are your client’s prized possessions’...

S P O N S O R E D B Y

ARE YOUR CLIENT’S PRIZED POSSESSIONS’

COVERED...WELL?

10/28/2013

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Antiques

Loss

Settlement

Issues

Antique Loss Settlement Issues

Irene and Bud have some antique furniture and collectibles left to them by their respective grandparents. Bud and Irene were the only grandchildren interested in preserving the family history v. selling the stuff and getting some quick cash. They inherited:

Antique brass bed 200 years old $5,000200+ Hand carved wooden bellows $15,000-20,000200 yr. old Birdseye maple dresser & mirror $5,000225+ yr. old silver tea set made by Paul Revere $20,00-25,000200+ yr. old roll top desk $8,000

Answer the following scenarios

1. These items are NOT SCHEDULED. If these items were stolen, what would the HO policy pay:

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HO-91 unendorsed loss settlement provision


The unendorsed ISO HO-2000/HO-2011 policy loss settlement Provision:

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HO personal property, which includes antiques, are settled on an ACV basis.

ACV means “like, kind and quality”.

For relatively new articles it is easier for the carrier to adjust ACV by a formula “replacement cost minus depreciation”.

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This “formula” does not work for antiques or collectibles because these items cannot be replaced. In Massachusetts we utilize the broad evidence rule for ACV which encompasses many things including “market value”.

Market value is the closest thing to ACV for antiques that is available. It is the burden of the insured to prove that it truly was an antique and what the approximate value would be. This should be done BEFORE the loss!!!!


If the HO 04 90 replacement cost endorsement were attached to the H-91 or HO-2000/HO-2011 would that change loss settlement?

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AntiqueLossSettlement

Issues

This endorsement would NOT change the loss settlement provision for antiques.

AntiqueLossSettlement

Issues

This endorsement would NOT change the loss settlement provision for antiques.

WHY?

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Even with HO 04 90 …Antiques STILL adjusted on ACV basis

Consider increasing Coverage C … Antiques ARE covered for “value”…unless

Special limit appliesorProperty excluded


HO-2000/2011 language – HO-91 similar

Consider coin collections

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Can antique jewelry ever REALLY be replaced???Antique firearms? “family silver”?



These limits apply whether antique or not

$1,000 HO-91

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Coverage C exclusions …not really “antiques

Many ….

Business related ….PetsRecreational vehicles

Perils Issues & Antiques – unendorsed HO

Their house is being painted and the painters drop the desk while moving it out of the room. What would the unendorsed HO policy pay?

Bud and Irene have authentic appraisals, but have not scheduled these items

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The unendorsed HO policy covers Coverage C items on a “named peril” basis.

“Dropping” is not a named peril and therefore the HO policy would NOT respond to this loss.

The insured would have to sue the painter. (His CGL policy would exclude this loss under the PD to property in his care, custody and control exclusion.) The insured would have to recover from the personal assets of the painter


The painter was “playing” with the bellows and pulled too hard, ripping the bellows in half. What would the unendorsed policy pay?


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The unendorsed HO policy provides named peril coverage for Coverage C items.

“Pulling too hard and ripping” is not a named peril. There would be no coverage under the HO policy for this loss.


The insured would have to sue the painter. (His CGL policy would exclude this loss under the PD to property in his care, custody and control exclusion. ) The insured would have to recover from the personal assets of the painter.

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The roll top desk is in front on the living room window.

The window was left open and the lawn sprinkler was turned on.

All day long, water was “sprinklered” into the house and ruined the roll top desk.


What would the unendorsed policy pay?


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The unendorsed HO policy covers contents Coverage C on a named peril basis.

Water from the sprinkler entering the house during the day would not be a named peril and therefore there would be no coverage.


Bud and Irene’s house is flooded due to heavy Spring rains.

Much of their contents is ruined due to flooding including the bellows and roll top desk.

What would the unendorsed policy pay?


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Unendorsed HO policy does NOT cover flood or earthquake.

In order to cover flood losses, a flood policy is necessary


Suppose the HO 00 15 with HO-91 was attached to the HO-3 policy or the HO-5 was sold, would your answers to questions 1, 2, 3,4 be any different?

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Breakage only named perils for CERTAIN type of property

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Open perils contents

In addition to “normal” exclusions found in HO-3 for Coverage A/B… Coverage C has some additional exclusions

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Section I exclusionsStill apply

Water damage exclusion changed by “Katrina” endorsement –HO-91 and HO-2000 (HO-2011 built in)


The HO 00 15 and the HO-5 ComprehensivePolicy language covers losses on a “covered unless excludedbasis”.

Dropping is not excluded.

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“Breakage” is only restricted forcertain articles. The HO 00 15 and HO-5 would cover the damage done to the antique desk dropped by the painter, damage done to the bellows by the painter and sprinkler water damage done to the roll top desk.

Breaking, dropping, rain coming in open window is covered as not excluded.


The HO 00 15 and the HO-5 Comprehensive Policy language covers losses on a “covered unless excluded basis”.

The HO 00 15 or HO-5 will NOT cover flood damage to contents on insureds’ premises.

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Flood is excluded and therefore the HO-5 and HO 00 15 will NOT pay the floodloss to bellows and roll top desk.

Don’t count on Flood policy …Limits coverage for antiques, jewelry, furs to maximum of $2500


Is there any way to cover flood damage to these antiques … other than buying a flood policy?????

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Importance of appraisals and Antiques

Supposing there are NO appraisals on these items.

Irene and Bud have pictures and a video of these items.

If these items were stolen, how do you think the insurance carrier could respond?

Importance of appraisals and Antiques

There could be a SERIOUS problem in determining the value of these articles.

Pictures and videos cannot PROVE the “authenticity” of the articles. Reproductions cannot be detected by pictures or videos.

The insured MUST get true appraisals on the articles whether they schedule the items or not

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Scheduled Personal Property Floater

If these items are scheduled under the Scheduled Personal Property FloaterHO 04 61 and theHO 04 90, Replacement cost endorsement is

also on the policy,

would the above losses described in 2,3,4 be covered and under what payment basis?

Scheduled personal property floater HO 04 61

The HO 04 61 Scheduled Personal Property Floater covers the scheduled items on an “open peril” basis. There are fewerexclusions than under the HO 00 15/HO-5.

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The HO 04 61 WILL cover FLOOD damage and earthquake. (no exclusion)This endorsement would have covered the flood damage to the antique bellows and roll top desk.


More exclusions if fine arts

What IS a “fine art”?


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More exclusionsif fine arts

What IS a “fine art”?



The breakage limitation for various articles CAN be removed by paying an additional premium under this (HO 04 61 or HO 04 60) endorsement

where it could NOT be removed under the HO 00 15 or HO-5.

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Endorsement has own loss settlement provision

Separate from the HO policy


If the antiques are considered “fine arts” then the loss settlement provision will be on an “agreed value” basis.


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Agreed value is NOT PERFECT!!!!!

Agreed value setsA maximum limit

Of payment



If the antiques appreciate higher than the agreed value limit or the designated stated amount limit, then the insured will not be compensated for the full value of the antique.

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If the antiques are not considered fine arts, thenthere is a different loss settlement provision


loss settlement provision will be on an ACV basis subject to an overall “scheduled limit” stipulation. We pay the LEAST of …..

ACVRepairReplace (our

cost)Stated limit


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If one did NOT use the HO 04 61, then a covered loss under the unendorsed HO-3 or HO-5 or HO-3 with HO 00 15 would ONLY be subject to the overall Coverage C contents limit!


Going back replacement cost endorsement …Does it REALLY modify the HO 04 61 Scheduled Personal Property endorsement?

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HO 04 90 Personal Property Replacement Cost Loss Settlement endorsement states that for certain items you might schedule on the NON-agreed upon basis …

Then the option of ACV in the LEAST of discussion of (4) …is NOT applicable …

What does that mean?

Don’t get happy …

The endorsement still states it pays the LEAST Of:

Now instead of FOUR items

It will be 3

RepairOUR replacementStated limit

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What range of perils does the client need?Named perilsopen perilsSpecial endorsement perils

Loss settlement optionACVStated AmountAgreed Amount

Burden of proof on clientWhether schedule or not …NEED appraisalsNeed to update appraisals

What should we consider when insuring Antiques???

What range of perils does the client need?

Named perilsOpen perilsSpecial endorsement perils


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Loss settlement optionACVStated AmountAgreed Amount


Burden of proof on clientWhether schedule or not …NEED

appraisalsNeed to update appraisals


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Pianos, other musical instruments,paintings, expensive furniture …

All these are covered ….no special limit

HO-5 or (HO-3 + HO-15 in the HO-91 edition)

Could be “sufficient” for perils

Should Scheduled Personal Property Endorsement be used for high value articles???

Is your Coverage C limit sufficient????

With most voluntary carriers …when HO 04 90 Replacement Cost Loss Settlement Provision …usually increase Coverage C …from 50% to 70% ….

Is this enough for “regular” contents and high valued articles?


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If not …

Increase Coverage C …

Or Schedule certain high valued identifiable articles only ….


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Thank you for attending…

Are your clients prized possessions covered ..well

are your client’s prized possessions’...

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