Which of the following losses would be covered by an unendorsed homeowners policy?

20) Which of the following losses to a dwelling would be covered under an unendorsed Homeowners 3 policy?A) smoke damage resulting from agricultural operations of a neighboring farmer

B) damage to the structure caused by a flash floodC) damage to the structure caused by the weight of heavy snowD) damage to a floor caused by water backing up through a sewer pipe

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Definition

Homeowners Policy Special Form 3 (HO 3) — part of the Insurance Services Office, Inc. (ISO), homeowners forms portfolio, the HO 3 insures the described owner-occupied dwelling, private structures in connection with the dwelling, unscheduled personal property on and away from the premises, and loss of use. Personal liability coverage and medical payments coverage are also provided by this policy. Coverage of the dwelling, related structures, and scheduled personal property is on an all risks basis, while coverage of unscheduled personal property is on a broad named perils basis. Losses to the dwelling and other structures are paid on a replacement cost basis, with no deduction for depreciation if certain conditions apply. Losses to personal property are paid on an actual cash value (ACV) basis, unless amended by endorsement.

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Unscheduled jewelry items affected by coverage limitation

Q I have a client insured under an ISO Special Form 3 policy. Recently, my insured experienced a theft of about $6,000 worth of jewelry. The items were not scheduled as no one item exceeded $30 in value. The policy has an enhancement endorsement that increases the limit for theft of jewelry to $2,000 on a replacement cost basis. What happens to the additional loss my client suffered? Costume jewelry and any ornament for personal adornment including those made of base metals, glass, plastic, etc., have been included in the definition of jewelry. This means that my old decoder ring that came out of a cereal box is jewelry. How do we make a distinction between what is defined as jewelry and what is defined as personal property?

--MICHAEL MEINKE, Bache and Associates, Inc., Norwalk, OH

This question is answered by Diana Kowatch, CPCU, AU, AAM, CPIW, editor in chief of Technical and Educational Products for The Rough Notes Company.

A Section 1--Property Coverage, Coverage C of an unendorsed HO3 homeowners policy, states:

"We cover personal property owned or used by an 'insured' while it is anywhere in the world..." and

"Special Limits of Liability: These limits do not increase the Coverage C limit of liability. The special limit for each numbered category below is the total limit for each loss for all property in the category...

"5. $1,000 for loss by theft of jewelry, watches, furs, precious and semi-precious stones..."

What this means is that the maximum amount available under the unendorsed homeowners policy for theft of jewelry, watches, furs, precious and semi-precious stones is $1,000. After the total limit is reached, coverage ceases.

Next, let's look at the word jewelry. Jewelry is not defined in the policy itself, so it is necessary to determine what a reasonable person would use to define the word. Webster's dictionary defines jewelry as: "objects of precious metal often set with gems and worn for personal adornment," or "a personal ornament of precious stones, to adorn with jewels, to fit with a jewel, anything highly valued."

In the unendorsed Homeowners policy, jewelry (defined as personal adornment with precious metal, gems, jewels, highly valued) is limited to a maximum of $1,000. So there is a maximum and no coverage exists after that point. However, according to the definition, it would appear to apply only to highly-valued items or those containing precious metals or semi-precious stones which may be a point of debate for a number of items appearing on your list of stolen property.

So any personal items of adornment containing gold, silver, platinum, and/or precious or semi-precious stones, are limited to a maximum of $1,000. This category of property limited to $1,000 normally would include items such as gold or silver hoop earrings (precious metal), earrings or other jewelry with gold posts or clasps (precious metal), opal, topaz, or amethyst necklaces or pins (semi-precious stone--whether or not the chain/pin is gold or gold-plated), etc., regardless of the final value. All watches would appear to fall into this category of limited property as no other description or wording is included.

Now we must look at what the enhancement endorsement does to the HO3 and what type of definitions, coverage, and limitations the "enhancement" provides. The particular endorsement in use is company-specific and adds or increases a number of coverages. Looking only for its effect on jewelry, it first increases the limit on jewelry to $2,000 instead of $1,000:

"Under Coverage C--Personal Property, the section entitled 'Special Limits of Liability' is deleted and replaced by:...5. $2,000 for loss by theft of jewelry, watches, furs, precious and semi-precious stones."

Next, if either policy HO 00 03 with HO 00 15 or policy HO 00 06 with HO 17 31 is used, the coverage is changed as follows:

"$2,000 for loss by theft, misplacing or losing of jewelry, watches, furs, precious and semi-precious stones."

So, not only is the limit increased, but the causes of loss for this coverage are broadened when either of the two mentioned policies is used.

The term jewelry is still not defined in the policy.

It appears that in this situation, any of the insured's jewelry that contained gold, silver or other precious metal or precious or semi-precious stones, or a watch would be limited to the $2,000 maximum. Once that is reached, no other coverage would exist. The remainder of the items would most likely be considered personal property of the insured as they do not fall into the category a reasonable person would consider "jewelry" by common definition. As such, they should not be limited.

To further elaborate, the following court case, while a few years old, supports the commonly understood dictionary definition of "jewelry."

The Texas Standard Homeowners policy carried by an insured contained the following exclusion applicable to unscheduled personal property coverage: "...does not cover...loss in excess of $500 (in any one loss) of gems, watches, jewelry or furs..." The term jewelry was not defined in the policy.

The insured's home was burglarized and among items of value that were taken were seven Indian belts and four bolo ties. Most were quite old, made of leather, and decorated with turquoise stones and silver. The insured was an active collector of Indian artifacts for 30 years and was an authority on the subject, having been a member of a museum committee charged with locating and acquiring Indian artifacts of museum quality for the museum. A lawsuit followed with the insurance company's contention that the belts and ties were jewelry, which was subject to the standard $500 theft limitation.

Expert witnesses offered conflicting testimony. A collector and trader of Indian artifacts for more than 50 years testified that he considered such belts as clothing and that "neither Indians nor other traders referred to them as jewelry." He considered a bolo tie to be an item of men's wear and saw no reason to classify it as jewelry. On the other hand, a professor emeritus in anthropology at a major southwestern university, and an author of numerous articles and books about Indian art, expressed the opinion that "the concha belt (the proper identification in question) and all bolo ties are always considered as objects of adornment, pieces of jewelry." She declined to say that all decorated belts and buckles were jewelry. It would depend on how decorated they were.

The trial court ruled that the word "jewelry" as used in the policy was ambiguous as a matter of law when applied to the facts of the case and should be construed against the insurance company. It refused the insurer's request for determination as to whether each item was or was not jewelry and rendered judgment decreeing that the insurer pay the insured $4,825. The insurer appealed.

As the policy did not define "jewelry," the court said that the ordinary lay meaning was applicable and noted that the parties did not differ on the definition, both accepting dictionary definitions. It concluded that there was no uncertainty about the proper meaning of the word and it was, therefore, not ambiguous. "The uncertainty is created, not from the meaning of the word, but by the application of the meaning to the described belts and ties." The adverse parties offered reasonable and conflicting evidence bearing on the issue whether the items are or are not jewelry.

The appeals court ruled that the trial court erred in directing a verdict and in refusing to submit for determination whether or not each item in question was or was not jewelry. The trial court judgment was reversed and the cause remanded.

(The Standard Fire Insurance Company, Appellant v. Griggs, Apellee. Texas Court of Civil appeals for the Seventh Supreme Judicial District at Amarillo. No 8898. May 22, 1978. CCH 1978 Fire and Casualty Cases 970.)

Editor's note: After receiving this answer to the question, along with his own research into the definition of jewelry, Michael Meinke was able to justify to the insurance company more monetary compensation for his insured. The insurance company, according to Meinke, "loosened their definition of jewelry," and reimbursed the insured for barrettes and non-collectible figurines which were initially lumped under the category of "jewelry." *

Which of the following would not be covered by an unendorsed homeowners policy?

Which of the following losses would not be covered by a homeowners policy?

Which of the following losses would be covered by a Ho 3 policy?

Which of the following are covered by a homeowners policy?