6.3 Homeowners Endorsements: NY Special Provisions, Earthquake, Identity Fraud, Scheduled Personal Property, Replacement Cost on Contents, Home Business & Water Backup
Key Takeaways
- The Special Provisions — New York endorsement conforms the ISO homeowners form to New York law, such as the § 3425 cancellation and nonrenewal rules, and controls over conflicting base-form language.
- The Earthquake endorsement (HO 04 54) adds earth-movement coverage with its own deductible; all shocks within 72 hours are treated as one earthquake.
- The Scheduled Personal Property endorsement (HO 04 61) covers listed classes such as jewelry, furs, fine arts, and cameras on an open-perils basis, free of the Coverage C theft sublimits.
- The Personal Property Replacement Cost endorsement (HO 04 90) pays replacement cost on contents, but the insurer may pay ACV until items are replaced when the replacement cost exceeds $500.
- Water back-up and sump discharge or overflow coverage buys back part of the homeowners water exclusion for sewer or drain backup and sump overflow; it is not flood insurance.
Why Endorsements Decide So Many Claims
A public adjuster reads the declarations' forms and endorsements schedule before forming any coverage opinion. Endorsements control over conflicting base-form language. Several of the endorsements below add coverage that many insureds do not know they bought, or that they wrongly assume they have.
Special Provisions — New York (HO 01 31)
Homeowners policies issued in New York carry a New York special provisions (amendatory) endorsement. It replaces the national cancellation and nonrenewal wording with the notice-and-reason requirements of Insurance Law § 3425. It also conforms other conditions to New York statutes, including the Standard Fire Policy minimums of § 3404 for the peril of fire. Adjusting rule: when a carrier cites a national-form condition, check whether the New York endorsement modifies it.
Earthquake (HO 04 54)
- Adds coverage for earthquake, land shock waves or tremors before, during, or after a volcanic eruption. This buys back part of the earth-movement exclusion.
- One earthquake: all shocks within a 72-hour period are a single earthquake, with one deductible.
- Separate deductible: a percentage of the applicable limit applies instead of the policy's flat deductible.
- Remaining exclusions: flood, tidal wave, or tsunami, even if caused by an earthquake; and typically exterior masonry veneer unless the endorsement states otherwise.
Identity Fraud Expense (HO 04 55)
Reimburses expenses an insured incurs as a direct result of identity fraud, subject to the limit and deductible in the schedule. Examples include costs of notarizing affidavits, certified mail to law enforcement and credit agencies, loan re-application fees, reasonable lost wages for time taken to deal with the fraud, and certain legal costs with the insurer's consent. It pays expenses, not the money stolen by the fraudster.
Scheduled Personal Property (HO 04 61)
Lists specific items or classes: jewelry, furs, cameras, musical instruments, silverware, golfer's equipment, fine arts, postage stamps, and rare and current coins.
| Feature | Unendorsed Coverage C | Scheduled under HO 04 61 |
|---|---|---|
| Perils | 16 named perils | Open perils (risk of direct physical loss, subject to limited exclusions such as wear and tear, insects, and war) |
| Theft sublimits | $1,500 jewelry, watches, furs; $2,500 firearms and silverware | Do not apply to scheduled items |
| Mysterious disappearance | Not a named peril | Generally covered for scheduled classes |
| Deductible | Policy deductible applies | Scheduled items usually are not subject to the Section I deductible |
| Valuation | ACV (unless HO 04 90) | Most classes: the least of actual cash value, cost to repair or replace, or the scheduled amount. Fine arts are generally valued at the scheduled amount. |
Scenario: a $12,000 diamond ring is stolen from a hotel room. Unscheduled, the theft sublimit caps recovery at $1,500. Scheduled at $12,000 under HO 04 61, recovery is up to the scheduled amount under the valuation terms, with no theft sublimit.
Personal Property Replacement Cost (HO 04 90)
- Changes loss settlement for Coverage C (and, in the homeowners forms, awnings, carpeting, household appliances, and outdoor equipment) from ACV to replacement cost.
- Ineligible property remains at ACV: antiques, fine arts, paintings and similar articles of rarity or antiquity; memorabilia, souvenirs, and collectors' items; articles not maintained in good or workable condition; and outdated or obsolete articles stored and not being used.
- Repair or replace first: when the full cost to repair or replace is more than $500, the insurer need not pay more than ACV until the item is actually repaired or replaced.
- Payment is the least of replacement cost without depreciation, the full cost of repair, any special limit, or the Coverage C limit.
Home Business Insurance Coverage (HO 07 01)
The homeowners form excludes most business exposures and limits business property to $2,500 on premises and $1,500 away. For an eligible home business shown in the schedule, HO 07 01:
- Raises coverage for business personal property to the amount scheduled;
- Adds business income and extra expense and other business-related property coverages;
- Adds business liability, including products-completed operations, for the scheduled business.
A PA whose client runs a bakery or design studio from home should look for this endorsement before accepting a $2,500 business-property cap.
Water Back-Up and Sump Discharge or Overflow (outline: HO 23 85)
- Buys back part of the water exclusion: covers direct physical loss caused by water or waterborne material that backs up through sewers or drains, or overflows or is discharged from a sump, sump pump, or related equipment, even if the overflow results from mechanical breakdown of the pump. Coverage is subject to the limit and deductible in the schedule.
- It is not flood coverage. Loss caused by flood, surface water, or waves remains excluded even if water enters through a drain.
- It generally does not pay to repair the sump pump or related equipment itself, and it does not cover loss caused by the insured's negligence.
Scenario: after a heavy storm, the municipal sewer surcharges and sewage backs up through a basement floor drain. Without the endorsement, the homeowners water exclusion bars the claim. With it, the loss is covered up to the endorsement limit. If instead the street floods and water flows over the ground into the basement windows, that is flood, which is excluded even with the endorsement and belongs under an NFIP policy (Section 9.1).
A homeowner has an HO-3 with an HO 04 61 Scheduled Personal Property endorsement listing a $9,000 bracelet. The bracelet disappears at a wedding and cannot be found. How is the claim treated?
Under the Personal Property Replacement Cost endorsement (HO 04 90), when may the insurer limit payment to actual cash value until the item is actually repaired or replaced?
A basement is damaged when water flows across the yard during a storm and enters through the windows. The HO-3 includes water back-up and sump discharge or overflow coverage. Is the loss covered under that endorsement?