13.1 THE POLICY
13.101 In General. By statute, a fire insurance policy in Virginia must include certain information and standard agreements. Every policy must prominently include the name of the insurer, the location of the home office, and a statement of whether the company is a stock company, a mutual company, reciprocal insurer, or other form of insurer. 1 It must state the amounts of the insurance and location of the agent. 2 The policy should have a specific insuring agreement setting forth certain terms unless there is an approved "easy read" form. 3 Standard provisions, conditions, and stipulations are set out, by statute, in a 172-line policy. 4 These standard provisions are a source for required terms, conditions, and exclusions found in the "easy read" form policies. 5
A policy is considered a "fire insurance" policy if any part of the coverage is fire coverage. 6 Homeowners insurance is a form of fire insurance. It is a combination fire, miscellaneous property, and liability insurance primarily insuring owner-occupied residential real property and personal property. 7
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The State Corporation Commission (SCC) has adopted standards for "easy read" policies, pursuant to section 38.2-2107 of the Virginia Code. These standards include minimum requirements for a basic form, broad form, and special form for dwelling and contents policies and homeowners policies as well as condominium unit owners' forms and market value policies. 8 All policies must contain, at a minimum, the terms set forth in the examples in the regulations, but the insurer is free to add additional benefits. 9
A limited-form market value policy must contain an appropriate title that reflects the limitation in coverage in a simple and objective manner, such as "Limited Homeowners" or "Market Value Homeowners." This name must appear everywhere the title appears in the policy form. Further, the policy jacket must contain notice of the restricted coverage in a market value policy. 10 Market value policies should be offered only for those properties for which the market value of the property equals 80 percent of the structure's full replacement cost. 11
Replacement cost policies have additional statutory requirements, 12 including a statement of minimum requirements for the replacement cost benefit to apply. 13 The SCC must also approve these forms. 14 A claim for replacement cost benefits must be made within six months from the last date on which the insured received payment for actual cash value 15 or the date of entry of a final order of a court of competent jurisdiction declaratory of the right to replacement cost benefits. 16
Insurers may offer coverage limited to the amount necessary to repair or replace damaged property with functionally equivalent property at a lower
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cost than would be incurred if replaced with material of like kind or quality. 17 Such policies require specific notice printed in bold face type. 18
13.102 Coverages. Each policy will specifically identify what types of coverage may be found in the policy, limitations on the types of coverage, and dollar amounts. A policy may provide coverage for loss as a result of "all risks" for a dwelling, while at the same time providing coverage only for specific or limited perils for personal property. A policy may also cover a dwelling, with its garage or barn having separate limits as an "other" or appurtenant structure. 19 Specific types of personal property, such as jewelry, firearms, and furs, may also have separate limits. 20 Homeowners policies may also cover costs for debris removal as a percentage of overall benefits for the dwelling, tree and shrub removal and damage, and the increase in living expenses incurred to relocate while the dwelling is uninhabitable.
13.103 Exclusions.
A. In General. Exclusions limit the circumstances under which an insured may recover under a policy. The insurance company has the burden of proving that the exclusion applies. 21 In determining the applicability of an exclusion, the Virginia Supreme Court has, at times, said that exclusionary language in an insurance policy is to be strongly construed against the insurer 22 and, at other times, has stated that the policy is to be interpreted like other contracts, with the intention determined from the words used in the document. 23 Reasonable exclusions not in conflict with the statute will be
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enforced. 24 Under either approach, the exclusionary language must clearly and unambiguously bring the particular event within its scope. 25 Ambiguous language will be construed against the insurer. 26 Merely because courts in different jurisdictions have given various interpretations does not make the language ambiguous. 27 Some common exclusions are discussed below.
B. Earth Movement. Modern property policies typically exclude coverage for a loss that is the result of land sinkage, land subsidence, landslide, gradual erosion, or other earth movements. Whether the cause of the damage is a result of earth movement, which is excluded, or earth pressure, which is not excluded, is a question for the trier of fact. 28 Some courts have limited the term earth movement to phenomena resulting from natural rather than man-made forces. 29 Whether a particular policy excludes only natural movement depends on the language found in the exclusion.
C. Pollution Exclusion. Various policies use different terms to define coverage for damage resulting from pollution. 30 Policies fall within three categories: (i) the absolute pollution exclusion; (ii) the pollution exclusion with an exception for "sudden and accidental" discharges of pollutants; and (iii) those providing pollution liability insurance. 31
D. Vandalism. Typically, vandalism will be a covered loss unless the property is vacant for a minimum period. 32 Vandalism has been found to include an intentionally set fire. 33
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E. Illegality. Although a policy may not contain language expressly excluding coverage for illegal activities, these exclusions are implied in the policy. 34 These implied exclusions include claims for any intentionally set fire. "[I]t is elementary that principles of public policy deny the right of recovery to an insured who fraudulently sets on fire the property covered by the contract of insurance." 35 Proof of a criminal conviction of arson is conclusive upon the insured and, for matters of public policy, bars recovery. 36 Importing goods in violation of the Trading with the Enemies Act will also bar coverage. 37 Other jurisdictions have applied this implied exclusion to illegal alcohol or participation in illegal activities. 38
F. Neglect of an Insured to Preserve the Property at the Time of or After the Loss. An exception to the general concept that insurance covers the insured's own unintentional folly is the exclusion for neglect to protect the property at the time of and after the loss. 39 To apply, the insured must, at least, have the mental capacity to recognize alternate courses of action. 40 Whether there is a violation of this exclusion is a factual issue to be determined by the trier of fact. 41 The neglect exclusion has been used to exclude coverage for an intentional act of arson and excludes coverage for the innocent spouse. 42 The measure of reasonableness of the insured's conduct will take into account the exigent circumstances of the loss. 43
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13.104 Insurable Interest. It is a violation of Virginia public policy for one to insure the property of another without an interest in that property. This interest is the "insurable interest." A contract of insurance is void if the insured does not have an interest in the property. The theory is that the lack of an insurable interest carries with it the temptation to commit a crime, to which the insured should...
