Under Pennsylvania’s social host liability or “Dram Shop law”, a business or individual who gives alcohol to a visibly intoxicated person may be legally responsible for any damage that person might cause. While a social host may not be liable for injuries sustained by the drunken guest (as they are also negligent), the host may be held liable for third parties, and may even be liable for passengers of the guest who have been injured in their car.

Before planning a party in your home, it is important to speak with your insurance agent or company representative about your homeowners coverage and any exclusions, conditions or limitations your policy might have for this kind of risk. Homeowners insurance usually provides some liquor liability coverage, but it is typically limited to $100,000 to $300,000, depending on the policy and may not be enough.

If you plan to serve alcohol at a holiday party the Insurance Information Institute offers the following tips to promote safe alcohol consumption and reduce your social host liability exposure:

• Make sure you understand your state laws. Before sending out party invitations, familiarize yourself with your state’s social host liability laws. These laws vary widely from state to state. Some states do not impose any liability on social hosts. Others limit liability to injuries that occur on the host’s premises. Some extend the host’s liability to injuries that occur anywhere a guest who has consumed alcohol goes. Many states have laws that pertain specifically to furnishing alcohol to minors.

• Consider venues other than your home for the party. Hosting your party at a restaurant or bar with a liquor license, rather than at your home, will help minimize liquor liability risks. 

• Hire a professional bartender. Most bartenders are trained to recognize signs of intoxication and are better able to limit consumption by partygoers. 

• Encourage guests to pick a designated driver who will refrain from drinking alcoholic beverages so that he or she can drive other guests home. 

• Be a responsible host/hostess. Limit your own alcohol intake so that you will be better able to judge your guests’ sobriety. 

• Offer non-alcoholic beverages and always serve food. Eating and drinking plenty of water, or other non-alcoholic beverages, can help counter the effects of alcohol. 

• Do not pressure guests to drink or rush to refill their glasses when empty. And never serve alcohol to guests who are visibly intoxicated. 

• Stop serving liquor toward the end of the evening. Switch to coffee, tea and soft drinks. 

• If guests drink too much or seem too tired to drive home, call a cab, arrange a ride with a sober guest or have them sleep at your home. 

• Encourage all your guests to wear seatbelts as they drive home. Studies show that seatbelts save lives. 

Thus, if you are hanging out with a small group of friends for cocktails or throwing a big family bash, remember that a good host is a responsible host, and needs to take steps to ensure guests get home safely if they have been drinking. Have a wonderful and safe holiday season!

Sewer, Drain and Sump Pump Backup Coverage

The Backup of sewer, drain and sump pump coverage provides protection when heavy rains overburden sewer systems and sump pumps causing unwelcomed water to enter the home. Not only does a backup cause thousands of dollars of damage but it also can create a major health hazard if raw sewage is involved.

A recent study by Zogby International shows that 67 percent of homeowners believe water damage from a sewer, drain or sump-pump back up would be covered. However, most homeowner and renter polices do not cover this type of loss without specifically adding it to your policy by endorsement. The good news is that this coverage can be added to most homeowner or renter insurance policies for ~$50-$100 per year and it can give you $2,500 to $50,000 of protection.

Do not assume you have this coverage today and make sure to ask your agent about your specific policy and need for this coverage. If you are shopping homeowner insurance make sure to find out if this coverage is included in your quote. This is great example how buying based on the lowest price and not knowing the details of the policy can leave you with some unexpected surprises at claim time.

Flood Insurance Is Available to Everyone

According to the FloodSmart.gov, your home has a greater chance of being damaged by a flood than by fire. However, your homeowner or renter insurance policy does not cover damage to your home or property for a flood. The only way to have coverage for a flood is to buy flood insurance from an insurance agent.

One common myth about flood insurance is that it is only available to homeowners who live in high risk flood areas with mortgages. Actually, any homeowner, renter or condo owner can buy flood insurance. According to FloodSmart.gov, those in low risk areas are also eligible for flood coverage on their building and contents which can start as low as $129 per year. With the average flood claim for 1 inch of water in a 2000 square foot home costing $21,000, the benefits of having flood insurance can add up quickly for any renter or homeowner. Click here to find out how much a flood may cost for your home.

Flood insurance is not designed to be as comprehensive as a homeowner insurance policy but it is simply designed to get you back on your feet. For example, flood insurance can be very limited for damage to basements, walkout basements and crawl spaces and the property that is stored in them. Most flood insurance also has a 30 day waiting period before the policy takes effect. So it is a good idea to start the process early because you will not be able to get coverage the week prior to the next big Lancaster storm.

For more information on the details of flood prevention and flood insurance visit www.fema.gov or www.FloodSmart.gov

One thing that was strange about the situation is that I just read an article about earthquake insurance the day prior and it stated that experts believe an earthquake between 6.5 and 7.5 remains possible in the East Coast or Northeast. In addition, John had put a sticky note on the article to write a blog post about this topic in the following weeks. After the most recent events in Lancaster and several phones calls from people wanting to know more about earthquake insurance, it was pretty obvious this blog topic needed to get moved up the priority list.

The Earthquake Exclusion
Earthquakes can have a devastating impact on property owners because earthquakes are not covered under standard homeowner or commercial insurance policies. The following excerpt is from the earth movement exclusion found in the ISO commercial property policy CP 10 30 06 07.¹

B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss
b. Earth Movement
     (1) Earthquake, including any earth sinking, rising or shifting related to such event

The only good news about the exclusion is that coverage for related damages that may result from earthquakes, such as fire and water damage, may be provided by standard homeowner and commercial property insurance.

How to Get Earthquake Coverage
Unlike flood insurance, earthquake coverage in PA can be added to your existing homeowner or commercial policy by endorsement. However, the cost will differ widely based on location, insurance company, distance from fault lines and the type of structure covered. Generally, older buildings cost more to insure than new ones because older building are less likely to be updated to current construction code. Wood frame structures generally benefit from lower rates than brick buildings because they tend to withstand quake stresses better.²

Be aware that you may not be able to get earthquake coverage immediately. Right after the earthquake we felt in Lancaster we had customers calling to add earthquake coverage immediately to protect themselves against any potential aftershocks. However, we could not “bind” the earthquake coverage right away because insurance companies have specified waiting periods relative to the last tremor before earthquake coverage takes effect.

Earthquake Deductible Issues
The major difference about earthquake coverage compared to coverage for fire or any other cause of loss, is that it has its own separate deductible that is a percentage rather than a dollar amount. In Lancaster PA, earthquake deductibles normally range between 2-5% with deductibles up to 20% in higher risk areas of the country. This means if your home is insured for $200,000 and you have a 2% earthquake deductible, you would have a $4,000 deductible for an earthquake claim.

Earthquakes are a real risk in our area with Harrisburg having an earthquake of 3.4 as recently as July 16, 2010. Take five minutes and ask your insurance agent if earthquake insurance is right for your home or business. To get other tips on taking protective measures before an earthquake strikes and what to do during and after earthquake visit FEMA’s website Are You Ready?

¹Christopher Tritto, “Are We Prepared for Our Own Disaster?” St. Louis Business Journal, Sept. 9, 2005
²Robert J Prahl, “Earthquake Insurance, What’s Your Experience?” Adjusting Today, Aug. 1, 2011

The Forgotten College Student Auto Discount

It is no myth that adding a young driver to an auto insurance policy can be expensive. According to MSN Money adding a teen driver will increase your auto insurance by an average of 156%! One of the factors driving this shocking auto insurance increase for young drivers is, not only who is driving the car but how they are using it.

This fall many families will be sending “young drivers” away to school and many of the students will not be taking cars that are insured on their parent’s auto insurance policy. For these families, the young drivers will not have regular access to that car and many insurance companies may offer a significant discount for the reduced car use by your young driver.

One thing to keep in mind is this discount usually has a distance requirement. The insurance company assumes if your child is attending college within a few miles from home, they will most likely still have regular use of that vehicle and the discount may not apply. However, other discounts like “good student” may still be available for college students that live close to home.

Are My College Student’s Belongings Covered?

The short answer is it depends. To have any coverage for liability or their belongings at school they must first qualify as an “insured” on your homeowner or renter insurance policy. According to the PA Insurance Service Office’s (ISO) homeowner insurance policy, an “insured” on a homeowner insurance policy includes a student enrolled in school who meet all the following:

1. Enrolled as a “full time” student defined by the school

2. Who was a resident of your household before moving out to attend school

3. Under the age of 24 and your relative

Thus, if a student is not enrolled full time or is over the age of 23 attending school, they may not have homeowner insurance coverage from your policy. The good news for families in this situation is that endorsement HO 05 27 “Student Living Away From the Residence Premises” may be used to extend coverage from the parent’s homeowner insurance for a student who is 24 or older.

If a student is an “insured” on the parent’s homeowner insurance policy they should have coverage for their “stuff” at school – laptops, books, TVs, ipods, ect. However, the standard ISO homeowner policy has a limitation of 10% for personal property located off the insured’s “residence premises”. This means if your homeowner insurance policy has $100,000 of personal property coverage, student(s) at college would only have $10,000 of coverage for their “stuff”.

This may sound like more than enough coverage but $10,000 can go quickly depending whether you have multiple college students or just one student with some really nice “stuff”. Again there is an ISO endorsement to provide extra coverage beyond the 10% if needed. It is HO 04 50 “Personal Property at Other Residences” endorsement and it allows you to purchase additional coverage above the 10 percent limitation found on most policies.

I always use the phrase “you don’t know what you don’t know” and for many families sending students off to college this fall they don’t know how their insurance works for this major life event. Take five minutes to ask your agent if any additional auto insurance discounts apply and how your homeowner insurance covers or doesn’t cover your college student. The answer could be a very big surprise!

Caution: Many insurance companies have their homeowner policy forms and their provision may be different than the standard ISO form I outlined above. Always consult your insurance company to verify their specific requirements for definitions of “insured” and coverages.

Gold Prices July 2009 - July 2011

Let’s say you bought a $5,000 ring when you got engaged in 2009. Since you read our prior blog “Jewerly Insurance: You May Have Less than You Think!”, you already knew that a standard PA homeowner or renter insurance policy only has a $1,500 theft limitation on jewelry and you chose to buy a personal articles policy to insure the ring for the full $5,000. Your thinking this is great news, because if the ring gets lost or stolen you get another $5,000 to buy the same ring. No damage done.

Now fast forward two years where the price of gold and many other precious metals have skyrocketed and the same ring is worth $8,000. Guess what happens if the engagement ring is lost or stolen now? You get a “smaller” ring because the maximum your policy will pay is $5,000. I know that is not news I would be happy to hear or deliver to my wife!

What should I Do?

If you currently have jewelry scheduled or on a personal article policy, like in the example above, call your agent and get an updated appraisal. Having jewelry insured for an appraised value from just a year or two ago could leave you very disappointed if you need to file a claim today.

Even if you do not have any scheduled jewelry, make sure your total amount of jewelry does not exceed the standard PA homeowner and renter insurance policy theft limit of $1,500. If it does, look into raising the theft limit above $1,500 on your homeowner or renter policy or place some of the jewelry on a personal articles policy.

Overall, this is just another example of why it is important to review your insurance on an annual basis with an agent. Things change in life, like the price of gold, and most people don’t even realize it actually impacts their insurance.

Now with social media we are expressing our thoughts and opinions more freely than ever before. However, unlike traditional one-on-one conversations, social media conversations can be visible to all our “friends” and “followers” and our words spread much more quickly. In addition, what we say online is much more permanent and documented. Thus, something we may regret saying or posting online can quickly spiral out of something we can’t control.

So what does this have to do with insurance? Actually it is a lot more than most people think. The standard PA homeowner or renter insurance policy does protect you when you are liable for causing “Bodily Injury” or “Property Damage” to someone else. However, the standard homeowner or renter insurance policy in PA does not protect you for harm arising from acts such as libel or slander.

This means if you unintentionally say or post something on social media and a person or business files a lawsuit for defamation, you have no coverage to pay a claim, court costs, time off work or lawyer fees. To fix this coverage gap you need to add HO 24 82 “Personal Injury” coverage to your homeowner or renter policy.

“Personal Injury” broadens your personal liability coverage on a homeowner or renter insurance policy to include injury arising out of the following

1. False arrest, detention, or imprisonment

2. Malicious prosecution

3. Wrongful eviction, entry into or invasion of the right of private occupancy room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor

4. Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services

5. Oral or written publication of material that violates a person’s right of privacy

“Personal Injury” coverage also provides you defense even if a defamation lawsuit is groundless. In addition, the coverage extends to your children if they are residents of the household.

There are several exclusions to the “Personal Injury” coverage, including acts that are intentional, acts arising out of or in connection with a business and acts performed out of civic or public activities.

“Personal Injury” is a coverage that everyone needs and in many circumstances there is little to no cost for adding to a homeowner or renter insurance policy. Ask your agent, make sure you have it and always think before you post!

With all of the bad storms the last few weeks we are getting a lot of calls about roof damage. Damage to your roof can take a few different forms. 

In extreme cases sections of your roof may be blown off and completely missing. The key thing here is to get some type of protection up there as soon as possible. This can sometimes be as simple as covering the area with a tarp.  Many of us remember after a hurricane went through Florida, all of the pictures of “blue roofs”. These tarps are only a very temporary solution though and are not meant to last very long. They are to protect the contents of your property until a more permanent solution can be arranged.

Other damage may be more cosmetic. Maybe a shingle blew off, or some gutter was damaged. Some damage may not even be noticeable from the ground. After a hail storm, small dents or punctures may appear in your roof membrane, metal flashings, or shingles. These are sometimes only visible by a close inspection on the roof. I would recommend that after a severe storm, that you have a local roofing professional examine your roof.

BEWARE the “Storm chasers”!  After any severe weather event they descend on an area like locusts. They come from all over the country and can be in an area almost overnight. They may even set up a temporary local office, so that they can use a local address.

Residential roofing contractors in Pennsylvania must obtain a license (they are relatively easy to get). Under the “Pennsylvania Home Improvement Consumer Protection Act” proposals must include the approximate start and completion date. The proposal must also include a “Right of Rescission” which allows you to rescind the contract within three business days of signing with no penalty.

Contractors from your general area will be much better to work with. You can check with local references and maybe even look at other jobs that they have done over the years in your area. Chances are that they are members of local organizations and their reputation is very important to them.

Joe has many other great roofing and home maintenance tips on his blog, Facebook page and Twitter account.

Photo by Scott Keuper via LancasterOnline

Just two days after Christmas I got a call from my wife, who was extremely upset, because our neighbor’s house was engulfed in flames.  Thankfully, no one was injured by the fire.  I arrived home about an hour later and the firemen were still fighting the flames that were being fueled by 30 mph winds. As I walked up to my house that was completely blocked off by emergency crews and fire hoses, debris and smoke filled the air. This was the second fire in our neighborhood in the last 3 months and I remember telling my wife that I never want to experience the heart-breaking smell of a house fire ever again.

The home that caught fire was a unique 1700’s stone mill house that people would admire when they walked or drove by. When I tried to explain to people where I lived, I actually used this as a reference landmark because so many people knew where it was located. The reason I bring this up is because the materials needed to rebuild this home were unique and they just started rebuilding the house this past March.

Photo by John Crawford via LancasterOnline

Then two weeks ago on May 26^th we had a small group of friends over to our house when someone said they smelled smoke. At first I thought they were joking because it was the evening major storms rolled into our area and we were watching the weather channel to make sure no tornados were coming our way. After realizing they were serious, I ran outside and to my devastation I saw the same house that caught fire in December was on fire again. This time the 3 car attached garage was on fire and the heat was so intense that I could feel it in my driveway 100 yards away. Again no one was injured but I will never forget seeing the owner’s crushing reaction as he walked up to see their home was being lost again.

As the firefighters tried to save the hard work that was done on the home from the first fire, we stood and tried to comprehend how this could happen twice to the same house and family. The probability had to be unfathomably small that the same house could catch on fire twice within 6 months.

I tell this story because many people, including myself, put important things off, like buying enough life insurance, disability insurance or completing a will. We think that we can either avoid a “lightning strike” in our life or we hope it won’t happen before we get to it. So if you have an insurance need, a will or anything else that you know is important but you have been procrastinating, please don’t wait. As a first hand witness, “lightning” can strike unexpectedly anytime, and in the most unimaginable ways, it can strike twice.

Myth 1: My homeowners policy covers my home and personal property against flood.

FACT: Most Homeowners policies do NOT cover damage by flood.  The good news is that a flood policy can be purchased, often from your local agent.  Flood policies are provided by the National Flood Insurance Program (NFIP) and Homeowners can purchase coverage on their home and their personal belongings.  Remember, your home might just be your single most important financial asset.  Make sure it’s protected.

Myth 2: You don’t need a flood policy because you’re not in a high-risk flood zone.

FACT: Technically, everyone lives in a flood zone.  Statistics indicate that about one-third of all flood claims are for damages to buildings that are not in high flood areas.

According to www.Fema.gov, flooding is the nation’s most common natural disaster.  In fact, if you click the “flood” link under the “Are you Prepared” section of the homepage, you will find great information regarding preparing yourself for a potential flood.

Further, the average flood claim over the last 10 years has amounted to nearly $48,000.  WWW.floodsmart.gov has a unique tool to help you estimate the cost to repair damage done by a flood.  For instance, using the link, a home of 1000 square feet, with up to six inches of water on the ground floor could experience damages adding up to over $20,000.  The same home with only an inch of water covering the ground floor could experience damages over $10,000. 

The best reason to buy a flood policy is because flood damage is expensive!

There’s more good news!  The government has developed Preferred Plan, which is available for homes in low to moderate risk areas.  This plan offers flood insurance at lower costs.  Your agent should be able to help you determine whether your home is eligible for this program.  As an example, a flood policy for a home in a low-risk flood zone could provide $100,000 of building coverage and $40,000 of contents coverage for about $300 a year. 

Another important thing to remember is that if you are attempting to secure a loan for a home that is located in a high-risk area, the bank may require you to buy a flood policy.

Myth 3: You cannot buy flood insurance if your home has been previously flooded

FACT: You are still eligible to purchase flood insurance as long as your community participates in the National Flood Insurance Program.  Further, you can purchase a flood policy at any time.  However, there is normally a 30-day waiting period before the policy takes effect, unless the policy is required by a bank for settlement on a loan.  The policy will not cover any flood losses that occur until after the policy takes effect.  So, if you buy a flood policy just before or during an actual flood, the policy will probably not cover the damage that might result from that particular flood. 

Myth 4: This last myth I want to discuss could be approached in a couple of ways.  Some people I’ve talked to assume a flood policy will cover all of their personal contents in their basement.  Others assume that the flood policy covers none of their property in a basement. 

FACT:  The fact is most personal belongings in a basement are NOT covered by a flood policy.  However, there are some building-related items that are covered. 

Covered Property in a Basement (If connected to a power source and installed in their functioning location)

• Sump Pumps
• Furnaces, water heaters, air conditioners and heat pumps
• Foundation Walls, staircases and elevators
• Unpainted drywall for walls and ceilings
• Electrical Outlets, switches and circuit breaker boxes
• Washers and Dryers
• Food Freezers and the food in them (but not Refrigerators)

Property Not Covered in a Basement

• Basement improvements such as finished walls and flooring
• Personal belongings such as clothing, electrical equipment (TVs) and furniture
• Kitchen or bathroom supplies
• Bookcases and window treatments
• Refrigerators

In summary, it doesn’t take two guys with expertise in physics and special effects to understand the basics of flood insurance.  Just some simple research.

Myths…   BUSTED!

What is “Insurance to Value”

Insurance to Value is a provision in most home insurance policies that states you must insure your home to a specified percentage of the value of the home. This requirement is normally 80%-100% of the cost to replace or rebuild the property (not the market value). In return to complying with this provision, the insurance company usually offers lower rates. However, if the Insurance to Value requirement is not met, you are considered “underinsured” and can be penalized when a property claim is filed. The penalty is calculated using the formula below.

Insurance Carried on Property

————————————–     X   Damage Amount  =  Amount Paid by Insurance

Insurance Required on Property

Let’s revisit our example to see why the Insurance to Value provision caused the insurance company to pay $20,000 less than the $100,000 of damage you suffered in the fire. After letting you blow off some serious steam, the adjuster explains that the amount of “Insurance Carried” on your home insurance policy was $200,000 but the “Insurance Required”, based on your 100% Insurance to Value provision, is $250,000. Thus, you are underinsured by $50,000 or 20% and your $100,000 of fire damage is only covered for $80,000*.

$200,000 (Carried)

—————————   X   $100,000 (Damage) = $80,000 (Paid by Insurance)

$250,000 (Required)

How Can I Protect Myself

I know this example may sound extreme but it can and does happen. It is estimated that 60% of homes are underinsured by as much as 20%. Here are some tips to protect yourself from being underinsured and from being disappointed if you have a home insurance claim.

1. Contact your agent to find out what your “Insurance to Value” requirement is on your home insurance policy. The impact can be significant if it is 80% or 100%.

2. Have your agent calculate the replacement cost value of your home and find out if you are underinsured. Even if you have to pay a few extra dollars to increase the coverage on your home insurance, it is much better than going through a claim that leaves you paying thousands of dollars out of pocket.

3. Make sure to contact your agent anytime you upgrade, improve or make an addition to your home because this may change the amount of insurance you are required to carry. See more on this subject in our prior blog post “Don’t Improve Your Home Without Improving Your Insurance”.

4. If you are shopping your home insurance, make sure to ask what the Insurance to Value requirement is and how a partial loss and total loss claim would be handled. Not all insurance companies handle this the same way and this is a great example why shopping insurance solely on price can be dangerous.

Were you aware of this important home insurance penalty? Please leave questions and comments below.

* This example assumes the actual cash value settlement option is less than the Insurance to Value option