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Last Post 04/17/2008 8:45 AM by  JimGary
Know your policy
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Tom Toll
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09/24/2007 4:25 PM

    Janice and I worked a commercial loss last week and submitted it for payment 4 days after assignment, through a vendor with a major carrier. This was a lightning damage claim to a 5 ton outside A/C unit and a neon lettered sign affixed to the front gable end of a large restaurant. It was an ACV policy with adequate limits of insurance. There was no question of it being lightning and not surge. The A/C had heavy arcing a burning of electrical wire and components, as did the sign. They were both on the same circuit in the panel. We figured replacement of the 5 ton unit and repairs to the sign were in excess of $2,000.00, as written by the sign company. We allowed $1,000.00 for repairs to the sign on the estimate with a note that there is only $1,000.00 coverage for damage to signs affixed to the building, any one occurrence.

    Three days after submission, we received this from the vendor with a copy of an e-mail sent to him by the examiner:

    "The sign is attached to the building; therefore, there is coverage for the sign.  Signs not attached have the $1,000 limit.

    Please revise the estimate and forward at you earliest convenience".


    Under a CP 00 10 04 02, Limits Of Insurance: "The most we will pay for loss of damage to out-door signs attached to buildings is $1,000.00 per sign in any one occurrence". The examiner may have been  influenced by the agent who called and wanted the sign damage paid for in full. The examiner did not read the policy in full, and other examiners with her company agreed with her. So, now what do you do.

    You put on your diplomacy hat, decide how you approach this with utmost diplomacy and make a direct call to the examiner. After thinking about this, the call was made and after reading the policy to her and her finding it in her policy, she agreed and was very happy I had called her to explain why only a $1,000.00 was allowed, under the terms of the policy. We definitely made a friend with this lady. Had the file been reviewed by auditors, the probability that this mistake would be found was high. She asked me is she had a policy question, could she call us and of course I said yes. We are, after all, a family in this industry. The importance of being diplomatic is enormous. Never sound like a smarter than the person you are talking to. Relate your self properly and you can win friends and influence people. Always try to pay an insured what they are entitled to under the policy, but no more.  I don't have all the answers , but I do know where to look or  who to call if I don't.

    Knowledge is power. I realize that is an old saying and I use it quite frequently, but it is true. Learn the policies you will be handling while you are not working. You will be glad you did when a storm finally hits. Always, always, be diplomatic in your conversations with company representatives or vendors. 

     

    Success is not final, failure is not fatal: it is the courage to continue that counts.
    stephie76
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    09/24/2007 6:46 PM

    Very good advice! Thanks for sharing the scenerio.

    HuskerCat
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    09/24/2007 7:49 PM

    Perhaps what the examiner was trying to say--and how I would have handled it--was to change your estimate to show the excess loss being absorbed by the deductible.  The policy says the max "payable" for attached signs is $1,000... not the max covered being $1,000.

    When examiners are changing hats between HO & Commercial, and property vs. casualty, this often becomes lost in the translation.

    OdieWyatt
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    09/24/2007 10:55 PM
    Some carriers will tack on their own "enhancement" endorsement, that increases most of the specific limits on the basic 00 10. Some even include business interuption, even if the insured didn't originally buy any bi to "enhance".
    Tom Toll
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    09/25/2007 8:29 AM

    Mike, it says Limit of Insurance. Please explain in more detail how this could be an excess payment and how it could be absorbed. Odie, this was a standard ISO policy, no enhancements. That was one of my first questions to the examiner.

    Success is not final, failure is not fatal: it is the courage to continue that counts.
    Todd_Summers
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    09/25/2007 12:42 PM
    Tom,
    Isn't it true that any covered damage that exceeds the limit reduces or completely absorbs the deductible to keep the policyholder from having to pay their deductible twice, in effect?
    HuskerCat
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    09/25/2007 2:33 PM

    Tom, my reasoning was already given.  I've been staff for 3 different large carriers, and then handled similar losses for a multitude of other carriers as an independent.  This type loss was always handled in that manner, and never questioned.

    It is not unlike a jewelry loss on an HO3, say with a theft loss of $3000 but the special limit of $1500.  If the policy has a $500 deductible, how much do you pay?  $1500 or $1000?  I was always taught and/or directed that the entire limit is payable, as long as the covered loss exceeds the limit plus the deductible.

    Maybe some carriers don't subscribe to that train of thought, but I haven't run across them yet.  

     

    johnclark719@yahoo.com
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    09/25/2007 3:38 PM
    I agree with Mike on the deductible, depending on the amount.

    Another way of saying it from various companies I have worked for is "The deductible is applied to the loss and not the limit".

    Outdoor Signs are one of the worst to keep up with.
    Tom Toll
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    09/25/2007 4:39 PM

    The policy limit is $350,000.00 and the limit of insurance is within that limit of coverage. How can it possibly be absorbed in a CP 00 10. MSB apparently agrees with me, as it did not absorb the difference. Since this came up, I have talked to several of my GA friends and the agree that it cannot be absorbed.

    Had the sign been an endorsement, say of $2,000.00 and the loss was $3,000.00, then yes, the deductible would have been absorbed, but in this case, it is not. I always, without fail, try to get the insured as much as possible under their contract, but not in this case.

     

    Success is not final, failure is not fatal: it is the courage to continue that counts.
    Ray Hall
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    09/25/2007 5:27 PM

    I think I disagree with all the posters and agree with the company examiner as the neon sign attached to the building does not have a limit. (It becomes a fixture) Its only detached signs that have a limit and only for the 5 perils mentioned for coverage under "Outdoor Property". Rework the loss.

    claims_ray
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    09/25/2007 6:49 PM
    However Ray, Tom has stated that the policy reads as follows:

    Under a CP 00 10 04 02, Limits Of Insurance: "The most we will pay for loss of damage to out-door signs attached to buildings is $1,000.00 per sign in any one occurrence".

    Tom, I do not understand what difference the amount of coverage or the amount of loss makes. The cost to repair the sign exceeds the coverage and therefore shouldn't it be applied towards the deductiblbe. If not please explain it one more time. I have never used Integra does it automatically reduce the deductible when the loss exceeds the coverage.
    claims_ray
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    09/25/2007 6:49 PM

    .

    HuskerCat
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    09/25/2007 7:04 PM
    Posted By Tom Toll on 09/25/2007 4:39 PM

    The policy limit is $350,000.00 and the limit of insurance is within that limit of coverage. How can it possibly be absorbed in a CP 00 10. MSB apparently agrees with me, as it did not absorb the difference. Since this came up, I have talked to several of my GA friends and the agree that it cannot be absorbed.

    Had the sign been an endorsement, say of $2,000.00 and the loss was $3,000.00, then yes, the deductible would have been absorbed, but in this case, it is not. I always, without fail, try to get the insured as much as possible under their contract, but not in this case.

     

    Tom, I'm assuming you're referring to MSB your estimating program.  I don't use it, but wasn't aware that it could interpret policy terms unless you are inputting specific limits and coverage codes to begin with.  But I can see where that could fail too, with the wide variety of coverages available.

    Here is the language from the CP0010 Ed 04/02 that addresses this topic:

    C. Limits Of Insurance

    The most we will pay for loss or damage in any one occurrence is the applicable Limit of Insurance shown in the Declarations.The most we will pay for loss or damage to outdoor signs attached to buildings is $1,000 per sign in any one occurrence.

    D. Deductible

    In any one occurrence of loss or damage (hereinafterreferred to as loss), we will first reduce the amount of loss if required by the Coinsurance Condition or the Agreed Value Optional Coverage. If the adjusted amount of loss is less than or equal to the Deductible, we will not pay for that loss. If the adjusted amount of loss exceeds the Deductible, we will then subtract the Deductible from the adjusted amount of loss, and will pay the resulting amount or the Limit of Insurance, whichever is less.

    When the occurrence involves loss to more than one item of Covered Property and separate Limits of Insurance apply, the losses will not be combined in determining application of the Deductible. But the Deductible will be applied only once per occurrence.

    Likely, we will continue to agree to disagree...not only on this, but also on whether a sign would be considered a fixture by most.  

    Ray Hall
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    09/25/2007 9:55 PM

    I am reading all 4 corners of the CP 00 10 04 02 and I will stand by my opine in my post. As pundits take all  the time you need, but the underwriters consider neon signs attached to buildings as fixtures and the $1,000. limit only applies to signs not attached to buildings for the 5 named perils.  In fact the CP 00 10 04 02 covers neon signs and tubing on resturants the same as other componants of the building for windstorm.

    HuskerCat
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    09/26/2007 6:27 AM

    Gonna try this again...but it reformats everytime I hit the enter button.  There's a little word transposing down around the named peril part, that won't stay in edited form, but you can figure it out.    

    Ray, I’ll agree with you part-way. After looking at the 4 corners, and then going smack dab into the middle, here’s what the CP0010 has to say about sign coverage.

     

    2. Property Not Covered

     

    Covered Property does not include:

    q. the following property while outside of buildings:

    Grain, hay, straw or other crops;

    (2)

    Fences, radio or television antennas (including satellite dishes) and their leadin wiring, masts or towers, signs (other than signs attached to buildings), trees, shrubs or plants (other than "stock" of trees, shrubs or plants), all except as provided in the Coverage Extensions.

    Meaning: Outdoor signs are not covered unless they are attached to the building. All Covered Causes of Loss apply. However, detached signs may be covered but see Coverage Extensions.

    ---------

    5. Coverage Extensions

    Except as otherwise provided, the following Extensions apply to property located in or on the building described in the Declarations or in the open (or in a vehicle) within 100 feet of the described premises.

    e. Outdoor Property

    You may extend the insurance provided by this Coverage Form to apply to your outdoor fences, radio and television antennas (including satellite dishes),signs (other than signs attached to buildings), trees, shrubs and plants (other than "stock" of trees, shrubs or plants), including debris removal expense, caused by or resulting from any of the following causes of loss if they are Covered Causes of Loss:

    (1)

    Fire;

    (2)

    Lightning;

    (3)

    Explosion;

    (4)

    Riot or Civil Commotion; or

    (5)

    The most we will

    Aircraft.pay for loss or damage under this Extension is $1,000, but not more than $250 for any one tree, shrub or plant. These limits apply to any one occurrence, regardless of the types or number of items lost or damaged in that occurrence.

    Meaning: There is coverage for detached signs within 100 ft of the described premises, subject to the 5 named perils. The most payable is $1000 after subtracting the policy deductible from the loss total.

    --------

    C. Limits Of Insurance

    The most we will pay for loss or damage in any one occurrence is the applicable Limit of Insurance shown in the Declarations. The most we will pay for loss or damage to outdoor signs attached to buildings is $1,000 per sign in any one occurrence.

    Meaning: This limitation applies only to signs on or attached to the building, all Covered Causes of Loss are applicable, and the most payable is $1000 after subtracting the policy deductible from the loss total.

    ---------

    Now the argument might be made that a lighted sign is a fixture, but how do you get around the fact that it is still a sign? The specific limitations that use the word “sign”, narrows that down to a specific type of fixture that is subject to these limitations. I agree that neon tubing/lighting that is not a sign (use is limited to lighting or decorative only and, does not convey a written message) could be considered fixture. But by agreeing with that, does it then open the door for neon signage? You can hear the argument now “well, my neighbor had straight line neon that was covered. Mine is just curved and forms words, so why is it limited?.” Handling of this probably varies from one carrier to another, like a lot of things do.

    This is all anyone probably never wanted to know about sign coverage on a CP. You can bet that your next sign loss will be on a BOP, and then none of the above applies!

     

     

    (1)

     

     

    Ray Hall
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    09/26/2007 12:54 PM

    The argument is "fixtures", including outdoor fixtures which are # (2) paragraph under little a. building.

    The search for the non existant definition of fixtures in the CP 00 10 04 02 and you will not find one. Therefore, you must use the common language meaning. One page 8 you will find Outdoor Property which spells out an optional extension of coverage for certain perils only. Please note fixtures are not listed. The signs mentioned mean stand alone pylon type only, meaning this section is not applicable in this loss.

    Then you must fall back to the four corner rule and use the common language use of fixtures(by the nature of electrical connected) and on the building fit the only definition of fixture a reasonal person reading the facts could conclude.

     

     

    Tom Toll
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    09/26/2007 1:02 PM

    sign

    [script removed]

     [script removed]

    1. Something that suggests the presence or existence of a fact, condition, or quality.
    2.
    a. An act or gesture used to convey an idea, a desire, information, or a command: gave the go-ahead sign.
    b. Sign language.

    3.

    a. A displayed structure bearing lettering or symbols, used to identify or advertise a place of business: a motel with a flashing neon sign outside.
    Success is not final, failure is not fatal: it is the courage to continue that counts.
    HuskerCat
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    okclarryd
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    09/26/2007 9:26 PM

    Folks,

    You can bet your ice cream allowance that the carrier has danced to this music more than once and has a determination of what a "sign" is under their guidelines and policy provisions, as interpreted in the last court case. THAT determines what is and what ain't. For that carrier, that is.

    The question of deductible absorption must also be addressed by the carrier on the loss. Some carriers will allow absorption by a sub-coverage and some carriers won't.

    Submit your case either for or against in a suitable format to the supervisor, manager, or otherwise noteworthy person and what ever the decision might be ................. that's the answer.

    This is the beauty of working commercial losses. Ya just don't know all the interpretations and policy provisions of each particular carrier unless you've worked many, many commercial losses for them and, even then, the company's stance can change on a moment's notice.

    As far as MS/B absorbing the deductible, it can be done by setting up separate sub-coverages and addressing the deductible application.  But, that's another subject that can be discussed in another forum.

    Happy Trails

    Larry D Hardin
    johnclark719@yahoo.com
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    09/26/2007 11:13 PM
    Tom shows the Policy Language in his post of 9-24-07 showing a $1000 limit on a sign attached to building even though it is a part of the total policy limit of $350000 but I did not see any deductible.

    I still believe the deductible amount would be applied to the over $2000 in repairs the sign company gave an estimate of.

    On MSB you would have to show the sign limit as a separate coverage of $1,000 and show the main coverage as $349000. You would then show the deductible being applied to the separate sign coverage, that will make the MSB system show the excess and is how I have done many claims on signs, tree debris, jewelry & or trailers or boats. This was done with CNA Commercial & Great American Insurance to name a couple to show it was not just a company thing, and of course I believe that is the correct way.



    wscook
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    09/28/2007 2:01 PM

    With all due respect to Tom Toll, whom I consider to be one of the most learned members of this forum,  I would challenge him in the instant case for full coverage for the neon light fixture portion of the loss.

    These are the type controversies that whet the appeitite of this public adjuster.  I would be delighted to accept the challenges on this claim, were I licensed in the state where this loss happened, on a contengency fee basis.  It would be my contention if the policy limitations for any exterior attached signs exceeded the limits that the deductible would be absorbed to the etent of that excess amount..  I would then address the issues related to ambiguities as to whether the neon lights attached to the buidling should be considered a light  fixture or a sign.   Since a fixture is subject to more than one meaning and it is not defined in the policy the ambiguity should be interpreted in favor of the most desirable outcome for the nondrafter of the contract. 

     When I decorate my commercial building  at Christmas time by temporarily attaching lights to the permanent hooks installed on my roof to spell out "MERRY XMAS"  I expect that if they are struck by lightning they will be covered under my commercial policy.  Further when my attached  neon lights that were installed to take advantage of illumination of a portion of my building I also expect them to be paid if struck by lightning. 

    I may not win the battle but it certainly is not a slam dunk for insurers.

    William S Cook

    Florida Licensed Public Adjuster

    William S Cook Public Adjuster/Umpire/Appraiser
    Tom Toll
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    09/28/2007 3:08 PM

    William, I certainly respect your knowledge of policy also. I think intent may be the deciding factor. Your Christmas lights were not intended to display a business, rather decorate it. The intent of the sign I handled was to provide advertisement for that business, not a display such as yours. The sign as shown is not ornamental/decorative in design, rather displayed to attract and display the business. This has gone all the way to the top of this company and they say the $1,000.00 limit will stand.

    The neon tubing is permanently attached to the metal sign, therefore becomes a part of the sign. Please understand this is a metal fabricated sign with letters, with neon letters highlighting the letter on the metal box frame.

    Success is not final, failure is not fatal: it is the courage to continue that counts.
    HuskerCat
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    09/29/2007 1:50 AM

    Now then, doesn't this make us all back up and think a little?  A pretty simple loss when you think about it to begin with.

    I (me) and most would have taken the (it's a sign stance) originally.   But after Tom's last post...and Trader's opinion...maybe the neon tubes are fixtutres (call them night-time enhancements) attached to the sign.  You have a sign that can be seen/read during daylight, but at night then the neon highlights it.  Hmm?  I've always found a way to pay for the pole or the wood/brick monuments separate from the sign itself.  Same thing with the roof-top A/C surrounds that had signs attached.  Those were separate structures with sign facings attached.

    More opinions--and discussion--like this thread envoked, will go a long way for the readers here. Just my thoughts.  Don't claim to have had the ultimate answer, but posed what I thougt were all the questions and potential answers.

    By the way, Tom, you said the carrier stood by the $1000 limit.   Did that mean "payable" or "coverage limit only"?

     

    wscook
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    09/29/2007 8:15 AM

    Certainly it would appear that there exist enough varied interpretations among this learned forum that the matter is subject to more than one interpretation. This is the standard that has been used by the courts in the past in many instances to reverse a non-payment stance by the top echelons of the insurers in favor of a payment to the insured.

    This is what the courts in NY had to say about ambiguity........

    An exclusion from coverage "must be specific and clear in order to be enforced" (Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311), and an ambiguity in an exclusionary clause must be construed most strongly against the insurer (see Ace Wire & Cable Co. v Aetna Cas. & Sur. Co., 60 NY2d 390, 398; Thomas J. Lipton, Inc. v Liberty Mut. Ins. Co., 34 NY2d 356, 361). However, an unambiguous policy provision must be accorded its plain and ordinary meaning (see Sanabria v American Home Assur. Co., 68 NY2d 866, 868), and the plain meaning of the policy's language may not be disregarded in order to find an ambiguity where none exists (see Garson Mgt. Co. v Travelers Indem. Co. of Ill, 300 AD2d 538, 539; Acorn Ponds v Hartford Ins. Co., 105 AD2d 723, 724). "[P]olicy exclusions are to be read seriatim and, if any one exclusion applies, there is no coverage since no one exclusion can be regarded as inconsistent with another" (Sampson v Johnston, 272 AD2d 956, 956; see Hartford Acc. & Indem. Co. v Reale & Sons, 228 AD2d 935, 936)....

    This section is posted in regard to addressing interpreting ambiguity and not to the issue if the neon lights versus sign is ambiguious as that would be for others to decide.

    I am not being adversarial to the posters but posting views  from my sides perspective. I learn new things on a daily basis usually as a result of controversy. I am never offended by differing opinions because my batting average includes many strikeouts. I consider being allowed to participate in the CADO forum a valuable asset.
    Thanks to ALL
    William S Cook
    Florida Licensed Public Adjuster

    William S Cook Public Adjuster/Umpire/Appraiser
    Ray Hall
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    09/29/2007 12:19 PM

    Lets throw this question in this discussion. The metal building has a gable end facing I-40 and the tan baked on paint finish building has the gable end painted navy blue background for a yellow painted lettered sign that reads "Tom's Bar B Q". Is this sign a part of the building on the same policy.?   Why ?

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