Coverage Corner

ARE VARMINTS COVERED?

By Bill Wilson

In an insurance career that spans seven decades, I’ve responded to dozens, maybe hundreds, of questions about homeowners’ coverage for damage caused by animals. The types of animals involved in these claims include mice and rats, squirrels, roaches, snakes, turtles, bats, pigeons, goats, raccoons, skunks, carpet beetles, spiders, dogs, deer, bears, chipmunks, and the list goes on and on.

Just about every homeowners’ policy I’ve ever reviewed excludes damage caused by birds, rodents, and insects. So, in my list above, we can immediately rule out coverage under these policies for mice and rats, roaches, pigeons, carpet beetles, squirrels, and chipmunks.

So, sticking with the list above, what about snakes, turtles, bats, goats, raccoons, skunks, dogs, deer, and bears? Might damage caused by these types of animals be covered? The answer, so often the case in insurance, is … maybe.

Using Insurance Services Office’s (ISO’s) HO 00 03 as a model homeowners’ form – prior to the 1991 edition of this form – in addition to birds, rodents, and insects, also excluded were “domestic animals” and “vermin.” Addressing the first term, for example, dogs are usually considered “domestic animals,” so we can remove dogs from the above list of animals that might be covered. Likewise for cats…. I’ve been involved in a few cat urine and claw damage claims.

With traditional pets, the “domestic animals” language was not problematic. However, sometimes disputes arose about the meaning of the word “domestic” when other animals were the cause of loss. One such claim in Indiana involved a herd of goats that managed to get inside a rural home and caused extensive damage.

When the homeowner called his agent, the CSR told him the damage was covered because “domestic” refers to animals like dogs and cats. Unfortunately, the adjuster disagreed and based his denial on the word “domestic” meaning “domesticated.” On that basis, damage caused by a goat or cow could be excluded but probably not damage by a deer or bear. (As an E&O learning point, be very careful as an agent in suggesting that something is or isn’t covered without confirming that, where possible, with the carrier’s claims department.)

As a result of this potential ambiguity, in 1991 ISO replaced the “domestic animals” language with “animals you own or keep.” So, in the immediate example above, if the goats belong to the homeowner, there is no coverage, but if they belong to a neighbor, there is coverage. The same thing applies to animals like dogs and cats on the 1991 and later editions of the ISO HO 00 03.

Returning to our original list above, one would assume that damage caused by wild animals like bats, raccoons, and skunks would usually be covered even under the “domestic animals” language. However, note that, in addition to birds, rodents, insects, and animals you own or keep, the exclusion in 1991 also applied to any animal that would be considered “vermin.” So, the question is, what is “vermin”?

When I was with the Big “I” national association, I did extensive case law research and wrote a lengthy and detailed article called “What is a ‘Vermin’?” I reprinted the article on my blog at InsuranceCommentary. com if you want to read a greatly expanded version of this article with case law citations.

Essentially, in my research, I could find no precedent-setting case law that upheld a claim denial based on the “vermin” wording in homeowners’ exclusions. It was almost universally found to be an ambiguous term. Using this research, the Big “I” national technical affairs committee convinced ISO to remove the word “vermin,” and its associated ambiguity, from the exclusion.

As a result, in their 2011 countrywide homeowners’ program revision, ISO essentially adopted the exclusion in their commercial property Special Causes of Loss form and replaced “vermin” with “Nesting or infestation, or discharge or release of waste products or secretions, by any animals….” This change continues in the current 2022 edition of the ISO HO 00 03 form.

To illustrate the impact of such policy language revisions, prior to the 2011 change, I had assisted several agents in getting claims paid for damage caused by bats nesting in attics, the primary damage being caused by their waste products. The downside to the 2011 revision in ISO’s HO 00 03 form is that these claims are clearly not covered anymore.

On the other hand, many other claims that were arguably unjustly denied based on the “vermin” exclusion are now covered. The point of lobbying ISO for this change was to remove or limit the ambiguity of an exclusion so that all parties can better understand whether a loss exposure would or would not be covered.

So, now answering the question “Is animal damage covered by an ISO homeowners’ policy,” we can replace “maybe” with “it depends.” I guess that’s a good thing?

Bill Wilson, CPCU, ARM, AIM, AAM is the founder and CEO of InsuranceCommentary.com and the author of seven books, including “When Words Collide…Resolving Insurance Coverage and Claims Disputes.” He can be reached at Bill@InsuranceCommentary.com.