Why I Chose My Homeowner's Insurance Company Over Other Options: Youth in Care
Everyone has different needs and every insurance policy may respond to those needs differently. Do you have a dog, a swimming pool, a wood furnace, a golf cart, an older roof? These are just a few of the variables that could affect your insurance needs.
My concerns may not be the same as yours, but I'd like to explain why I've poured through insurance policies reading the definitions for "who is an insured" and the exclusions for "intentional loss."
I have foster kids in my home. Based on the definition of an insured (see below definition which is standard for most policies), foster kids are considered to be an "insured" on my homeowner's policy.
"Insured" means:
a. You and residents of your household who are:
(1) Your relatives; or
(2) Other persons under the age of 21 and in your care or the care of a resident of your household who is your relative;
b. A student enrolled in school full-time, as defined by the school, who was a resident of your household before moving out to attend school, provided the student is under the age of:
(1) 24 and your relative; or
(2) 21 and in your care or the care of a resident of your household who is your relative
That's great when it comes to liability, because if a foster youth were to accidentally cause an injury or damage that I became liable for, my homeowner's policy would likely provide the protection that I need. But how about the opposite scenario? What if a foster youth causes damage intentionally, and the damage is to my own property? Am I protected?
The answer depends on which insurance carrier I have chosen for my coverage.
The Insurance Services Office develops standard insurance policy language and forms that are adopted by most insurance carriers as their policies. For any policy that uses the ISO form for a Homeowner's (HO3) policy, it states that if any "insured" causes an intentional loss, no "insured" is entitled to coverage, even innocent insureds. See below two sections from the ISO policy for Intentional Loss and Concealment or Fraud
8. Intentional Loss
Intentional Loss means any loss arising out of any act an "insured" commits or conspires to commit with the intent to cause a loss.
In the event of such loss, no "insured" is entitled to coverage, even "insureds" who did not commit or conspire to commit the act causing the loss.
Q. Concealment or Fraud
We provide coverage to no "insureds" under this policy if, whether before or after a loss, an "insured" has:
- Intentionally concealed or misrepresented any material fact or circumstance;
- Engaged in fraudulent conduct; or
- Made false statements;
relating to this insurance.
That makes complete sense for the insurance carrier, it eliminates claims made for moral and morale reasons, like an insured who wants a new kitchen and burns down their house to get it (okay maybe that's an extreme example, but bottom line, it is protecting the insurance carrier from claims based on criminal acts). But for me, everyone who has been in my home doesn't necessarily have a vested interested my well-being or that of my home (I'm not painting all foster youth with that character, but I've often had really tough kids with really hard backgrounds that have left them mentally unstable) and it creates a coverage gap and leaves me potentially exposed to not collecting from my policy if I have a loss that was intentionally committed. Do I take the risk and choose to foster teenagers and leave myself that exposure, do I decide I can't take that risk and not foster kids, or do I have another option?
A handful of insurance carriers choose to write their own policy coverage (often adopting standard language from ISO), changing language to create provisions for missing coverage or to exclude coverage as they find necessary, which is then approved by state insurance departments.
In my case, I found a suitable solution outside of a standard ISO policy. The insurance carrier uses the standard language for an intentional loss but makes two exceptions. The first is for a loss that arises to covered property because of abuse by one insured against an innocent insured. And second, for a loss caused by fire by an insured. In both cases, only an insured who has not conspired or committed an intentional act can collect and they can only collect to the extent of their legal interest (i.e. the mortgage being in the innocent party's name). Similar language appears in the concealment and fraud provision, whereby a claim for fire loss doesn't exclude and insured who has not had an intentional part in the loss. See below.
Intentional Loss
a. Intentional Loss means any loss arising out of any act an "insured" commits or conspires to
commit with the intent to cause a loss.
In the event of such loss, no "insured" is entitled to coverage, even "insureds" who did not
commit or conspire to commit the act causing the loss.
b. However, this exclusion will not apply to deny payment to the "insured" who did not cooperate in or contribute to the creation of the loss if the loss:
(i) Is otherwise covered property under Coverage A, B, or C of the policy; and
(ii) Arises out of abuse to that innocent "insured" by another "insured".
With respect to this provision, abuse means:
(i) Abuse as defined in the Pennsylvania Protection From Abuse Act; or
(ii) Attempting to cause or intentionally, knowingly or recklessly causing damage to covered property so as to intimidate or attempt to control the behavior of another person.
If we pay a claim under this provision 8.b., our payment to the "insured" is limited to that "insured's" insurable interest in the property. In no event will we pay more than the Limit of Liability.
c. This exclusion does not apply, with respect to loss to covered property caused by fire, to an "insured" who does not commit or conspire to commit any act that results in loss by fire. We cover such "insured" only to the extent of that "insured's" legal interest, but not exceeding the applicable limit of liability.
We may apply reasonable standards of proof to claims for such loss.
Concealment Or Fraud
1. With respect to loss caused by fire, we do not provide coverage to the "insured" who has:
a. Intentionally concealed or misrepresented any material fact or circumstance;
b. Engaged in fraudulent conduct; or
c. Made false statements;
relating to this insurance.
2. With respect to loss caused by a peril other than fire, we provide coverage to no "insureds" under this policy, if whether before or after a loss an "insured" has:
a. Intentionally concealed or misrepresented any material fact or circumstance;
b. Engaged in fraudulent conduct; or
c. Made false statements;
relating to this insurance.
So which insurance carriers offer these exceptions? The policy language included above is from Hippo Insurance, but Cincinnati Insurance has a provision similar to the exception for abuse, but not the specific provision for fire, at least at the time of this writing for the state of Pennsylvania. Insurance policies can change year to year (even ISO policies) and insurance carriers can seek exceptions from state insurance departments as needed. If you have a specific question, talk to an agent who understands policy language and is willing to actually read your insurance policy. The worst time to find out you have a hole in your coverage is when you have a claim for that very thing, even if it is incredibly unlikely to ever happen. Sometimes the benefits of an insurance policy and the peace of mind they provide goes beyond whose is the cheapest; not all insurance policies are created the same.
Tracy Mitchell - CPCU, ARM, CWCA
Mitchell Insurance, Inc.