The ISO 2022 HO Program was examined for enhancements to coverage in the HO policy forms last month in ISO 2022 HO Program—Part I. This article will examine the restrictions introduced in the HO policy forms, a new policy form, and new enhancement and restrictive endorsements.
These forms will go into effect March 1, 2022—if your state adopts them.
Restrictions of the HO policy
Model aircraft and watercraft. ISO introduced a sublimit for model or hobby aircraft and watercraft in the HO policy. The sublimit amount is $2,000, but it can be increased with the HO 04 65Coverage C Increased Special Limits of Liability endorsement. On the other hand, liability coverage is enhanced by exception for “model or hobby watercraft not used or designed to carry people or cargo,” which complements the same exception for aircraft.
Credit cards. The additional coverage titled Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money Coverage is removed from the policy form. A base limit of $1,000—together with optional increased limits up to $10,000—are made available under the revised HO 04 53 Increased Limit endorsement.
Home sharing. While there is no change in coverage, you should know that the mandatory Home-Sharing Host Activities Amendatory endorsements have been incorporated into the policy forms and the Personal Injury endorsements.
Cannabis. The 2011 HO policy makes no reference to cannabis under property coverages, but it includes marijuana as a controlled substance under the liability exclusion. The 2022 HO policy addresses cannabis in a more comprehensive manner. The policy has been revised to exclude cannabis as covered property, apart from prescription drugs and goods, or products containing or derived from hemp. Also excluded is any liability arising out of the use, sale, manufacture, delivery, transfer or possession by any person of cannabis, regardless of whether such cannabis is considered a controlled substance.
New policy form
Enhanced renters policy. An optional alternative to the traditional HO 00 04 Homeowners 4–Contents Broad Form policy is introduced, titled the HO 00 14 Homeowners 14–Contents Comprehensive form. ISO developed this new form after surveying millennials about their coverage needs. As presented elsewhere in this article, you can see that cannabis has received attention in the 2022 HO program. I can’t help but think that cannabis has something to do with the development of this form, because the rationale for the selection of coverages in it are a mystery to me.
All risks not excluded are covered perils—which could have been accomplished by endorsement to the HO 00 04—and the contents are settled at replacement cost, which, currently, can be accomplished by endorsement. There is automatic broadened coverage for home-sharing host activities (who knew insureds regularly offered their rented premises on Airbnb?) and coverage for motorized bicycles and motorized scooters (coverage that actually makes sense, but could be accomplished by the new endorsement). Then, there are additional coverages for hard-drive data recovery ($300) and bed bug remediation ($500).
Comparing the special limits of the HO 00 14 with the HO 00 04 for the benefit of the policyholder is going to be difficult. There is an aggregate loss limit of 10% for selected special property (instead of separate dollar sublimits), and it includes the value of antiques and fine arts (which are not limited on the HO 00 04). There is no property coverage for watercraft; trees, shrubs and plants; fire-department service charges; loss assessment; collapse; safety glass; building additions or alterations; ordinance or law requirements; and grave markers. There is no liability coverage for service vehicles and certain recreational vehicles; watercraft; loss assessment; and residence employees.
Bottom line—be cautious when offering this new form as an alternative to the HO 00 04 form.
New broadening endorsements
Theft for dwelling under construction. ISO introduced a new, optional HO 06 67 Limited Theft-Coverage A and B-Dwelling Under Construction endorsement, which insures theft of property covered under Coverage A-Dwelling and Coverage B-Other Structures to complement the existing HO 06 07 endorsement, which covers the theft of personal property.
Water backup. Currently, the HO 04 95 Limited Water Back-Up and Sump Discharge or Overflow Coverage endorsement requires the backup to originate from within the dwelling where the named insured resides. ISO introduced a new, optional HO 06 95 Broadened Water Back-Up and Sump Discharge or Overflow Coverage endorsement to remove that limitation, providing broader coverage for backups occurring outside the premises.
Other structure replacement cost. ISO introduced a new, optional HO 06 91 Coverage B–Other Structures Away From The Residence Premises–Replacement Cost Loss Settlement For Buildings endorsement to provide a replacement cost on other structures at another location. Additionally, a new, optional HO 06 92 endorsement provides the same enhancement to give replacement cost for specified other structures. And, the HO 04 43 Replacement Cost Loss Settlement For Certain Non-Building Structures On the Residence Premises endorsement is revised to include replacement cost loss settlement to permanent, built-in outdoor kitchens and cooking facilities.
Other insured locations. Liability coverage for an “insured location” can include another residence, vacant land and a premises used in connection with the residence. ISO introduced a new, optional HO 24 02 Other Insured Location(s) endorsement to cover locations that do not fit the listed categories of an insured location.
Motorized scooters/bicycles. The use of motorized scooters and pedal-assisted bicycles has become popular, especially in urban areas. As previously discussed, the new HO 00 14 renters form automatically covers these vehicles for liability. Accordingly, the optional HO 24 13 Incidental Low Power Recreational Motor Vehicle Liability Coverage endorsement is revised to include liability coverage for owned motorized scooters and motorized bicycles, while being used off an insured location.
Additionally, liability coverage in the policy forms that accommodates nonowned recreational vehicles has been expanded to include motorized scooters and motorized bicycles more explicitly, by changing the definition of motor vehicle. However, the insurer can remove this nonowned coverage from the policy by adding the new, optional HO 24 03 Non-Owned Motorized Bicycle and Motorized Scooter Liability Exclusion endorsement.
Cannabis. ISO has introduced two new, optional endorsements to restore some of the coverage removed by the new cannabis exclusions in the policy forms. The HO 06 01 Limited Cannabis Property Coverage endorsement makes cannabis covered property for certain specified perils. The HO 24 01 Cannabis Liability Coverage endorsement provides broadened liability coverage when damages arise out of the lawful use or possession of cannabis by any person.
New restrictive endorsement
Other structure. Suppose the insurer is willing to write a HO policy on the dwelling, but has concerns about an old, dilapidated garage. ISO introduced a new, optional HO 06 21 Specified Other Structure(s) Exclusion endorsement to exclude a described other structure as covered property on the residence premises. Additionally, the endorsement provides the option to also exclude liability coverage for that structure.
There is a lot to absorb in this new HO program. You have a few months to sort it all out before it goes into effect next year—assuming your insurers adopt it.
Remember: For future reference, both Part I and Part II of this article will be available on PIA Northeast News & Media. They can be found using a category search (“Technical”), or a key word search (“ISO”).
Includes copyrighted material of Insurance Services Office, Inc. with its permission. Copyright, Insurance Services Office Inc. 2021.
Dan Corbin, CPCU, CIC, LUTC
Dan Corbin joined the PIA team in 1992 and is the association’s director of research. His insurance background spans 45 years, with varied experience as agency owner, commercial service representative, producer, personal-lines manager and insurance specialist for a mortgage lender. Each year, he responds to approximately 800 technical inquiries from members. Dan is a member of the Chartered Property Casualty Underwriter Society and the Society of Certified Insurance Counselors. On Jan. 1, 2021, he became a contracted provider of membership services.