This policy condition addresses who should pay for a loss when it is covered by another insurance policy or by some other agreement such as a home warranty agreement or an extended warranty agreement. When there is other insurance, the two insurers will share the loss in the proportion that their respective policy limits bear to each other. As a practical matter, if one insurer refuses to pay, the other insurer will often pay the entire claim, and then proceed to sue the first insurer to recover the unpaid share. If there is a service agreement such as a home warranty plan, this condition provides that the insurance afforded by the policy will only pay the excess of any amounts payable under the service agreement. 94 The Complete Book of Insurance SUITS AGAINST US Suits against us (no-action clauses) address two separate concepts. First, this condition provides that no action can be brought against the insurer unless there has been full compliance by the insured with all the policy’s terms and conditions. As a practical matter, the insurer cannot prevent the insured from filing a lawsuit. All this clause does is provide the insurer with a legal defense to a lawsuit by an insured when the insured fails to follow the policy requirements, such as refusing to submit to an examination under oath or failure to comply with the proof of loss requirements. Second, this condition provides that suit must be brought within two years after the date of loss. This provision again cannot prevent an insured from filing a lawsuit against the insurer. It does, however, afford the insurer a legal defense to a lawsuit by the insured if that lawsuit is not filed within the two-year limit. Check your policy—many policies contain only a oneyear period in which a suit must be brought. This provision is enforced in the same manner as is a statute of limitations. In some states, the two-year period does not begin to run until the loss has become sufficiently apparent that a reasonable insured would know that his or her duty to give the insurer notice of the loss has been triggered. This is something that frequently becomes an issue in soils movement and foundation damage claims. Further, in some states, the clock on the two-year period stops running between the date when the insured gives notice of the claim and the date on which the insurer informs the insured of its coverage/claim decision. Still further, if the insured is having difficulty completing the proof of loss, the insured and the insurer can enter into an agreement that the twoyear limitation on suit period can be extended, just as they can agree that the time for submission of the proof of loss can be extended. Any such agreement necessarily should be confirmed in writing. OUR OPTION This condition permits the insurer to repair or replace any part of the damaged or destroyed property itself, instead of paying the insured. Conditions 95 LOSS PAYMENT This condition addresses several issues, including to whom and when a claim payment will be made. This condition provides that payment will be made to the named insured unless some other person is named in the policy (e.g., your spouse) or is legally entitled to receive payment (e.g., your mortgage lender). This condition further provides that loss payment will be made sixty days after the insurer’s receipt of proof of loss and: ◆ the insured and the insurer agree to the amount of loss; ◆ there is an entry of a final judgment in the lawsuit; or, ◆ there is the filing of an appraisal award with the insurer. ABANDONMENT OF PROPERTY This condition provides that an insurer has no responsibility for property abandoned by an insured, whether for purposes of repair, demolition, disposal, or otherwise. In effect, this condition confirms that the insurer’s duty in the event of a covered loss is fundamentally one of paying money. MORTGAGE CLAUSE This set of conditions sets forth the insurer’s and mortgage lender’s respective rights and obligations. (You can rest assured that most mortgage lenders are quite aware of their rights and obligations with respect to your policy.) The principal things that you need to know are that any loss payable for damage or destruction to the dwelling and other structures will be made both to you and your mortgage lender. Mortgage lenders often will require that claim payments be held in trust or in an account over which they have control in order to assure that the insured effects necessary repairs. NO BENEFIT TO BAILEE In effect, this provision is designed to assure that if a moving or storage company hired by you damages, loses, or destroys any of your property, it will be liable for that loss, not your homeowners insurer. 96 The Complete Book of Insurance NUCLEAR HAZARD CLAUSE This condition defines what constitutes nuclear hazard for purposes of the nuclear exclusion, and effectively provides that only direct loss by fire resulting from the nuclear hazard is covered. In the context of current times, this means that radioactive contamination of your property as the result of the leaks from a nuclear generating station would not be covered. Neither would radioactive contamination from a terrorist setting off a so-called dirty bomb. RECOVERED PROPERTY This condition details what will happen in the event stolen property is recovered that the insurer has paid for. It requires both parties to give notice to the other that property for which a claim has been made or paid has been recovered. This condition gives to the insured the choice of retaining the claim payment and surrendering the recovered property to the insurer or reclaiming the recovered property. If the insured elects to keep the recovered property, the loss payment will be adjusted down by the amount the insurer previously paid to the insured for loss of or damage to the property. This means that the insurer can deduct this amount from any outstanding amount of the claim from which payment will be made or that the insured will have to reimburse the insurer for the amount in question. VOLCANIC ERUPTION This condition provides that all volcanic eruptions that occur within a seventytwo-hour period will be considered one eruption. This provision is potentially relevant to how many: ◆ covered losses there may be and ◆ how many deductibles will apply. Conditions 97 POLICY PERIOD This condition provides that the policy only applies to loss during the policy period. Under the law of many states, a property loss is deemed to have occurred during the policy period when the damage becomes apparent to the insured. Notwithstanding the fact that some kinds of losses occur gradually over multiple policy periods, this provision in effect provides that in such cases, only the policy in effect when the insured becomes aware (or should have become aware) of the loss will apply. CONCEALMENT OR FRAUD This is a highly important condition for all policyholders to be aware of. Concealment or fraud on the part of any person insured—at any time before or after a loss, including at the time of application—will void the policy of that insured altogether. There will be no refund of premiums. Moreover, the consequences of misrepresentation, concealment, or fraud with respect to applying for an insurance policy or with respect to a claim are far-reaching. Most insurers maintain fraud databanks and share that information with each other and insurance regulatory authorities. If the fraud was in connection with a claim and you received a payment to which you were not entitled because of your fraud, you could also be subject to criminal prosecution. Committing a fraud on an insurance company has the potential of affecting your ability to obtain insurance in the future. If you cannot get insurance you may not be able to register your car in some states. Lacking insurance, you may not be able to operate certain kinds of businesses. LOSS PAYABLE CLAUSE This condition bears some parallels to the mortgage clause. It provides that if the declarations show a loss payee for specified items of personal property, the policy’s definition of insured is amended to include the loss payee with respect to that property

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