Last week, I stumbled upon an interesting policy statement thanks to a phone call from another veteran policyholder lawyer. The policy provision came in the form of an approval that turns a policy for broad homeowners into a DIC policy. The endorsement essentially states that in exchange for a premium credit, the insurance excludes coverage for any losses that may be insured under the California FAIR Plan. hazards to be excluded, which are the same as those covered by a standardized California FAIR planning policy. 1, 2
This was weird for me and several others I talked to. The vast majority of DIC policies add primary layers to coverage that is lacking in a FAIR plan policy and exceeding the limits for those present. Thus, if a DIC policy identifies coverage already provided in the FAIR plan policy, the common assumption is that this is excessive coverage. However, when a DIC policy consists of a broad-based policy with a FAIR plan exclusion, this assumption is completely dangerous. The specific language for the exclusion of the FAIR plan must be examined to make sure that a double coverage is excessive, or only surpluses added immediately are deleted. In the two examples discussed above, no excess inventory is provided.
Frankly, I am surprised that carriers can even offer DIC policies in this way (if they really are). Insured are given a long policy that aims to provide broad coverage, but a recommendation at the end removes much of it. In the case of an approval of a widescreen policy that excludes all coverage that could be obtained through the FAIR Plan, the policyholder probably has no idea what this Frankenstein DIC policy actually covers.
It is very important to ensure that you have the right DIC policy for your needs. Few limits beyond what the FAIR plan can be decisive for some insured. For example, the FAIR plan limits garbage removal to 5% of the coverage A limits; other structures and code upgrades to 1
Legally, a carrier can not sell a DIC policy unless the customer also has a FAIR plan policy. If they did, there would be no coverage for fire, which is contrary to the minimum requirements in the standard form for homeowners. 3 If a carrier sells such insurance without taking steps to ensure that the customer also has a FAIR Plan policy, the carrier may have trouble implementing the approval.
While it is easy to trust agents and brokers who can tell you what you want to hear for customer service and sales purposes, it is important to do a thorough review of your coverage to ensure you are adequately protected. It is better to be happy with your insurance claim than unhappy and in a lawsuit against your agent or broker.
1 A DIC policy complements a FAIR plan policy, which covers only the most fundamental hazards. , namely fire, and is subject to sometimes insufficient restrictions.
2 The FAIR Plan is an association of insurance companies that sell insurance to consumers who cannot obtain insurance from the recognized market. The FAIR plan was created by law, and all approved homeowners must participate. See Cal. Ins. Code § 10093 et. seq.
3 Cal. Ins. Code §§ 2070, 2071.