4.2 Dwelling Coverages A, B, C, D & E and Other Coverages

Dwelling Coverages A, B, C, D & E and Other Coverages

Exam Priority: Expect multiple numerical and coverage-trigger questions on the 10% vs. 20% percentage rules, whether an extension reduces Coverage A/C (DP-1) or acts as additional insurance (DP-2/DP-3), the DP-1 1/12th monthly cap on Fair Rental Value, 5 days vs. 30 days for Property Removed, and which perils are excluded on Trees, Shrubs, and Other Plants.

The ISO Dwelling Policy divides property and time-element protection into five primary coverage parts (Coverages A through E) plus a set of built-in Other Coverages. Because a Dwelling policy can be customized for a non-occupant landlord, an owner-occupant, or a residential tenant, only the coverages with a limit or premium shown on the Declarations page (plus their automatic extensions) are active.

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1. Coverage A — Dwelling & Coverage B — Other Structures

A. Coverage A — Dwelling

Coverage A insures:

1. The 1- to 4-family dwelling on the Described Location shown in the Declarations, including structures attached to the dwelling (such as an attached garage, breezeway, or attached deck).
2. Materials and supplies located on or next to the Described Location used to construct, alter, or repair the dwelling or other structures on the Described Location.
3. Building equipment and outdoor equipment used for the service of and located on the Described Location (unless covered elsewhere).

Critical Exclusion — Land: Coverage A never covers land, including the land on which the dwelling is located, nor the cost to excavate, grade, or backfill land unless specifically required to repair a covered building.

B. Coverage B — Other Structures

Coverage B covers other structures on the Described Location set apart from the dwelling by clear space, or connected to the dwelling only by a fence, utility line, or similar connection (such as a detached garage, tool shed, detached gazebo, or swimming pool).

• The 10% Extension Rule (DP-1 vs. DP-2/DP-3):
  • On DP-1, the insured may apply up to 10% of the Coverage A limit to Coverage B, but payment under Coverage B reduces the available Coverage A limit for the same loss.
  • On DP-2 and DP-3, the 10% of Coverage A extension for Coverage B is additional insurance—it does not reduce the Coverage A limit.
• Ineligible Other Structures (Not Covered under Coverage B):
  1. Any structure used in whole or in part for commercial, manufacturing, or farming purposes.
  2. Any structure rented or held for rental to any person not a tenant of the dwelling, unless used solely as a private garage.
  3. Gravemarkers and mausoleums.

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2. Coverage C — Personal Property

Unlike a Homeowners policy (which automatically includes Coverage C at 50% of Coverage A), Coverage C is optional in a Dwelling policy and must be separately purchased on the Declarations page. Landlords who rent out unfurnished dwellings typically omit Coverage C, whereas owner-occupants or tenants purchase it.

• What Coverage C Covers: Personal property usual to the occupancy as a dwelling and owned or used by an insured or members of the insured's family residing with them while the property is on the Described Location. At the insured's request, Coverage C also covers personal property owned by a guest or servant while on the Described Location, and a tenant's personal property in that portion of the Described Location occupied by the insured.
• 10% Worldwide Off-Premises Extension: The insured may apply up to 10% of the Coverage C limit to covered personal property while anywhere in the world (for example, luggage stolen from a hotel—if Broad Theft is endorsed—or damaged by a hotel fire). On every Dwelling form, using this 10% reduces the Coverage C limit for the same loss—it is not additional insurance. Note: Rowboats and canoes are NOT covered off-premises under this 10% extension.
• Property Not Covered Under Coverage C (High-Yield Exam List):
  1. Money, Currency & Negotiable Papers: Accounts, bank notes, bills, bullion, coins, currency, deeds, evidences of debt, letters of credit, notes, bank cards, manuscripts, passports, personal records, securities, tickets, and stamps are completely excluded on a Dwelling policy (unlike Homeowners, which provides small sublimits for money and securities).
  2. Animals, birds, or fish.
  3. Aircraft and parts.
  4. Motor vehicles and all other motorized land conveyances—except motorized vehicles not subject to motor vehicle registration that are used solely to service the Described Location (such as a riding lawn mower) or designed to assist the handicapped (such as a motorized wheelchair).
  5. Watercraft, other than rowboats and canoes while on the Described Location. (Motorboats, sailboats, and personal watercraft are excluded; rowboats and canoes are covered on-premises under Coverage C!).
  6. Data, software, and computer records (beyond the cost of blank retail media), credit cards, and gravemarkers/mausoleums.

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3. Coverage D — Fair Rental Value & Coverage E — Additional Living Expense

Coverages D and E are indirect loss (time-element) coverages triggered when a Peril Insured Against damages the Described Location and makes that part of the premises unfit for its normal use.

1. Coverage D — Fair Rental Value (Available on DP-1, DP-2, and DP-3):
   • Applies to that part of the Described Location rented to others or held for rental by the insured.
   • Pays the fair rental value of the damaged unit minus any expenses that do not continue while the premises is unfit for normal use (for example, if the landlord normally pays $150/month for water and trash service that is suspended during reconstruction, that $150/month is deducted from the gross rent).
   • Paid for the shortest time required to repair or replace that part of the Described Location.
2. Coverage E — Additional Living Expense / ALE (Built into DP-2 and DP-3 Only):
   • Available automatically in the DP-2 and DP-3 forms (and available on DP-1 only by endorsement).
   • Applies when an owner-occupant (or tenant-insured) is displaced by a covered peril.
   • Pays the necessary increase in living expenses incurred by the insured so that the household can maintain its normal standard of living (for example, if a family normally spends $600/month on groceries at home and must spend $1,400/month on restaurant meals while living in a hotel without a kitchen, Coverage E pays the $800 difference, plus the hotel bill).
3. Civil Authority Prohibits Use (Up to 2 Weeks):
   • If a civil authority (such as a county sheriff or fire marshal) prohibits the insured from using the Described Location because of direct physical damage to a neighboring premises by a Peril Insured Against, the policy pays Fair Rental Value (Coverage D) and/or Additional Living Expense (Coverage E) for up to 2 weeks.
4. Percentage Limits & The DP-1 Monthly 1/12th Cap:
   • DP-1 Rule: Under the current (2014) ISO DP-1, Rental Value is limited to 20% of Coverage A (the older 2002 form allowed 10%); using it reduces the Coverage A limit, AND the insurer pays no more than 1/12th of that amount per month (or proportionate period) of untenantability. For example, on a DP-1 with a $120,000 Coverage A limit, the Rental Value extension is $24,000 (20%), and the maximum monthly payout is $2,000 per month ($24,000 ÷ 12).
   • DP-2 and DP-3 Rule: The combined limit for Coverage D and Coverage E is 20% of Coverage A (10% under the older 2002 forms), provided as additional insurance (does not reduce Coverage A) and not subject to the 1/12th monthly cap.

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4. Other Coverages in the Dwelling Policy

Special Exam Notes on Other Coverages:

• Property Removed (5 Days vs. 30 Days): When insured property is removed from a premises endangered by a Peril Insured Against (such as moving furniture into a storage truck to escape an approaching wildfire), it is insured against direct loss from ANY cause (even theft or flood while in transit!) for 5 days under DP-1 and 30 days under DP-2 and DP-3.
• Trees, Shrubs, and Other Plants (DP-2 & DP-3 Only): Covers outdoor trees, shrubs, plants, or lawns up to 5% of Coverage A in total and no more than $500 per tree, shrub, or plant ONLY against: Fire or Lightning, Explosion, Riot or Civil Commotion, Aircraft, Vehicles not owned or operated by a resident of the Described Location, and Vandalism or Malicious Mischief. Notice that Windstorm, Hail, Weight of Ice/Snow, and Vehicles operated by a resident are NEVER covered perils for outdoor trees, shrubs, or plants!
• Collapse (DP-2 & DP-3 Only): Covers direct physical loss to covered property involving the abrupt falling down or caving in of a building (or part of a building) so that it cannot be occupied for its intended purpose, when caused by: (1) any of the Broad Form named perils; (2) decay that is hidden from view (unless known to an insured prior to collapse); (3) insect or vermin damage that is hidden from view (unless known to an insured prior to collapse); (4) weight of contents, equipment, animals, or people; (5) weight of rain that collects on a roof; or (6) use of defective material or methods in construction, remodeling, or renovation if the collapse occurs during the course of the construction, remodeling, or renovation. Mere settling, cracking, shrinking, bulging, or leaning is not a collapse.
• Glass or Safety Glazing Material & Ordinance or Law (DP-2 & DP-3 Only): Glass breakage is covered on DP-2 and DP-3 (including damage to covered property caused by broken glass), unless the dwelling has been vacant for more than 60 consecutive days immediately before the loss (except when breakage results directly from Earth Movement). Ordinance or Law provides up to 10% of the Coverage A limit as additional insurance for the increased costs incurred due to the enforcement of any building, zoning, or land-use ordinance or law regulating the construction, demolition, remodeling, renovation, or repair of a damaged covered building.