Keep your clients in the clear with these helpful lessons pulled directly from our case files
Even in good times, policy exclusions can test a relationship with a client. In tougher times, unforeseen exclusions can wreak havoc on an insured’s business and impede their ability to repair property damage, pay medical fees or adequately protect their assets.
Here Amanda N. Ruppel, Personal Insurance Manager, Burns & Wilcox and Melanie M. Elias, Corporate Associate Vice-President, Director of Claims, Minuteman Adjusters, examine several scenarios to highlight best practices and some common pitfalls in the policy creation process in order to help brokers and agents keep their clients on-track:
Successes
High-value vacant dwelling coverage:
A high-value secondary residence stood vacant while it was on the market for sale. As a lakefront residence, there were additional loss concerns, both property and casualty related, as coastline properties are more susceptible to damage from wind and water.
The insured’s prior standard market coverage had lapsed, creating a void in coverage but the broker was surprised to learn that Burns & Wilcox was able to provide a solution. By working together, the broker successfully secured Vacant Property Coverage, including Contents Coverage and Premises-Only Liability Coverage. As a result, the insured’s property was protected during its transition to new ownership.
The lesson:
With a change of occupancy, the insured usually experiences a lapse in insurance, which makes it difficult to place coverage so it is key to partner with a wholesaler who has access to the correct Excess and Surplus markets.
High-value dwelling, short-term rental to others:
The insured rented out their corporately owned high-value property with a TIV of over $10M for approximately eight weeks per year. The remainder of the year the home stood vacant. The protections on the home — interior sprinklers, monitors for fire and burglary, automatic water shut-off valves, proper brush clearance and more — made it favorable to consider coverage. Even with those protections there remained an increased risk of damage or injury to others as the property was unoccupied for such a large portion of the year.
Based on his comfort level and previous experience with commercial accounts, the broker assumed the insurance risk should be placed on a commercial form due to the ownership. After exploring various opportunities, the broker discovered a proposal through the personal lines market offering diverse endorsement options, customized solutions, and more protection for the risk. The casualty portion of the account was then handled via a partnership with Burns & Wilcox Brokerage. Together the Burns & Wilcox personal insurance department and Burns & Wilcox Brokerage approached their markets to offer Vacant Dwelling Coverage, as well as General Liability to the insured.
The lesson:
When dealing with homeowner policies with partial secondary occupancies, take the time to assess what type of vacant dwelling coverage (personal
or commercial) is needed to limit the client’s financial risk when the property was not being occupied.
Home renovations/builders risk:
The insured owned an existing structure valued at approximately $1.2 million and had planned to conduct a $500,000 renovation. The risk of property damage during the renovation was a significant concern for both the insured and the contractor, as any damage could result in severe, unexpected costs which would delay the building process or halt it entirely.
Coverage for renovation projects can be more difficult to place once the construction project has begun, as it’s considered “tail-end construction.” Luckily, the broker presented this risk to the underwriting partner prior to the start of renovations and Builders Risk coverage was successfully secured through Burns & Wilcox. As a result, both the homeowner and the contractor were protected in the event of unexpected property damage.
The lesson:
Highlight renovation risks before a project has begun to ensure all relevant parties are properly protected.
Cautionary Tales
High-value vacant dwelling coverage:
The insured purchased a secondary vacation home that they anticipated would remain unoccupied for most of the year. As a secondary home, the buyer assumed that the property would not require much ongoing maintenance and attention and obtained a basic named peril policy to protect their investment.
However, unoccupied buildings are at a greater risk of being damaged or causing injury because they are unmonitored. When the pipes froze and burst during some unseasonably cold weather, the insured was left financially responsible for repairing the home without any assistance from their insurance policy because generally water damage is not covered as a named peril.
The lesson:
Vacant Dwelling Coverage can help ensure this situation does not happen to your client because Burns & Wilcox analyzes all components of both the property and liability exposures.
High-value dwelling, short-term rental to others:
The insured owned a high-value income property as an investment that was protected by a basic homeowner’s insurance policy. However, because it was never confirmed that the tenant carried proper insurance coverage or that the property owner was named as the primary insured, when a guest injured himself during a visit, liability fell to the owner.
The lesson:
A property owner can be held personally liable for injuries to tenants, their visitors or for any accidental damage to their property. Ensure your client has confirmation that tenants have the appropriate coverage in place before moving forward with a rental agreement.
“Brokers and agents must initiate a probing conversation with their client to accurately determine the level and type of coverage needed. Without this conversation the client can be left underinsured.” — Melanie M. Elias
Home renovations/builders risk:
The insured was conducting home renovations and engaged a family member instead of a professional skilled contractor to complete some welding work. During the project, a spark from the torch led to a fire, resulting in substantial damage to the home.
Unfortunately, the insured had not notified their broker prior to starting construction on the renovation project so they were unaware that their policy contained a renovation exclusion clause. Additionally, the family member did not possess the appropriate contractors or builders risk insurance. As a result, the insured was left financially responsible for repairing the damage caused by the fire.
The lesson:
Remind clients that when renovating, all parties, including homeowners and contractors, should carry the appropriate coverage.
