RISK MANAGEMENT
INSURING HOT TUBS ON AN HO POLICY
How important is it to really to read the policy and discuss exposures with the carriers ?
Author : Bill Wilson
QWe recently had an outdoor hot tub claim where all of the pipes froze , resulting in a total loss of the hot tub . The homeowner has replacement coverage on the home and personal property . The insurance company wants to pay the claim on an ACV basis . They have stated that the hot tub is Coverage B , structures other than buildings . The hot tub is located within five feet of the patio door and one foot of an outdoor wall .
The agency believes that it is personal property and / or outdoor equipment and should get replacement value . Do you have information that would back up either party ?
QA friend told me that his homeowner ' s carrier adjusted the loss to his hot tub on an ACV basis , citing the Loss Settlement provision , which states that losses to ' structures that are not buildings ' are settled at actual cash value . Although a bit of a stretch , because the policy doesn ' t define Personal Property or Other Structures ( nor does it specifically exclude hot tubs ), could the case be made that a hot tub is either of these ? The Other Structures section on page 2 of 18 references other structures ' set apart from the dwelling by clear space .' In this case , the hot tub was part of the insured ' s deck attached to the house , so I guess it wasn ' t set apart by clear space , but if that ' s the case , wouldn ' t it be part of the dwelling ? Coverage A says that the dwelling includes ' structures attached to the dwelling .' If the ' attached ' deck is part of the dwelling , couldn ' t the hot tub ( part of the deck ) also be considered part of the dwelling ?
QI have a question in regards to hot tubs . Where would you find coverage for hot tubs that are placed outside ?
Usually , they are sitting on decks or cement pads not far from the house ( personal property or other structures ). I have had two claims with two different companies , and neither company has handled these claims the same . Company A fought it , but they finally covered it at RC . Company A thought it should be other structures and covered at ACV . We thought it was the personal property that should have RC . Company B fought it , sent an electrical engineer out , and declined it . They said they couldn ' t prove that a power surge / lightning struck the pump causing the lines to freeze . The Company B adjuster / Company C Electric said the pump ' malfunctioned ' before the line froze , causing damage . Do you have any insight ?
These questions center around three issues . First ,
A does loss settlement come from Coverage A , B , or C ? Second , is loss settlement for damage to a hot tub replacement cost ( RC ) or ACV ? Third , is the cause of loss covered by the policy .
Applying the current 2011 ISO HO-3 policy , the first two questions depend on whether the hot tub is Coverage A , B , or C and whether coverage has been endorsed onto the policy . If the hot tub is built into a deck that is affixed to the dwelling , then the hot tub , like the deck , is likely Coverage A . If there is a separation of clear space or a connection only from , for example , a water line to the hot tub , then the hot tub is likely Coverage B . If the hot tub might move with the residents , then there ' s an argument ( however weak ) it could be Coverage C . From the standpoint of limits , perils , and valuation , the important thing is to determine and agree with upfront and document the file with correspondence to / from the underwriter . Once you decide which coverage is appropriate or preferred , you can take
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