A magnitude 4.8 earthquake centered west of Manhattan struck the northeastern U.S. this morning. We at Big I New York hope that all of you, your families, friends, and clients are safe and suffered no injuries. However, it is possible that some of your clients suffered property damage. Your phones may ring with calls asking whether homeowners and commercial property insurance covers the damage. Here is what you and they need to know:
Standard homeowners and commercial property insurance policies typically do not insure against damage caused by earthquakes or other types of earth movement. The ISO Homeowners 3 – Special Form states that the insurer does not insure for loss caused directly or indirectly by earthquake, landslide, mudslide, or earth sinking, rising, or shifting. We have reviewed the homeowners policies of four carriers that use their own forms; all have similar exclusions. The ISO Commercial Property Causes of Loss – Special Form contains an almost identical exclusion.
Personal and commercial auto insurance policies typically cover damage to a vehicle caused by an earthquake if the policyholder purchased Comprehensive Coverage on the vehicle.
If your personal or commercial clients purchased earthquake insurance, their policies would include earthquake coverage endorsements. Examples include:
- ISO homeowners endorsement HO 04 54 03 22
- Travelers homeowners endorsement HQ-054 CW (02-20)
- ISO commercial property endorsement CP 10 40 02 19
- ISO businessowners policy endorsement BP 10 03 07 13
Deductibles for earthquake coverage are typically a percentage of the limit of insurance on the covered property. For example, the dollar earthquake deductible for a dwelling insured for $400,000 with a 5% deductible is $20,000.
The deductibles typically apply separately to buildings and personal property. If the deductible is 5%, and the homeowners policy insures the dwelling for $400,000 and the contents for $200,000, the insurer will apply two deductibles – one of $20,000, the other of $10,000, for a total of $30,000.
“Difference In Conditions” commercial property insurance policies typically provide earthquake coverage subject to a large deductible such as $50,000. Some inland marine coverage forms may also provide the coverage as an option. For example, builders risk and installation floater policies often have coverage available by endorsement.
The Insurance Information Institute offers these explainers for those who want more information:
If you have specific questions, feel free to email us at expert@biginy.org.