Introducing Service Line Coverage
By Sherry Taylor, Manager of Product Development and Support
Recently, WRC clients received an email announcing the introduction of a set of new endorsements, Residential Underground Service Line Coverage. These optional property endorsements were developed in response to a number of requests for this type of coverage because it is not readily available to our client companies in the open market.
Service Line Coverage provides protection against damage or repair needed due to the failure of underground piping or wiring that provides a conduit for residential services such as cable, data, drainage, electrical power, heating or water. However, it does not provide coverage for all lines. Items such as those running under dwellings, French drains, septic or leach field equipment, and lines solely servicing outdoor equipment or buildings are specifically excluded.
Coverage is available for residential lines only, including rentals. It does not apply to lines that solely service appurtenant structures, farm buildings/structures, or other buildings.
Coverage is provided on a defined peril basis for covered underground service lines and additional living costs and loss of rents. Additionally, a few coverage extensions are included for covered losses. Extensions include excavation costs, reasonable extra expenses to expedite repair or replacement, and outdoor property. Outdoor property is limited to 10% of the limit.
The forms contain some exclusions including for the types of losses typically covered by a primary property policy; business interruption; increased utility usage; low pressure or blockage; green, ordinance or other upgrades; and matching undamaged property to name a few.
Two endorsements per program are available. One has a maximum available limit of $10,000 per occurrence and one has a maximum available limit of $15,000 per occurrence. Both endorsements have a drop-down provision that reduces the coverage limit to $3,500 for service lines 50 years or older. The limits are embedded in the endorsement and may not be increased.
Coverage is on a replacement cost basis, subject to the limit and the amount actually spent. A $500 deductible applies regardless of limit.
Each company may attach service line coverage on any underwriting basis they determine appropriate. However, application should be made on a consistent basis. A few examples may be helpful to illustrate some options.
It is acceptable to attach $10,000 coverage to every HO-2 and $15,000 to every HO-3, but it would not be acceptable to provide the $15,000 endorsement to some HO-3s, but not others – unless there are specific eligibility requirements that determine which limit is applied.
It is also acceptable to attach $10,000 to every HO policy and allow clients to increase coverage to $15,000 or allow removal of coverage altogether. However, again, the “rules” for doing so must be consistent and not discriminatory.
A third option is to announce coverage availability and let the agent or the insured request it. But approval of any request must be consistent and based on rational, quantifiable factors (that should consider adverse selection).
Normally, this coverage would be part of an agreement to write Equipment Breakdown, but the WRC- developed endorsements may be used on policies on a stand-alone basis. They are compatible with all current AAIS programs (Homeowners, Farmowners, Dwelling Fire and Farm Fire) and Iowa property forms (ER).
Unlike some of the other service line coverage available in the marketplace, WRC does not reinsure these endorsements on a 100% basis. The full amount of any coverage is the responsibility of the company issuing the endorsement. However, any amounts paid do count toward a client’s reinsurance aggregate.
Each company taking advantage of these offerings is also responsible for claims adjustment, but our claims consultants are available for any needed assistance.
To begin using the endorsements, a form filing is required. They have not been filed in any state. Additionally, if your state requires a rate filing, that would need to be submitted as well. Minimum suggested rates for all programs are shown below.
|Limit||Owner-Occupied Dwelling||Non-Owner-Occupied Dwelling|
|$10,000||$30 each||$40 each|
|$15,000||$40 each||$50 each|
As always, the WRC Mutual Assistance team is available to support implementation of these new endorsements. Should you have any questions, feel free to contact Melissa Stream for underwriting or Sherry Taylor for filing information. Both are available for coverage questions.