Homeowners' Insurance & Pipe Line Projects
Frequently Asked Questions – Homeowner’s Insurance and Gas Pipe Line Projects
From the desk of Mark D. Sammarone, CIC, CISR
Vice President, Arthur Hall Insurance
(June 13, 2017) I have received a number of inquiries regarding what affect a gas pipeline passing through a homeowner’s property would have on their homeowner insurance coverage as well as the availability of coverage. Here are some answers to those questions.
QUESTION: Does homeowner insurance cost more if you live near a pipeline?
ANSWER: No, insurance should not cost more. Rates are currently formulated using predictive models which include various inputs such as municipality, fire protection, value of the home, do they also insure your cars, and a variety of data points about the insured themselves and the home such as credit score, home ownership, length of time at a house, length of time with prior insurer, whether they applied for coverage seven days or more before the effective date, prior claims for the insured AND claims at the location even under a prior owner. Like credit scoring, companies typically don’t divulge how exactly they weight the various inputs. Two wild possible exceptions might be if a home experienced lots of claims from the proximity to the pipeline that could factor into the predictive model on the basis of past claims…not necessarily the fact they came from a pipeline. Also if a home’s market value dropped dramatically below the construction rebuild cost [i.e. like an inner city home in a bad neighborhood], it creates a moral hazard where an insured would get more if the house was lost in a fire than if they sell it. However these are far stretching examples.
QUESTION: Would a pipeline accident/incident that impacts a home be covered under homeowners insurance? Or is it exempt from coverage?
ANSWER: This is a little more complex to answer how a policy might respond to an incident. The coverage trigger on a typical homeowner policy (HO-3) is “Direct physical loss to the building” which is incredibly broad. But the building MUST be damaged before coverage triggers. The only things that are not covered are things the insurance company thought to exclude. Thus a sudden and accidental incident should be covered unless one of these many exclusions apply. Short list of potential exclusions…..
EXCLUSIONS:
– Ordinance or law requirements
– Earth Movement (but you can buy earthquake and sinkhole coverage for additional premium)
– Flood (surface water running into their basement). National Flood Policy (NFIP) might not cover unless 1 square mile, or two or more properties impacted if you have one.
– Power failure
– Neglect
– War, Nuclear Hazard
– Intentional loss
– Governmental action – destruction, confiscation or seizure of property
– Faulty planning, zoning, development, design, workmanship, materials used, maintenance (meaning they will not fix someone else’s stupidity, but if the house catches fire and burns to the ground they could cover the fire loss).
Note – something not covered would be the cost to relocate UNLESS the house did receive damage and had a covered claim. An example of this would be an environmental incident near the home, but that did not physically damage the home. Additional living expenses are only triggered after a covered loss occurs.
QUESTION: Does the exclusion for “Governmental Action – destruction, confiscation or seizure of property” include a home that has a right of way taken by eminent domain? Similarly, does the exclusion apply in the case when the PUC grants the pipelines PU status including the right to claim eminent domain. If the incident occurs on the “taken” portion of the homeowner’s property or next to the homeowner’s property, will insurance still be valid in paying for any loss to home? Or does this PU status exempt insurance companies from paying a claim that occurs on property taken by eminent domain that affects nearby homes?
ANSWER: Coverage does not “globally” void just because of a government action such as eminent domain or easements. If the house becomes destroyed by something other than (the otherwise undamaged house) getting torn down by a governmental requirement, the policy pays as intended for normal claims. Normal meaning…direct physical loss to house….policy pays to repair the damaged portion only….and the policy can kick in an extra couple dollars (usually 10%) for those little upgrades you need to make to meet current building code that were not there originally.
QUESTION: If I am a condominium unit owner or renter, and I only insure my contents, how would my coverage respond to a pipe line event?
ANSWER: Similar to other homeowners, there are common covered perils such as explosion and fire. Also similar to other homeowners you can’t collect temporary living expense coverage unless you first have a property loss claim.
QUESTION: How is my personal liability coverage impacted by a pipeline located nearby or a utility easement that travels across my property?
ANSWER: A homeowner policy covers the insured members of your household against claims of bodily injury and property damage they cause to others as a result of their negligence. There are no special provisions in a typical homeowner policy altering the normal terms and conditions as a result of a utility line being in close proximity or under seizure by eminent domain.
These FAQ comments are provided as general interpretations based on common homeowner insurance policy language and are not to be considered binding. Please consult with your insurance professional for guidance in determining the specifics of your homeowner insurance program and how it may apply to these matters.
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