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Monthly Archives: December 2011

Let it Snow..Let if Snow..Let it Snow

Skier carving a turn off piste

Image via Wikipedia

Let’s talk skiing and insurance.

As we ring in the New Year most of us will head back to a busy office and try to finish up our January 1 renewals. Others of us will head off to a ski resort to enjoy the slopes and packed powder. Which brings us the Community’s New Years Topic about the dangers of the slopes and how to insure them.

I started skiing later in life so I still have the fear of being wiped out on the hill. I am not fearful of my own skiing, as I am a controlled non risk taking sort. It is all those crazy skiers, or often, snowboarders coming down the hills at an uncontrolled speed. There is no worse sound then a snow boarder skidding across ice behind you which gives you just enough time to turn your head and feel the impact of the collision. For those of you that have had this happen you know the next thing that happens is that the skier/snowboarder quickly gets up and speeds right by you. And that is why you never ski alone—you need someone fast on their skis to catch the assailant, find their parents (they always seem to be fun-loving young adults usually on winter break) and verify the liability limit on their Homeowners Policy. Or more, correctly stated, their parent’s Homeowners Policy. This is when we put the policy to its real test in terms of who is an “insured” and what the limits are on the policy.

While all sports have their risk of injury; according to data from the Consumer Product Safety Commission‘s (CPSC) National Electronic Injury Surveillance System (NEISS), in 2007-2008 alone there were 101,111 ski related injuries in the US. Statistically most ski accidents happen due to the carelessness of the skier themselves. Other accidents can be due to conditions on the mountain (even avalanche); breakdown of machinery/equipment on the hill such as lifts and equipment failure such as faulty skis. The insurance issues relating to skiing often involve unique legal issues and involve several different parties that could be responsible for loss and damages.

Many states have instituted a Ski Safety Act that defines, and in most cases, limits the responsibility of the ski resort operators themselves. The laws recognize that there are inherent risks in the sport of skiing/snowboarding, which should be understood by each skier and which are essentially impossible to eliminate by the ski area operator. It is the purpose of the Ski Safety Act to define those areas of responsibility and affirmative acts for which ski area operators shall be liable for loss, damage or injury and those risks which the skier or passenger expressly assumes and for which there can be no recovery. Examples of states with the act include Colorado; Michigan, Massachusetts; New Mexico, Washington; Alaska and North Carolina. With so many ski resorts in California there is no Ski Safety Law on the books. In fact in October 2010, California Gov. Arnold Schwarzenegger vetoed AB 1652 sponsored by the California Ski and Snowboard Safety Organization. This bill would have established California as a national leader in ski safety. The bill promoted safety by requiring better signage, accident and injury reporting and mandatory helmet use for children. The various laws are specific to the various states but do have a commonality is some of their language. What follows is an excerpt taken from Colorado Ski Safety At section 33-44-109. Some of the responsibilities listed include:

1. A skier’s responsibility for knowing the range of his own ability
2. Skier’s acceptance of the legal responsibility for any injury to person or property resulting from any inherent dangers and risks of skiing
3. The duty to maintain control of his speed and course at all times
4. The requirement that a skier stay clear of snow-grooming equipment, lift towers, etc
5. The responsibility for each skier to heed all posted information and warning and not go out-of-bounds.

FEBRUARY 22, 2010 Out of Bounds Skiers Are Threat to Others The new snow this weekend tempted two skiers at Aspen Highlands to duck a rope and head into out-of-bounds territory. They were spotted by a ski patroller who followed the pair. An avalanche was triggered by the skiers and partially buried the ski patroller. The patroller extricated himself from the slide Sunday and wasn’t hurt. The skiers left, and resort officials weren’t able to find them. Those that duck ropes and ignore ski area rules put others in harm’s way. http://www.skisafety-blog.com

6. Requirement that each ski or snowboard used while skiing to be equipped with a strap or other device able of stopping the ski or snowboard should the ski or snowboard become unattached from the skier One of the most important items, in my opinion, is the skier’s responsibility if they injure anyone on the hill. The Colorado statute states:

7. “No skier involved in a collision with another skier or person in which an injury results shall leave the vicinity of the collision before giving his or her name and current address to an employee of the ski area operator or a member of the ski patrol, except for the purpose of securing aid for a person injured in the collision; in which event the person so leaving the scene of the collision shall give his or her name and current address as required by this subsection (10) after securing such aid.” For a complete listing of Ski Safety Acts by state refer to http://www.skilaw.com/skistatelaw.html.

Clearly all of these laws attempt to hold an individual responsible and limit the liability of ski resorts and operators. There is still the absolute requirement that a ski resort carry liability limits that are adequate as well as an Umbrella Policy to provide protection for any claims for negligence resulting in Bodily Injury or Property Damage.

Then there are the more peculiar losses that a resort might sustain which are often the most difficult to insure and quantify. These are losses such as bad snow conditions resulting in too much snow; too little snow; or closures in the area due to weather curtailing traffic into the resort. All of these situations can result in a loss of business income to the resort in a business environment that cannot easily afford any additional financial loss. Standard Business Income policies do not respond to a loss of income due to snow conditions. In order for a typical Business Income Policy to respond there would have to be damage to property by a peril insured against and as a result the insured would have to demonstrate they were losing income. Clearly the test has not been met for “weather” or lack of “weather “as the causation of a loss of income.

The only solution to the issue of weather related income losses would be to approach a company specializing in Weather Risk products. Weather Risk products for lack of snowfall have existed for years now and, depending on the provider, the coverage may be offered as an insurance policy or a derivative. Cost may be a factor as weather derivatives can prove to be an expensive solution.. One company that provides weather insurance to a wide variety of weather sensitive businesses is Weatherbill. According to a press release in Business Wire November 15, 2010 “WeatherBill Becomes First Insurance Company Focused Exclusively on Protecting Businesses against Financial Impact of Climate Change” WeatherBill uses a technology-enhanced approach to automatically create customized weather insurance plans that reflect each policy holder’s unique needs to mitigate weather-related financial loss. Jeff Hamlin, Director of Product marketing for WeatherBill and a member of the Insurance Community Center shed some light on the challenges in providing Weather insurance for ski resorts.

Jeff stated: “It is difficult to write insurance for many of these resorts because we lack the necessary data to calculate the probabilities of a ‘low’ snowfall year. Most resorts want to guarantee that they will get a certain number of inches of snow in the weeks leading up to Christmas week or Presidents Day weekend (since these are the weeks that make or break the financial year for many ski resorts). But unfortunately snowfall is not measured by any independent third-party sources at these locations. We often have snowfall data for another location somewhere in the area, but ski resorts are located in the locations where they are located precisely because those locations tend to be snowier than the surrounding areas. So a snowfall report from a location that is 10 miles away from the resort with a 1,000 foot elevation change can have a very low correlation with what actually falls at the resort. Part of this problem could be solved by installing a new third-party weather station at the resort to monitor snowfall. That would at least allow us to know how much snow fell this year to allow us to settle claims. But it wouldn’t solve the rating problem. If we don’t have historical data about how much snow has fallen at that specific location in the past, we don’t know what the loss ratio might be and can’t rate the risk.

These problems are a bit easier to solve for some East Coast and Midwestern ski resorts that don’t rely on natural snow, but instead rely on snow making. These resorts just want a guarantee that they won’t have a stretch of warm weather leading into the Christmas or Presidents Day weeks. If the weather is cold enough, they can keep snow on the mountain and keep making more of it. But if temperatures get too warm, they have snow problems. There is reliable temperature data for most of these locations and can provide protection against unusual mild weather that comes at the wrong time and affects holiday ski revenues at these resorts. And some resorts in Minnesota, Wisconsin and Michigan actually look for the opposite. They want protection against the possibility that Christmas week or President’s Day week will overlap with a stretch of days when temperatures are too cold. They know that if the day time highs are below zero, many people will say it is too cold to go skiing and just stay home. So we also protect ski resorts against untimely bitter-cold weather that keeps skiers away from the resorts.“

So next time you pack up your skis to head to the slopes, I suggest you check the weather. Snow reports are available on several websites. If rain is your concern, for example when planning a golf outing to Ireland, WeatherBill now has a site at http://www.raincheck.com where you can purchase an insurance policy for vacation days that are ruined by too much rain. When all is said and done, maybe it’s safer to head back to the office and finish those January 1 renewals. At least you won’t be in harm’s way. All of us in the Community wish you a happy and healthy New Year.

~Laurie

 

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Planning for 2012 – Let’s Talk About You!

Everyone, including me, has been writing articles about how to plan for 2012.

English: Fireworks over Copenhagen the night b...

We have told you how to select your carriers, products and markets. How to improve sales by choosing your best target markets and how to study your numbers. All these are important. What we have not done is focus on the single most important factor in the Success Equation – You.

I have given several talks recently where I point out that most agents believe the single most important factor in why clients buy is price competition. When you survey the clients themselves you find that to your insurance buyer the single most important factor in their buying decision is their relationship with the agent. Quite a stark difference. If you go another step deeper into what is the single most important factor in why client choose the agent they do, the answer is the agents KNOWLEDGE. Knowledge of the clients industry; knowledge of the client’s business needs and knowledge of insurance, in that order.

A Profession is defined as an occupation requiring the mastery of a complex body of knowledge and specialized skills through a combination of formal education and practical experience, with its primary orientation to the community interest rather than to individual self-interest, and having a code of ethics. We in the insurance industry must commit to our profession.

I then talk about the difference between Education and Qualification.

All of us who are licensed are qualified under the law but we may not be educated to properly handle our clients’ needs.  To help you understand the difference let’s talk about your prospective client. Would it be smart to go into your client’s office and state “I have an insurance license and here is your price.” At a very base level every agents that goes into your clients office has this same qualification, it is the expected minimum level to even talk to clients, therefore there is no differentiation in the knowledge you bring to the table. What I am asking you to do in 2012 is to look at your capabilities and make a plan for improvement, a plan to differentiate yourself.

Think about it this way we all plan to gain our CE credits to continue being qualified, what are you going to do, in addition, to become more educated. It’s time to talk about Professional Development in 2012.

I guess this leads directly to the question, what should I study? Here are the broad strokes.

1. What do your clients want you to do?
2. What do your clients need you to do?
3. What can I learn to understand business?
4. What can I learn to improve myself?

Once you struggle to answer these questions, you need to outline a timetable and process for completion.

1. Join –  www.insurancecommunityuniversity.com
2. Plan – Plan out your year educational classes and get them on your schedule, Now.
3. Read – get in the habit of reading every day. Read about your industry and Profession. Magazines, websites, journal articles etc. Set aside 30 minutes every day to read.
4. Listen – If you don’t like to read, you may well be a person who learns best by listening. Find websites that have information available through webinars or podcasts. This is a great way to get broad business knowledge. Often times you will listen to a webinar that will present information that one or more of your clients can benefit from send it to them via email.
5. Partner – Often you will not know how to do something, don’t be afraid to join forces with someone that might be an expert, split commissions, and learn from the best. That commission split could be the cheapest education you ever receive.
6. Join Groups – You can learn an enormous amount of information about an industry by joining Special Interest Groups on LinkedIn or an industry specific site. Many industries have onsite meetings, go, join in and listen to the discussions. You will begin to gain an understanding of your clients real needs, much more broadly than just insurance. Remember clients want you to have knowledge of their industry.
7. Combine – Use more than one of these approaches.

“We spend January 1 walking through our lives, room by room, drawing

up a list of work to be done, cracks to be patched. Maybe this year, to balance the list, we ought to walk through the rooms of our lives… not looking for flaws, but for potential.” By Ellen Goodman

I wish you all a prosperous New Year and believe if you create a Professional Development Plan you will get there.
Please join us on the Community for our free webinars you can register right on the Community site.www.insurancecommunitycenter.com

 

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You Could be Held Responsible Under “Social Host Liability”

Dinner party at a Mandarin's house.

Image via Wikipedia

Having a Holiday Party?

Having the Whole family over for Christmas Eve Dinner? You could be held responsible under “Social Host Liability”.

I do not want to be the Grinch of Christmas but we don’t want our Christmas surprise to come in the form of a lawsuit. Most of us are aware of business’s legal requirements to stop serving alcohol to people who are visibly intoxicated. This is especially true for those insureds in the business of serving alcohol. What we are not as aware of is the liability we assume by serving liquor in a social setting referred to as “social host” liability. Or when a business is NOT in the business of serving liquor but does so occasionally or incidentally which is referred to as host liquor liability.

Let’s deal first with “social host” liquor liability. We become a social host whenever we are hosting an event that serves liquor be it a dinner party for another couple or putting on a wedding in our backyard. Examples of “social host” liability could be cases where our guest gets intoxicated and hurts themselves or causes injury to others; or the situation where our guest leaves our party and is involved in an accident as a drunk driver. Or, it could be a guest that leaves your party and is stopped and ticketed for drunk driving. I know you might be thinking “my friend…my brother in law would never sue me”. Surprise! They will.

State laws differ as relates “social host” liability and not all states recognize social host liability. However there are some guidelines as to when a host serving liquor can be held liable:
-The host did, in fact, provide or serve liquor to the individual in question
-The individual was intoxicated and caused either bodily injury or property damage to a third-party
-The host was aware or “should have been aware” that their guest was intoxicated

We cannot have this discussion without broaching the topic of parents who provide alcohol to minors in their homes—who become “social hosts” to under aged people. It may be that they do not serve the liquor to the minors but make it available or they allow alcohol to be brought in their home by their children’s friends. Some parents use a thought process that goes something like this: I would rather my child drink at home than attend a party and either drive home drunk or ride with someone who has been drinking. And here is the flaw in that thought process while you think you are providing a safe haven to your child, your friend’s parents may not share your same philosophy and, in fact, you have contributed to the delinquency of a minor. If that child gets hurt or hurts others and you contributed to that harm by providing alcohol, you will be named in the ensuing lawsuit and you may find yourself being held liable. And where’s the coverage to protect you, the loving parent, for the lawsuit? The Homeowners Policy? The Umbrella Policy? And the answer is check the policy. While the Homeowner’s Policy may not have a specific liquor exclusion, most policies will have an “expected or intended injury exclusion”.

The ISO 2000 edition says the following:
E.1. Expected or Intended Injury “Bodily injury” or “property damage” which is expected or intended by an “insured” even if the resulting “bodily injury” or “property damage”:

a. Is of a different kind, quality or degree than initially expected or      intended; or
b. Is sustained by a different person, entity, real or personal property, than initially expected or intended.

Could this exclusion be broad enough to remove coverage for the parents? Perhaps it could. Could you then look to the Personal Umbrella? Better read the form. Some forms have a liquor exclusion that applies when serving liquor to a minor.

Let’s talk for a moment about a business that occasionally or incidentally serves liquor. The Christmas season is the perfect time for this discussion. We go to our hairdressers and they offer us a glass of wine, or eggnog with a little bourbon. The office that decides rather than taking everyone to an expensive restaurant will have pizza and beer brought into the office for the big celebration. Is there coverage on the Commercial General Liability Policy for the liability of the business in these situations? Are these businesses in the “business of serving liquor”? The CGL provides automatic coverage as the exclusion only applies if the named insured is the business of manufacturing, selling, serving or furnishing alcoholic beverages. The result of this language is that a business typically has coverage for these “social” situations involving liquor.

~Laurie

 
 

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She was drunk at her Junior High Dance. Who gave her the liquor?

This weekend I had a friend, Amanda, visit for a couple of days.  Within hours of arriving she got a call from her daughter’s school saying she (her 15 year old daughter) had to be picked up immediately because she and her friends had been drinking. The drama unfolded with her being picked up, suspended for at least a day and hopefully being an indentured servant at her home for an unlimited time frame.  But the question Amanda kept asking in heated tone was “where did you get the liquor”.  Finally, after escalating threats, the daughter admitted to getting the liquor from her friend’s parent’s home with whom she was spending the night.  Lucky in this case there were not any injuries—no one getting behind a wheel intoxicated—but, it could have happened and what then.

English: several liquor bottles Deutsch: einig...

As we look at the holiday season and the parties we give and attend (and those our children are attending) we have to revisit our treatment of this issue from our last holiday newsletter which discussed “Social Host Liquor Liability”.

Most of us are aware of business’s legal requirements to stop serving alcohol to people that are visibly intoxicated. This is especially true for those insureds in the business of serving alcohol. What we are not as aware of is the liability we assume by serving liquor in a social setting referred to as “social host” liability.

We cannot have this discussion without broaching the topic of parents who actually provide alcohol to minors in their homes—who become “social hosts” to under aged people. It may be that they do not serve the liquor to the minors but make it available or they allow alcohol to be brought in their home by their children’s friends. Some parents use a thought process that goes something like this: I would rather my child drink at home than attend a party and either drive home drunk or ride with someone who has been drinking. And here is the flaw in that thought process while you think you are providing a safe haven to your child, your friend’s parents may not share your same philosophy and, in fact, you have contributed to the delinquency of a minor. If that child gets hurt or hurts others and you contributed to that harm by providing alcohol, you will be named in the ensuing lawsuit and you may find yourself being held liable.

This brings us to the discussion of “social host” liquor liability. We become a social host whenever we are hosting an event that serves liquor be it a dinner party for another couple or putting on a wedding in our backyard. Examples of “social host” liability could be cases where our guest gets intoxicated and hurts themselves or causes injury to others; or the situation where our guest leaves our party and is involved in an accident as a drunk driver. Or, it could be a guest that leaves your party and is stopped and ticketed for drunk driving. I know you might be thinking “my friend…my brother in law would never sue me”. Surprise!

They will.

State laws differ as relates “social host” liability and not all states recognize social host liability. However there are some guidelines as to when a host serving liquor can be held liable:

-The host did, in fact, provide or serve liquor to the individual in question
-The individual was intoxicated and caused either bodily injury or property damage to a third party
-The host was aware or “should have been aware” that their guest was intoxicated
And now to the question of insurance when you are sued as a result of someone becoming intoxicated in your home and incurring or causing damage be it bodily injury or property damage.  The Homeowners Policy?  The Umbrella Policy? The answer is a “probably” yes but as always you have to check the policy.  While the Homeowner’s Policy may not have a specific liquor exclusion, most policies will have an “expected or intended injury exclusion” that the claims adjuster may or may not want to pursue. Whenever we talk about limits on a policy, these are specifically the type of situations that can take that $300,000 limit trying to respond to a $1,000,000 judgment.

The ISO 2000 edition says the following:

E.1. Expected or Intended Injury “Bodily injury” or “property damage” which is expected or intended by an “insured” even if the resulting “bodily injury” or “property damage”:
a. Is of a different kind, quality or degree than initially expected or      intended; or
b. Is sustained by a different person, entity, real or personal property, than initially expected or intended.
Could this exclusion be broad enough to remove coverage for the parents? Perhaps it could. Could you then look to the Personal Umbrella? Better read the form. Some forms have a liquor exclusion that applies when serving liquor to a minor.

Let’s talk for a moment about a business that occasionally or incidentally serves liquor. The Christmas season is the perfect time for this discussion. We go to our hairdressers and they offer us a glass of wine, or eggnog with a little bourbon. The office that decides rather than taking everyone to an expensive restaurant will have pizza and beer brought into the office for the big celebration. Is there coverage on the Commercial General Liability Policy for the liability of the business in these situations? Are these businesses in the “business of serving liquor”? The CGL provides automatic coverage as the exclusion only applies if the named insured is the business of manufacturing, selling, serving or furnishing alcoholic beverages. The result of this language is that a business typically has coverage for these “social” situations involving liquor.

 

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A Bit of Holiday Cheer

The holidays are supposed to be all about family fun and, of course, eating and drinking too much.

That’s how it all began at our family Thanksgiving dinner at my sister’s

English: Thanksgiving cheer distributed for me...

It all began with the turkey that was undercooked and put back in the oven.  The aluminum foil caught on fire and smoke filled the room.  The insurance person I am screamed out “covered, subject to your deductible”.house but it ended up as five separate insurance claims in a span of five hours.  A claim an hour—not bad!

Next, the turkey was taken out of the oven and put on the kitchen counter right as the light socket in the soffit above started pouring out water on the now overcooked turkey.  Apparently one of the guests had used an upstairs bathroom that overflowed causing the water that went on the floor to leak through the ceiling.  Again, I screamed out “covered, subject to your deductible”.

We sat down to dinner without further incident and then after dinner went to the living room to play our traditional game of Taboo.  As we all stood up after the game one of the guests spilled her glass of red one on my sister’s white carpeting.  Again , I screamed out “covered, subject to your deductible” however find out who did that because it’s covered on their liability policy.

Next, as I was passing by the entrance hall table where a flower arrangement with two candles my son brought as a gift was placed, the candles had burnt down and the arrangement was catching on fire.  This one we caught in time and immediately put it in the sink.  Beware the arrangements you get with candles in them.

I decided to leave the premises to the safety of our hotel.  I called my sister to thank her for the evening and she said it was not over yet.  After we left, the pipe broke under the sink broke and the kitchen floor was flooded. I again reminded her covered, subject to her deductible”.

The next day at her house she became the proud owner of a new toilet upstairs and shiny new pipes under her sink. The soot on the walls had been cleaned up and they actually were able to get most of the red wine out of the carpeting.  A good ending, I guess but we have decided to do Christmas Eve at our house.  I hope your holidays are less eventful!

Laurie Infantino, AFIS, CISC, CIC, ACSR, CISR, CRIS
President of Insurance Community Center

 

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Frozen Turkey Thrown by Teenager Causes Severe Damage to Passenger and Vehicle

I saw the story on TV recently and my first thought was thank goodness this was not my son who threw the turkey.

It is only because he had other mischievous plots in mind. The incident occurred on Long Island in Lake Ronkonkoma  on November 13, 2004.  The injured woman has just published a book on the accident titled, No Room for Vengeance, and has been featured on several talk shows. FOX News said the release of Ruvolo’s book comes just after a similar shocking story made news around the country, in which Manhattan mother Marion Hedges was severely injured after kids pushed a shopping cart off of a fourth floor walkway onto the ground below. It landed on Hedges.

English: Turkey (bird)

The accident that injured Victoria Ruvolo occurred when a 20 pound turkey was thrown out of a moving car and smashed into her windshield. The driver was struck and immediately lost consciousness.  Were it not for her friend, in the passenger seat, leaning over and grabbing the steering wheel, who knows how many people might have been killed. Ruvolo sustained serious injuries and required hospitalization for three months.
Police say they had pictures of the assailants, five teenagers caught on store surveillance tape buying the turkey at a supermarket.  They bought the turkey with a stolen credit card. This was a somewhat unique set of circumstances. The driver was 19 years old.  Too often these crimes go un-solved as people throw items from freeway overpasses, shot paint bombs or spray paint from guns blinding passengers and other such mischief.

This case was different, the five teenagers were arrested.  The driver was arrested on charges of first-degree assault, reckless endangerment, forgery, criminal mischief and criminal possession of stolen property.  The four other teenagers were charged with criminal possession of stolen property. A wonderful side note to this story is that Victoria received the Most Inspiring Person of 2005 from BeliefNet because of her appealing to the judge to NOT send the assailant away to serve a 20 year sentence. She insisted on offering him a plea deal. Cushing could serve six months in the county jail and be on probation for five years if he pleaded guilty to second-degree assault.

Now to the question of the hour—is this covered by insurance.  We might try looking at the Homeowners Policy first but will not find coverage there for a loss that occurs from the ownership of usage of a vehicle.  So now we look at the Personal Auto Policy and surprise—surprise.  The policy states:
We do not provide Liability Coverage for any “insured”:
1.  Who intentionally causes “bodily injury” or “property damage”.

The question will be did they “intend” to hurt someone by throwing the turkey or did they just throw the turkey as a prank.  Courts will look very strongly at the “intent” of the act and in most cases will determine that it was not an “intentional” bodily injury.  Clearly if the PAP responds in the manner we will look to our umbrella for excess limits.  What is interesting is that the PAP appears to have a much broader response then the most current edition dates on the Homeowners Policy.  Here is an example of the language the ISO 2000 edition contains:
E.1. Expected or Intended Injury “Bodily injury” or “property damage” which is expected or intended by an “insured” even if the resulting “bodily injury” or “property damage”:
a. Is of a different kind, quality or degree than initially expected or      intended; or
b. Is sustained by a different person, entity, real or personal property, than initially expected or intended.

 

Written By:

Laurie Infantino, AFIS, CISC, CIC, ACSR, CISR, CRIS
President of Insurance Community Center

 

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Tennessee Family Home Burns While Firefighters Watch

fire - onlookers

“A Tennessee couple helplessly watched their home burn to the ground, along with all of their possessions, because they did not pay a $75.00 annual fee to the local fire department.”

Vicky Bell called 911 when her home in Obion County caught fire.  Firefighters arrived on the scene but as the fire raged, they simply stood by and did nothing. South Fulton Mayor David Crocker defended the fire department, saying that if firefighters responded to non-subscribers, no one would have an incentive to pay the fee. Residents in the city of South Fulton receive the service automatically, but it is not extended to those living in the greater county-wide area.”http://news.yahoo.com/blogs/sideshow/tennessee-family-home-burns-while-firefighters-watch-191241763.html

What is even more interesting about this claim is that, the South Fulton Fire Department made national news last year after they refused to put out a house fire due to an unpaid fire subscription fee in the same county.  In that case the homeowner had forgotten to pay his subscription.

The city’s mayor told the news station that the fire department can’t survive without the fees and if they make exceptions to the rule, homeowners would not pay the fee. “There’s no way to go to every fire and keep up the manpower, the equipment, and just the funding for the fire department,” Mayor David Crocker said, adding that after last year’s fire, everyone should be aware of the city’s policy. I know what you are thinking, and I certainly had the same thought—“ I can not believe that the fire department just stood there and let the home burn”.  But it is true and has been for some time.

There is a policy is on file for each of the counties relating the requirement and cost to pay for the fire department to respond to a fire. .  In researching another case, in Yuma, Arizona I referenced the site https://www.ruralmetrofire.com/yuma-county-home.html  which provides specific information as to the areas that are subject to a fire subscription charge and what that charge is annually.  Residents in these unincorporated areas should be well aware of the requirement to pay for the subscription at the point they buy their property and are billed annually for the fee.

Until the reality of a loss like this occurs we never seriously question what it means when a dwelling or structure is located outside of the city limits—in counties that have to pay for fire subscriptions.  This term sometimes is referred to as “Pay for Spray” or even “Pray for Spray”.

Now we turn to the question of whether the couple’s insurance policy would pay– assuming they had carried the coverage.  On many occasions I have heard the argument from homeowners who are required to pay a fire department fee that they were not going to pay the fire subscription because they have insurance which will pay for the loss.  Sometimes it is an oversight, as in the example cited above, but sometimes the homeowner is willingly not paying the fee.

Now to the question of “covered not covered” on insurance. Some of you might be immediately thinking about the “fire department service charge” that is included in many policies for a sub-limit of maybe $500, $1,000 or $2,500. Here is what that paragraph says in the 5/11 edition date of the ISO Homeowners form HO 0003.

4. Fire Department Service Charge

We will pay up to $500 for your liability assumed by contract or agreement for fire department charges incurred when the fire department is called to save or protect covered property from a Peril Insured Against. We do not cover fire department service charges if the property is located within the limits of the city, municipality or protection district furnishing the fire department response.

This coverage is additional insurance. No deductible applies to this coverage.

This paragraph will respond for a loss wherein the insured has agreed to pay a fee for the fire department to put out a fire.  Clearly this would not pay their fee required for the fire department to respond in the first place ($75.00 or whatever was being charged) but rather pay a portion of a fee that the insured has contracted for in advance for a department to put out a fire.  In the case at hand this would not appear to have applied.

I posed this question to several insurance companies interjecting my thought that I did not think that the policies should pay—be it a Dwelling Form; Mobile Homeowners; or Homeowners.  After all the insured “willfully” chose not to purchase the protection or “negligently” forgot to pay the annual fee.  Without exception the insurance companies disagreed with me.  The first response from the insurance companies was a bit of surprise and as I was on the phone with one of them he was goggling this issue and  struck by how many cases of this type of loss had occurred over the last couple of years.  The common answer from all the companies was:

1. There is no exclusion for this in the form.
2. There is nothing in the form that requires them to pay the fee and if they don’t the policy would not apply.
3. This is an underwriting issue.  We do not have that question on our application.  We accepted the risk therefore we are on the claim.
4. We should have asked that question, but there are so few of these situations that it would just add one more burden to our underwriting process.

So there you have it.  Somehow I think these are all interesting answers for the small claims but when this becomes the million dollar question of that beautiful home perched up on an isolated mountain top I think the companies may look differently about that answer.

 

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