4.2 Homeowners Section I: Property Coverages, Limits and Exclusions

Section I: Property Coverages & Internal Limits

Section I establishes the four primary physical damage coverage parts and strict dollar sublimits for specific personal property classes.

Coverage A — Dwelling

Covers the residential dwelling building described in the Declarations, including structures attached directly to the dwelling (such as an attached garage, screened patio enclosure, or attached deck). It also covers materials and supplies located on or next to the residence premises used to construct, alter, or repair the dwelling. Land, including the land on which the dwelling is located, is universally excluded.

Coverage B — Other Structures (Appurtenant Structures)

Covers structures on the residence premises that are separated from the dwelling by a clear space, or connected only by a fence, utility line, or exterior walkway. Common examples include detached garages, storage sheds, gazebos, fences, and in-ground swimming pools.

• Default Limit: Automatically set at 10% of Coverage A.
• Addition to Limit: In ISO homeowners forms, Coverage B is an additional amount of insurance above Coverage A.
• Exclusions: Structures used for commercial business purposes or rented to any person who is not a tenant of the dwelling (unless rented solely as a private garage) are excluded.

Coverage C — Personal Property

Covers personal property owned or used by an insured anywhere in the world. Personal property of guests or residence employees can be covered at the insured's request while on the premises.

• Default Limit: Typically 50% of Coverage A (can be increased or decreased).
• Off-Premises Worldwide Coverage: Full Coverage C applies anywhere in the world. However, personal property usually located at an insured's secondary residence (e.g., a vacation cabin) is limited to 10% of Coverage C or $1,000, whichever is greater.
• Special Theft & Property Sublimits (ISO Standard):
  • $200: Money, bank notes, bullion, gold, silver coins, medals, and smart cards.
  • $1,500: Securities, accounts, deeds, evidences of debt, letters of credit, notes, passports, and transportation tickets.
  • $1,500: Watercraft of all types, including their trailers, furnishings, equipment, and outboard engines.
  • $1,500: Trailers not used with watercraft.
  • $1,500: Jewelry, watches, furs, precious and semi-precious stones (applies to the peril of THEFT only).
  • $2,500: Firearms and related equipment (applies to the peril of THEFT only).
  • $2,500: Silverware, goldware, pewterware, tea sets, and trophies (applies to the peril of THEFT only).
  • $2,500: Property on the residence premises used primarily for business purposes.
  • $1,500: Property away from the residence premises used primarily for business purposes.
  • $1,500: Electronic apparatus while in or upon a motor vehicle (only if powered by vehicle and off-vehicle sources).

Coverage D — Loss of Use

Protects the policyholder when a covered loss under Section I renders the residence premises uninhabitable. The default limit is typically 30% of Coverage A on the HO-3 form. Coverage D combines three distinct benefits:

1. Additional Living Expense (ALE): Pays any necessary increase in living expenses incurred by the named insured to allow the household to maintain its normal standard of living (e.g., hotel bills, temporary apartment lease, increased restaurant food costs, pet boarding, and storage units).
2. Fair Rental Value: Pays the fair rental value of that portion of the residence premises rented to others (or held for rental), less any expenses that do not continue during the period the property is uninhabitable.
3. Civil Authority Prohibits Use: If a civil authority prohibits the insured from using the residence premises as a direct result of damage to neighboring premises caused by a peril insured against, the policy covers ALE and Fair Rental Value for a maximum of two weeks (14 days).

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Exam Trap: Theft Sublimits vs. Open Peril Building Losses

Exam Trap: On the Florida Adjuster examination, questions frequently test whether the $1,500 jewelry sublimit, $2,500 firearms sublimit, or $2,500 silverware sublimit applies to losses caused by fire or windstorm.

The rule is absolute: These special dollar sublimits apply strictly to the peril of THEFT. If an insured loses $15,000 worth of fine jewelry or a $12,000 firearm collection in a residential house fire, the special sublimit does not apply! The fire loss is paid up to the full policy limit of Coverage C, subject only to the deductible.

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Standard Section I Exclusions

All standard ISO Homeowners forms contain general exclusions eliminating coverage for specific catastrophic or non-insurable hazards:

1. Ordinance or Law: Cost of complying with local building codes, ordinances, or demolition mandates. (Note: Standard ISO provides an additional coverage of 10% of Coverage A for Ordinance or Law, and Florida Statute § 627.7011 requires Florida insurers to offer 25% and 50% options).
2. Earth Movement: Earthquake, landslide, mudslide, mine subsidence, and earth sinking. (Florida requires catastrophic ground cover collapse coverage by statute, but standard sinkhole damage requires a separate endorsement).
3. Water Damage: Flood, surface water, storm surge, tidal water, overflow of bodies of water, sewer or drain backup, and water below the ground surface exerting hydrostatic pressure on foundations.
4. Off-Premises Power Failure: Interruption of power or utility service originating away from the residence premises.
5. Neglect: Failure of the insured to use all reasonable means to save and preserve property at and after the time of a loss.
6. War & Nuclear Hazard: Direct physical loss from undeclared war, insurrection, or nuclear reaction/radiation.
7. Intentional Loss: Any loss arising out of an intentional act committed by or at the direction of any insured with the intent to cause damage.
8. Government Action: Destruction, confiscation, or seizure of property by order of any governmental or public authority (except destruction to prevent the spread of a fire).