Coverage Corner

BIG DOLLARS IN THOSE COLLARS: THE LATEST ON DOGS AND HOMEOWNERS’ INSURANCE

By Kevin C. Amrhein, CIC, CBIA

We have three cats and a betta fish. But the real star of our show is Bruce, our 16-year-old rat terrier who still gets around pretty doggone good. 😆

If this resembles the ensemble at your home, we are not alone. As evidenced below, America’s love of (and spending on) dogs and pets in general is growing by leaps and hounds. I could go on, but this is an article about insurance, so let’s do this:

A MASSIVE EXPOSURE

▲ The National Pet Owners Survey (found at americanpetproducts. org) says 70% of U.S. households owned a pet in 2020, up 3% since 2019 and consistent with annual growth since the survey began in 1988.

▲ Dogs rule. Approximately 70 million households have at least one dog. 45.3 million have at least one cat. Placing a distant third are freshwater fish which can be found swimming in 11.3 million households.

▲ Americans spent almost $104 billion on pet expenditures in 2020. To illustrate the massive growth in this space, in 2017, pet expenditures accounted for $69.5 billion in spending.

▲ An abundance of pet-related data and the survey are available at iii.org (Insurance Information Institute).

WHO’S A GOOD BOY? WHO’S A GOO.. HE’S GOT MY HAND

First, the good news. The downward trend in the total number of liability claims resulting from a dog’s behavior (such as bites or falls) continued in 2020. Now for the bad news: the upward trend in the cost of such claims also continued in 2020. Between 2019 and 2020, the average cost per claim increased over 12% to $50,425 which should come as no surprise: the average cost has risen 162% since 2003.

THE INSURANCE SERVICES OFFICE (ISO) HOMEOWNERS’ POLICY

Based on the most recent edition (HO 00 03 03 22), here are several factors regarding this policy’s take on pet-related claims:

SECTION I – PROPERTY COVERAGES

▲ Pets are on the list of Property Not Covered. Item b. of this section contains the following: “We do not cover … Animals, birds or fish.” Thus, there is no coverage for costs relating to the pet itself.

▲ There is no coverage should a pet cause damage to the dwelling or other structure on the “residence premises.” Section A(6)(g) specifically excludes damage caused by “Birds, rodents or insects” while Section A(6)(f) specifically excludes damage caused by “Animals owned or kept by an ‘insured.’” Whether damage is caused by your own curious canine or a pal’s pup that you’re putting up, the exclusion applies.

▲ While the policy does not specifically exclude personal property damaged by a pet, keep in mind that many HO policies only cover personal property if damaged by a Covered Peril. For example, furniture damaged due to a pet’s chewing or scratching would not be covered.

SECTION II – LIABILITY COVERAGES

As you may expect, many insurers use various underwriting guidelines for the purpose of restricting liability for pet-related claims. For the purposes of this article, assume that the policy is not affected by any such guidelines:

▲ There is no exclusion for BI or PD solely because it was caused by a pet. However, as evidenced below, other policy exclusions may apply to claims involving pets.

▲ Due to language contained in the “business” exclusion, BI or PD caused to a “home-sharing occupant” is excluded. For example, if you make a bedroom in your home available to rent through Airbnb, your HO policy will not cover BI or PD to the renter or renter’s property caused by the actions of your pet (or yourself).

▲ Unless caused by fire, smoke, or explosion, damage to property rented to, occupied, or used by or in the care of an “insured” is excluded. For example, if you travel with your pup and he chews on the wall of the Airbnb you rented, there’s no coverage. Some good news: Additional Coverage C - Damage To Property Of Others offers up to $5,000 per “occurrence” for PD to property of others caused by an “insured.” Thus, should your pet damage your rented digs while traveling, this giveback would apply. This amount may be increased by endorsement. Note that there are limitations to this giveback. For example, it doesn’t apply if the PD is to property owned by a “homes-haring occupant.”

A FEW TAKEAWAYS FOR THE AGENT

▲ Agents should suspect a pet exposure exists in almost every personal residential account in the agency’s book.

▲ Cite the significant increases in both pet expenditures and claims as a reason to review property and liability limits as well as the need for excess/umbrella coverage.

▲ Review insurer-specific underwriting guidelines which would adversely affect coverage contained within the policy form as reviewed in this article.

▲ For pet owners most likely to take their pets with them to other places, such as friends’ homes, public locations, or traveling, discuss the $5,000 liability giveback for PD and option to increase by endorsement.

That’s all for now. Until the next round…. Cheers!

Kevin C Amrhein, CIC, CBIA is IA&B's education consultant. He works with our CISR and CIC programs, as well as our special topic seminars and live webinars. Catch him at one of our upcoming professional training offerings: IABforME. com/education