Property Insurance: Third-Party Provisions & Policy Basics
Third-Party Provisions in Property Insurance
These provisions apply to parties other than the insurer and the named insured.
Mortgage Clause
Applies to homeowners policies where mortgage lenders have a financial interest in the property.
Protects the mortgagee's interest.
Specifies conditions under which the insurer delivers claim payments to the mortgagee.
Claim denial to the insured doesn't automatically apply to the mortgagee.
Mortgagee Requirements to Submit a Claim:
Pay any premium the insured failed to pay.
Notify the insurer of changes in ownership or occupancy, or substantial increases in risk.
Submit a signed, sworn proof of loss if the insured fails to do so.
Mortgagee's Right to Payment:
Receives payment for a valid covered claim, even if the insured's claim is denied (e.g., due to arson).
Payment is up to the mortgagee’s interest in the property.
Policy Termination:
Advance notice must be provided to the Mortgagee in case the insurance company chooses to terminate the policy. This notice is in addition to the notice provided to the insured.
Loss Payable Clause
Similar to the mortgage clause.
Allows creditors, lenders, lienholders, or similar parties with insurable interest to be included as insureds to receive claim payments.
The loss payee is the first party paid for a covered loss.
Rights:
Do not have all the rights of mortgagees.
Must receive advance notice of policy cancellation or nonrenewal.
No Benefit to Bailee Condition
Bars certain third parties (bailees) from benefiting from a policy.
Definition of Bailee:
A person or organization that has care, custody, or control of someone else's property for servicing, repair, or storage.
Example: A dry cleaner is a bailee when taking in a customer's clothes.
Bailee's Responsibility:
Legally responsible for protecting the property from loss while in their care, custody, or control.
Purpose of the Condition:
Excludes paying claims that would benefit the bailee under the customer's insurance policy.
The bailee needs their own insurance policy to protect customers' property.
Pair or Set Clause
Applies when there is a loss to part of property that comes as a pair or set (e.g., earrings, dinnerware).
Recognizes that the value of the pair or set is more than the sum of individual parts.
Insurer Options in Case of Loss:
Repair or replace any part to restore the pair or set to its original value.
Pay the difference between the actual cash value (ACV) of the property before and after the loss.
Insurance in Action: Sofia's Earrings
Sofia owns a pair of diamond earrings.
Individual value: 800 each.
Combined individual value: 1,600.
Pair value: 2,000.
Value increase as a pair: 400.
Scenario: One earring is stolen.
Loss Calculation:
Loss of individual earring value: 800.
Loss of value as a pair: 400.
Total loss: 1,200.
Appraisal
Addresses disputes about the amount of a property loss.
Initiation: May be requested by either the insurer or the insured.
Process:
Each party selects its own appraiser.
The appraisers select an umpire.
Agreement by any two parties settles the loss.
Cost:
Each party pays the cost of its own appraiser.
The parties share the cost of the umpire and the appraisal process.
Important Note:
Appraisal is not used to determine whether the policy provides coverage for a loss; it only addresses the amount of the loss.
Recovered Property
Scenario: Lost or stolen property is recovered after the insurer has made payment.
Notification Requirement: The party that recovers the property (insured or insurer) must notify the other party.
Insured's Options:
Keep the claim payment and give up rights to the recovered property.
Retain the recovered property and return the claim payment.
Insurer's Option:
If the insurer chooses to retain the recovered property, the insurer will pay for recovery and repair expenses.
Standard Fire Policy (SFP)
The Standard Fire Policy (SFP) of New York is the basis for modern property insurance policies.
Structure: Written based on 165 standardized lines that describe coverages.
State Regulations: States using the SFP require that insurers cannot write a property policy that is more restrictive than the 165 lines.
Coverage:
Provides coverage for direct loss resulting from fire, lightning, and the removal of property endangered by fire or lightning.
Note:
In property policies, fire and lightning coverage is often combined.
Coverage for the removal of property endangered by covered perils is an additional coverage.
Insurer's Payment in the Event of Loss
The insurer will pay the lesser of:
Actual cash value (ACV) of the property at the time of loss.
The amount actually necessary to repair or replace property with material of like kind and quality within a reasonable time after the loss (excluding increased costs due to ordinance or law regulating construction).
An amount equal to the interest of the insured.
Uninsurable Property
Some items are considered uninsurable and are not covered, including:
Accounts, bills, currency, deeds, evidences of debt, money and securities.
Bullion and manuscripts (unless specifically named in the policy).
Other Insurance Condition
If other insurance applies to the same property, the insurer will use a pro rata liability basis to cover only its proportion of the loss compared to the total insurance covering the property.
Neuroplasticity
Neuroplasticity depends on:
Symptoms
Diagnosing
Treatment
Medication Management
Brain re-wiring depends on:
disassociation from doing psychoactive substances
doing breathing, mindfulness, CBT, ACT, things like that
Coping vs Conquering
Nobody should be coping with anything, but should be trying to conquer it.
Coping means there's still an earworm or itch that's unscratchable