Loss Conditions

Loss Conditions – Time Element Insurance

General Conditions

Definitions

Loss Conditions

H. Loss Conditions – Property Insurance

1. Deductibles

a. We will not pay that part of the loss that is attributable to the applicable deductible(s) shown in the Declarations of this Policy, in accordance with the provisions of 1.b. below.

b. Applicable deductibles by location are shown in the Declarations. If the Declarations show a deductible for a particular building, then that building is considered to be a separate location for the purpose of this Deductible clause. The deductible specified for a particular location applies to all property at that location. Therefore, if a building is shown in the Schedule as a separate location, all Covered Property at that location is subject to that deductible. The deductible will apply only once at that location in each occurrence of Flood.

If one occurrence results in loss or damage at more than one location, the applicable deductible will apply separately to loss or damage at each location that has sustained loss or damage, in accordance with the information shown in the Declarations for locations and deductibles. Therefore, for example, if Flood damages two buildings which are shown in the Declarations as separate locations, the applicable deductible will be applied separately to the loss at each location.

In any one occurrence of Flood, we will first reduce the amount of loss if required by the Coinsurance Condition. 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 applicable Limit of Insurance, whichever is less.

2. Coinsurance

The following applies only if a Coinsurance percentage for Covered Property is shown in the Declarations:

a. We will not pay the full amount of any loss if the value of Covered Property at the time of loss times the Coinsurance percentage shown for it in the Declarations is greater than the applicable Limit of Insurance for the property.

Instead, we will determine the most we will pay using the following steps:

(1) Multiply the value of Covered Property at the time of loss by the Coinsurance

percentage;

(2) Divide the Limit of Insurance of the property by the figure determined in Step (1);

(3) Multiply the total amount of loss, before the application of any deductible, by the figure determined in Step (2); and

(4) Subtract the deductible from the figure determined in Step (3). We will pay the amount determined in Step (4) or the Limit of Insurance, whichever is less. For the remainder, you will either have to rely on other insurance or absorb the loss yourself.

Analysis

As with any policy, there are conditions that apply whenever there is a loss. The first condition is deductibles, and they are listed by location in the declarations. The deductible applies to all property at the specified location, and it applies only once per flood occurrence. However, if a flood affects multiple locations covered under the policy, then the deductible applies separately to each location.

 Before the deductible is applied any coinsurance penalties will be applied, then the deductible. As always, losses below the deductible are not paid. If the adjusted amount of loss exceeds the deductible, the deductible is applied to the adjusted amount, and the resulting amount will be paid or the limit of insurance, whichever is less. For example, the deductible is $1,000. The loss is $50,000 but the property was not insured to value, so there is a coinsurance penalty since the property was only insured to 70 percent of value. The adjusted amount of the loss is then $35,000. The deductible is subtracted from this amount, leaving $34,000. As the limit of insurance is $250,000, $34,000 is what is paid for the loss.

 The standard coinsurance clause for property coverage is in the policy. The result of the value of the property multipled by the coinsurance percentage is then divided into the limit of insurance. This result is then multiplied by the amount of the loss. From this amount the deductible is subtracted. While the wording is awkward, the familiar had/should x amount of loss is another way to phrase the calculation. The form includes three examples as follows: