special Form attached to it. Your carriers might be using a different edition date, a coverage form that they wrote, or other carrier specific endorsements. Make sure that you’re checking the specific policy forms that you’re using. It’s worth noting here that I didn’t use the word policy right here. I intentionally avoided that word because we’re only dealing with two specific forms that make up the policy, not the whole policy. One is a coverage form and the other is a causes of loss form. Alone, they can’t form a whole policy. Commercial policies are fun like that.
We have to address the attached causes of loss form because our coverage form will have us refer back to it. The coverage form itself doesn’t tell us what causes of loss are included. Here’s the first statement that it makes about causes of loss, on the first page of the form.
Coverage: We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.
That seems simple, right? Let’s look at one more place on the coverage form to find out why it isn’t as simple as we want it to be.
Covered Causes of Loss: See applicable Causes of Loss form as shown in the Declarations.
That forces us to leave this form alone to validate whether we’re dealing with a covered cause of loss. Remember that we were talking about trees felled by windstorm. Of course, you still remember which causes of loss form we are working with (it’s the CP 10 30 Causes of Loss – Special Form). So, what does that tell us about Windstorm and Hail as a covered Cause of Loss?
Covered Causes of Loss: When Special is shown in the Declarations, Covered Causes of Loss means Risks Of Direct Physical Loss unless the loss is:
- Excluded in Section B., Exclusions; or
- Limited in Section C., Limitations; that follow.
Without going through and quoting the entire form, we have to review it and find that there are no exclusions or limitations that apply to the cause of loss that we’re concerned about, which is Windstorm or Hail. It’s worth noting quickly that it is possible that another endorsement is attached which may exclude or limit Windstorm or Hail. Make sure that you’re watching for that.
Let’s go back to our coverage form and see what we can find that might apply to our trees. Reading through A.1. Covered Property, we won’t find anything that specifically speaks to the trees on the property, unless the business has trees as “stock”, which may impact coverage. For today, let’s say that the business is not in the business of selling trees. They are not “stock”.
Since we’ve cruised through that part of the form, the next section is A.2. Property Not Covered. Maybe there’s something here that we need to consider.
A.2.q. The following property while outside of buildings:
(2) Fences, radio or television antennas (including satellite dishes) and their lead-in wiring, masts or towers, trees, shrubs, or plants (other than trees, shrubs or plants which are “stock” or are part of a vegetated roof), all except as provided in the Coverage Extensions.
Here comes a potential issue. The property not covered includes the trees, shrubs or plants that we are really interested in. If this is the only place we find trees, we conclude that there is no coverage for this type of property. If that were the end of the coverage form, we’d be right, except that there’s a lot more of the form left to look into, especially since this ends with an exception. Now we have to find the coverage extensions to find out if there is a coverage extension that applies.
The coverage extension portion of the policy is quite interesting because it is not emphatic. Let me show you what I mean.
If a Coinsurance percentage of 80% or more, or a Value Reporting period symbol, is shown in the Declarations, you may extend the insurance provided by this Coverage Part as follows:
The coverage extensions are conditional coverages. They are not guaranteed coverages. I get that you’re not likely to have a coinsurance percentage below 80%, and it would seem less likely that an insured is not going to want coverage according to the coverage extensions, but it is worth noting that the policy reads that “you may extend…” not “we shall extend…” or “the following insurance is provided…”. It uses the conditional statement. That means that there isn’t a guarantee of coverage. It is under the insured’s control. That’s enough of that diversion, let’s see if there is a coverage extension that applies.
e. Outdoor Property
You may extend the insurance provided by this Coverage Form to apply to your outdoor fences, radio and television antennas (including satellite dishes), trees, shrubs and plants (other than trees, shrubs or plants which are “stock” or are part of a vegetated roof), including debris removal expense, caused by or resulting from any of the following causes of loss if they are Covered Causes of Loss:
- Riot or Civil Commotion; or
We found the property that we’re looking for. Trees are outdoor property and they are specifically listed as such. What’s the problem now? Under this coverage extension, we have severely limited the covered causes of loss. You remember that our discussion was specific to trees felled by windstorm. Windstorm isn’t listed here. That means that we still haven’t found coverage.
What about debris removal? Didn’t we find some coverage under debris removal on the HO-3? Let’s take a look at the debris removal additional coverage here and see if we might pick up some coverage on this form. Turning to A.4. Additional Coverages; a. Debris Removal, we find that it is a detailed part of the policy, which may give us hope to find some coverage here.
- Subject to Paragraphs (2), (3) and (4), we will pay your expense to remove debris of Covered Property and other debris that is on the described premises, when such debris is caused by or results from a Covered Cause of Loss that occurs during the policy period….
- Debris Removal does not apply to costs to: (skipping subparagraphs a & b)
- Remove any property that is Property Not Covered, including property addressed under the Outdoor Property Coverage Extension;
You can’t say that we didn’t try, but it doesn’t look like there’s any coverage here for the question that we started with. Actually, we find that coverage is specifically excluded here.
Now, if it wasn’t wind that knocked the tree over, but fire, lightning, or a 747 it looks like we can find some coverage on the commercial policy.
Is there a point to all of this? Sure there is. Some of us get the blessing of specializing in personal or commercial lines. There are others that just don’t have that blessing. It is important to remember that all insurance policies must be understood based on their own coverages, exclusions, limitations, and endorsements. We can’t make any assumptions when we’re trying to understand policy language so that our customers can make informed decisions.
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