The claims staff is adamant that, unless scheduled, jewelry, furs, cameras, musical instruments, silverware, and golfing equipment are paid at fair market value subject to depreciation, not replacement cost. The underwriting/marketing folks on the other hand believe the HO 04 90 endorsement provides replacement cost coverage.

My reading of the endorsement would seem to support the underwriting/marketing group in that the endorsement is attached by means of additional premium, the specific intent being to expand coverage not restrict.

The first paragraph of the endorsement is exceptionally broad in that it provides settlement at replacement cost at the time of loss for Coverage C – Personal Property.

The language that appears to be causing disruption is the next paragraph which states:

Personal Property Replacement Cost coverage will also apply to the following articles or classes of property if they

are separately described and specifically insured in this policy:

a. Jewelry;

b. Furs and garments trimmed with fur or consisting principally of fur;

c. Cameras, projection machines, films and related articles of equipment;

d. Musical equipment and related articles of equipment;

e. Silverware, silver-platedware, goldware, gold-plated ware and pewterware, but excluding pens, pencils, flasks, smoking implements or jewelry; and

f. Golfer's equipment meaning golf clubs, golf clothing and golf equipment.

The adjusting staff's position is that unless these items (golf clubs) are scheduled in the policy they are not subject to replacement cost coverage. A different reading of this section of the endorsement may be that replacement cost will also apply to scheduled items as well as unscheduled personal property. I would appreciate your thoughts on the application of this endorsement in this matter.

California Subscriber

We really need to look at both endorsements to understand how this works. The HO 04 61, scheduled personal property, does more than change the loss settlement provisions for the covered property. It makes the causes of loss open perils instead of named perils. For loss settlement for golf equipment, losses are settled at the least of ACV, cost to repair/replace, or the amount of insurance.

On the HO 04 90, replacement cost loss settlement, the endorsement is expanding the loss settlement provisions to the least of replacement cost, cost to repair/replace, special limits stated in the policy, or the limit of liability that applies to property listed in A.2.a-f. You are correct in that the description of eligible property is very broad. Note that in A. 2. it reads “ This method of loss will ALSO (emphasis added) apply…” this is providing coverage to the listed items in addition to what is covered under A.1. Since the HO 04 61 includes ACV as a replacement option, when combined with the HO 04 90, that is changed to replacement cost. The last paragraph in section 2 states that other property separately described will not be settled at replacement cost. The intent of the language is to apply the replacement cost provisions to the listed scheduled items as well as other property, not that the property must be scheduled in order for the provisions to apply.

Let's look at an example. An insured has golf equipment scheduled for $10,000 on the HO 04 61 on his HO 03. The equipment is stolen. At the time of loss the actual cash value of the equipment is $7000; the cost to replace the equipment is $12,000 and it is scheduled for $10,000. The HO 04 61 pays the lesser of the three, thus paying $7000.

Now let's add the HO 04 90 to the above situation. The actual cash value of the scheduled property endorsement is replaced by the replacement cost provision of the HO 04 90; therefore instead of paying the lesser of $7000, $10,000 or $12,000 the form now pays the lesser of $12,000, the replacement cost, or $10,000, the scheduled amount.

Now, if the golf equipment was not scheduled but the HO 04 90 applies, then the HO 04 90 pays the replacement cost of $12,000 since there are no special limits that apply to the equipment.