My renters insurance policy contains exclusions, but parts of the policy appear to conflict with each other. Are there situations where an exclusion doesn’t apply because there were multiple causes of loss? What about a liability claim? If part of the claim is excluded, would you still receive defense coverage for the claim?
Personal Property Claims With Multiple Causes of Loss
How do we analyze coverage under a renters insurance policy? We define the issue, locate the rule within the policy, apply it, and come to a conclusion. It’s actually a simple and straightforward process in most cases.
Issue: Personal Property Coverage Following a Loss With Multiple Concurrent Causes, One or More of Which is Excluded
The issue at hand is what happens when a personal property claim on California Renters Insurance has multiple concurrent causes of loss. Let’s assume for the moment that these concurrent causes of loss happen at the exact same time and are equally responsible for the loss. Will your personal property be replaced if one of the concurrent causes of loss is excluded?
Rule: “…[E]xcluded regardless of any other cause or event contributing…”
The rule can be found in the California HO-4 policy form. Using a Travelers policy form as an example, the rule reads as follows:
We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area. [Listed exclusions follow, including those for earthquake, mudslide, and earth movement]
To restate the rule, a loss caused by an excluded cause of loss is excluded even if a covered cause of loss contributed to the loss. It’s irrelevant which cause of loss came first, or if the perils occurred simultaneously.
Application: Given a Specific Loss, Is There Coverage?
Application of the rule is simple. If a personal property loss is caused by something excluded by the policy language, there will be no coverage for the loss. Coverage or lack thereof for a secondary cause of loss is irrelevant because the exclusion is absolute. To apply the rule, we need an example. Since we’re looking at a renters insurance policy in California, an earthquake loss might be a propos.
Bob rents an apartment in San Diego, which lies within an apartment community. The apartment community has contracted to make the apartment available to Bob, as well as to make available a number of various amenities. An earthquake strikes the apartment community, and a pipe in Bob’s building breaks as a direct result of the earthquake. The broken pipe causes significant damage to Bob’s personal property, including electronics and a valuable watch for which coverage has been properly endorsed onto the policy. What portion, if any, of this loss is covered?
Conclusion: What Portion of The Loss is Covered?
If Bob has properly endorsed the watch onto his policy with the standard HO-61-B Valuable Items Plus endorsement, the watch is covered at its full replacement cost, up to the value insured for under the endorsement. A separate, and much more limited, set of exclusions is written into the endorsement. That separate set of exclusions applies only to items covered under the endorsement such as jewelry and watches. Water damage is covered, and there is no earthquake exclusion to be found in the HO-61-B.
The remainder of the personal property loss, however, would not be a covered loss. While damage from burst pipes is a covered cause of loss under the standard policy form, earthquake is excluded. The pipe would not have broken and no damage would have occurred if not for the earthquake. The presence of an excluded cause of loss prevents coverage from applying even though there is a concurrent covered cause of loss which occurred at roughly the same time.
It is possible to endorse some earthquake personal property coverage in California, though specific rules apply to the availability of the coverage. Without so endorsing the policy, losses caused by an earthquake would not be covered even if they also involve another cause of loss. Exceptions may apply for fires and explosions resulting from earth movement, however.
What About Liability Coverage?
It’s often said that the duty to defend is broader than the duty to indemnify. Your liability coverage includes defense coverage, but what happens if there’s a claim for something that isn’t covered, may not be covered, or which triggers an exclusion? Your insurer likely still has a duty to defend you against the claim.
Defense coverage doesn’t mean that there is coverage for the loss, and defense coverage is often offered under a reservation of rights letter. This coverage ensures that you are defended against a claim which may or could be paid by the policy, at least until such time as it’s determined without a doubt that there is no coverage under the policy.
In addition, if there’s a liability claim with concurrent causes of loss and only one is excluded, the insurer may offer a partial settlement to settle their obligations under the covered portion of the loss. If the settlement were accepted, this is where defense coverage would end. You may be responsible for the remainder of the loss, but the insurer’s portion of the loss would be paid through the settlement. A duty to defend may exist even where there is no duty for the company to indemnify you.
Renters insurance is designed to offer you broad protection against a wide variety of risks to your personal property as well as liability risks. A number of different types of coverage are included in the policy as standard, and you can extend coverage with a variety of endorsements based on your individual coverage needs. Effective Coverage offers insurance experts to help you get the right coverage at the right price, quickly and efficiently. To get started, just call (800)892-4308 or click to get covered - whether you need California renters insurance quotes online or coverage anywhere else!
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