North Carolina Subscriber

A: The coverage denial you describe does not stand up to scrutiny. It is our impression that insurers routinely pay for damage caused by tree sap when the insured has purchased comprehensive coverage under the personal auto policy. If damage by tree sap is “direct and accidental,” then how can it be argued that acid rain is any less so?

Unless it can be said that the insured deliberately sought out the exposure to acid rain, the loss is unquestionably “accidental.” As to whether the loss is “direct,” there is no question that the loss is direct as to place (the exterior of the covered auto). Further, on the assumption that each drop of acid rain causes its share of damage, each occurrence is also “direct” as to time. Simply, a lot of little losses occur before they become measurable.

Business Use of a Personal Auto

Q: We have an insured who was using the auto listed on the policy to deliver newspapers. The insured auto struck another vehicle. Insured was negligent for the loss.

Does the insured auto in this incident not fulfill the definition of a covered auto due to the fact that they were delivering newspapers? Does the PP 00 01 06 94 definition of a covered auto under J.2.a. and b.2 exclude both liability coverage and physical damage coverage when an auto is being used to deliver newspapers, pizza, etc.?

Ohio Subscriber

A: Presuming this vehicle is not a newly acquired vehicle, as long as the auto is a covered auto as scheduled in the declarations, there is no exclusion to prevent liability coverage or physical damage coverage. The liability section of the policy does have an exclusion for using a vehicle in a business but that does not apply to the use of a private passenger auto or a van or pickup owned by the named insured. The same is true in the physical damage section. Now, the insurer may want to revise the premium based on the use of the vehicle but the policy itself does not exclude coverage in your situation.

Asbestos Damage to Swimming Pool

Q: We have an insured with an HO-0003 (04/91) homeowner's policy.

A neighboring property was having a roof replaced and during the contractor's removal of the shingles the asbestos from the shingles/roof system somehow migrated into the insured's in-ground swimming pool causing damage.

The question is:

Is there coverage for this type of loss under the HO-0003 (04/91) policy?

Massachusetts Subscriber

A: The in-ground pool is an other structure, coverage B. As such, coverage is on an open perils basis. There is an exclusion for faulty workmanship, repair, construction of part or all of any property on or off the residence premises; it doesn't have to be the insured's property that the repair is to, the policy just says any property on or off premises. While there is an ensuing loss provision that could provide coverage, asbestos is a pollutant and is not covered unless caused by a coverage C named peril. Therefore, coverage for the asbestos in the pool would be excluded. However, the contractor should be responsible for the claim since his actions caused the loss.

Asbestos Floor Tiles Removal

Q: Under our Mortgage Service Residential Policy (MSP-RES), the dwelling sustained an on-premises covered water loss that resulted in damaged flooring. It turned out the floor tiles were of older manufacture and contained asbestos. While there is no disagreement the water damages are covered, does the policy owe for the extra costs of asbestos special handling and disposal?

The policy is an open peril dwelling form with no coverage C. It insures against direct loss to covered property but excludes loss caused by: [(5) release, discharge, or dispersal of contaminants or pollutants.]

One view is that the cause of loss in this claim is water damage, not pollutants. The asbestos pollutant itself is not a cause of loss to the flooring. Rather, it threatens hazard upon removal of the floor tiles, when the asbestos becomes airborne. Thus, since the loss was not caused by release of pollutants, the exclusion for loss caused by release of pollutants would not be applicable. The asbestos clean up would be an incidental necessitated by reasonable water damage repairs and covered.

Another view is that the water damage is the loss cause and the removal of the asbestos tile creates an ensuing loss, be it an actual ensuing loss or a threatened ensuing loss. The policy states that any ensuing loss not excluded or excepted is covered. As the pollution dispersal is indeed excluded in the policy, the costs of asbestos handling and disposal would not be covered.

Others think that the removal of asbestos tiles do not constitute an ensuing loss. Mold, by contrast, is actually caused by water interacting with a particular material. Mold is thus said to be an ensuing loss. Asbestos, however, was not created by the water loss and thus is not an ensuing loss. The asbestos is considered a latent vice or defect. And while the policy also excludes latent vice and defect, the cause of loss was water damage, not asbestos. Because the latent vice of asbestos did not cause the floor damage, the exclusion for loss caused by latent vice would not be applicable. Which interpretation is correct?

Missouri Subscriber

A: The asbestos is not an ensuing loss nor does the pollution exclusion apply; you have a water loss, and the removal of material containing asbestos is part of debris removal which is covered. The asbestos isn't really an inherent vice since when it was put in it was acceptable construction – it wasn't until later that we learned of its dangerous side effects. The loss, and the removal of the asbestos containing material, is covered.

Comprehensive or Collision Loss under PAP

Q: Our policyholder drove through some wet paint on the road, which caused damage to his vehicle. Our question is whether this is a comp or a collision claim or if this would be covered at all?

Iowa Subscriber

A: Interestingly, this question came up at a recent claims association meeting attended by the FC&S editors. The consensus of the claims adjusters there was that this type of loss can be considered as covered under either scenario. The damage was caused by an impact with another object, that is, paint as an object impacting with the auto. Or, this could be a comprehensive loss with paint falling across the auto. The answer should be one that is in the best interests of the insured; in other words, if the insured has a lower deductible with a collision claim, then this would be considered a collision loss; if the insured has a lower deductible with a comprehensive claim, then this would be considered a comprehensive loss. The insured should get the benefit of the doubt here since both a collision loss and a comprehensive loss are understandable and reasonable explanations for the claim.

Collision Coverage Under a Personal Auto Policy

Q: Our insured was driving his car down the highway when a tire on the car shredded. Parts of the tire broke the muffler system and dented the wheel well. The insurer wants to cover the damage under the collision coverage, but we feel that other than collision coverage is more proper. Your thoughts on this claim will be appreciated.

Pennsylvania Subscriber

A: The definition of “collision” that is on the auto policy is important in this instance. Assuming that the definition is “impact with another vehicle or object,” we believe that if the tire tread had completely separated from the rest of the tire and the wheel at the time it struck the muffler, collision is the proper coverage; that is, if the tire tread pieces had separated from the tire and wheel, then they were “another object” that collided with the insured's auto. If the pieces were still somehow connected to the auto at the time of the damage, then the pieces cannot be considered “another object” separate from the insured's auto. In such an instance, coverage would be under the other than collision part of the policy.