Determining Coverage A on an HO Condo Policy

The Virtual University “Ask an Expert” service recently received the following question: “Can you provide a good rule of thumb for determining the unit owner’s coverage limit on an HO6? Most clients have no idea how to determine the limit they need. I recall attending a CIC seminar several years ago that provided a rule of thumb—I believe it was take 60% or 70% of the purchase price and use that as the limit. Can you tell me?”

This question has an answer, but not a simple, easy solution. The answer lies in who precisely owns what within the association and who is responsible for insuring what. This is often determined by a combination of state statutes, association bylaws and CC&Rs—and the policy forms themselves. Unfortunately, there is just no way around studying all of these documents in order to ascertain the responsibilities of all parties.

For a VU faculty discussion of this issue, click here.

Managing Townhouse, Condo Unit Owner’s Risk

A condominium or townhouse owner is much more likely to have major insurance gaps in his p-c insurance coverage than any other personal insurance policy.

There are several critical issues in managing this unique risk, including adequacy of Coverage A limits, need for broadened perils, measuring the loss assessment exposure, determining interior structural risk, discovering pertinent state laws and covering the master policy deductible.

For more information, including 11 steps to a well-constructed unit owner’s insurance program, click here.

Insuring Physical Damage on Employee Autos

The VU “Ask an Expert” service recently fielded the following question: “I have a client who wants to provide primary physical damage coverage to employees who use their own (employee-owned) vehicles for business purposes. My reaction is this can’t be done. However, in my effort to resist the constant temptation to quickly jump to the conclusion, I decided to research it.

“I traditionally put the CA 20 54 ‘Employee Hired Autos’ endorsement on my accounts. When I closely reviewed this endorsement again, I noticed language that states: ‘For Hired Auto Physical Damage Coverage, the following are deemed to be covered “autos” you own: 1. Any covered “auto” you lease, hire, rent or borrow; and….’

“This made me wonder if I have Symbol 8 for Physical Damage coverage and the CA 20 54 attached, does the CA 20 54 supersede the portion of the definition of Symbol 8 that restricts the employee’s owned auto from this coverage? I wouldn’t think so, but the CA 20 54 does say ‘any.’

“If this doesn’t accomplish the desired outcome, can physical damage coverage be provided on a primary basis to employee owned autos while being used on company business?”

The question of how (if at all) a business can provide physical damage coverage on an employee-owned auto being used by an employee on business is raised regularly.

As for the CA 20 54 endorsement, it wouldn’t have the effect that the language, on the surface, would appear to provide. The reason is that the language cited in the question above only modifies the “Other Insurance” provision in the BAP and Garage forms. It doesn’t affect the status of Covered Autos or any exclusions relating to that.

ISO has no way to extend physical damage coverage unless a company can be convinced to create a symbol using CA 99 54. The only other—probably unworkable— solution is for employees to technically lease their vehicles to the business and be covered under the BAP as leased autos. A better solution might be for the business to pay employees on a mileage basis or using some sort of stipend. A portion of that would go toward offsetting the cost of their physical damage coverage.

For more information,click here.

Bill Wilson (bill.wilson@iiaba.net) is Big “I” director of the Virtual University, an online learning center for agents and brokers.