How to classify and cover damaged appliances

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Question: The settlement language in question reads:

‘Carpeting, built-in or permanently installed domestic appliances, awnings, outdoor antennas and outdoor equipment, whether or not attached to the buildings, at actual cash value at the time of loss but not exceeding the amount necessary to repair or replace with material of like kind and quality.’

Our question concerns what is an appliance. We have always considered appliances to be microwave ovens, ranges, stoves, ovens, dishwashers and subject to ACV policy language. Water heaters, trash compactors have not been considered appliances and have been subject to r/c language.

Should water heaters, trash compactors be considered appliances? 

—— Texas Subscriber

Answer: ‘Appliances’ are always confusing.

Merriam Webster defines appliance as: A piece of equipment for adapting a tool or machine to a special purpose, or an instrument or device designed for a particular use or function; a household or office device (such as a stove, fan, or refrigerator) operated by gas or electric current.

In Armstrong v. Farmers Ins. Co. of Idaho, 147 Idaho 67, the court reviewed multiple definitions of appliances, and stated that “Household appliance” as used in everyday parlance refers to devices such as toasters, electric can openers, food processors, et cetera. These are all items  [***13] that are used to perform a specific active function such as toasting, cutting, and chopping. The common element of the various definitions of “household appliance” offered by the parties and relied upon by the district court is the character of an instrument or device performing a specific function.

We have always considered a hot water heater a necessity, and part of the house. A hot water heater is not optional for a house to be fully functional, similar to electric and plumbing service. Hot water is necessary, and therefore is part of coverage A. Also, the hot water heater is not removed when the homeowner moves out; it stays with the house. The purpose of the original language is said to have been the elimination from replacement cost recovery of items that are routinely replaced in most households, such as washers, dryers, blenders, microwaves, and similar items.

The trash compactor is similar to the washer, dryer, and other appliances. It is not vital to making the home habitable. The hot water heater should be coverage A and replacement cost, the trash compactor should be coverage C and actual cash value.

Appliances and vandalism

Question: We have a vandalism loss to a home that is foreclosed, and theft of a range and a fridge. We feel that the theft is not covered because the appliances could be considered personal property as they were not permanently attached to the home. The fridge was connected to the water line and the range was connected to the gas line, but both are movable property. The policy specifically excludes personal property but does not mention appliances or fixtures.

Do you feel these items would be covered under this policy? Vandalism and theft are covered perils so the question is related to the appliances alone.

Here’s some of the relevant policy language:

Foreclosed Building Coverage

1. “Foreclosed” buildings at the location described on the Declarations for which a Limit Of Insurance is shown. This includes:
   • Detached garages, storage sheds and other structures at the described location;
   • Outdoor swimming pools and fences;
   • Satellite dishes, radio and TV antennas less than 100 feet in height;
2. Underground pipes, flues or drains; and
3. If not covered by other insurance, materials and supplies on or within 100 feet of the location described on the Declarations for use in the construction, alteration or repair of the “foreclosed” building or other structures at this location.

However, loss to building materials and supplies not attached as part of the building structure caused by or resulting from theft are excluded.

PROPERTY NOT COVERED

The following property is not covered under Foreclosed Building Coverage:

1. Land (including land on which the property is located), water, growing crops or lawns (other than lawns which are part of a vegetated roof);
2. Trees, shrubs and plants (other than trees, shrubs and plants which are part of a vegetated roof);
3. Personal property;
4. Bulkheads, pilings, piers, wharves or docks;
5. Retaining walls that are not attached to the “foreclosed” building; or
6. Bridges, roadways, walks, patios, parking lots or other paved surfaces.

—— Wisconsin Subscriber

Related: 5 strategies to reduce property vandalism

Answer: A home is more than simply four walls, a roof, and floors that provide shelter. In order for it to be used for its intended purpose, certain things are considered a given. Heat for one, and the ability to cook and store food, as well as electricity to provide and other such features. While the stove and refrigerator are movable objects, people do not frequently upgrade them or rearrange them for aesthetic purposes. The refrigerator, stove, and dishwasher are necessary parts of making a dwelling habitable. Microwaves are a little different as they are much smaller and readily portable, so unless built in they are personal property.

 Correctly classifying an air conditioning unit

Question: My insured has CP 00 10 04 02 and CP 10 30 04 02 coverage forms applicable with replacement cost coverage on structure and contents.

An outside central a/c unit was stolen off its platform behind the building.

The CP 00 10 form declares the following property will be valued at ACV even when attached to a building:

1. Appliances for refrigerating, ventilating, cooking, dishwashing or laundering; or
2. Outdoor equipment or furniture.

I don’t think the a/c unit would be classified in this category and should be paid at RCV once the unit has been replaced.

Do you agree or disagree?

—— Arkansas Subscriber

Answer: We agree with your assessment of the situation. The property to be valued at ACV section does not include air conditioning units in its list of appliances, and an a/c unit does not seem to fit into any of the categories on the list.

Building coverage versus business personal property coverage

Question: Under the Building and Personal Property Form, CP 00 10 06 07, can the insured split coverage for appliances used for refrigeration, HVAC, and the like? In the event that an item could be covered under both building and business personal property, and the insured hit the limit on the business personal property, can the excess be considered on the building coverage?

—— Michigan Subscriber

Answer: The building limit could be tapped for appliances used to maintain or service the building, structure, or premises, such as for refrigeration. Refrigeration appliances could also fall under business personal property as machinery and equipment or all other personal property owned by the insured and used in the insured’s business. The HVAC system may be more difficult to fit into the personal property category as it may be seen as part of the building as permanently installed fixtures but not necessarily business personal property.

See also:

Clarifying homeowners’ insurance liability policy language

Understanding debris removal coverage, costs and settlements

Insurance questions arise when vehicles get towed