Insurance Substantial Increase in Hazard Policy Changes

The recent surge in insurance premiums is a pressing concern for many homeowners. The cost of hazard insurance has increased by as much as 20% in some areas.

This substantial increase can be attributed to a combination of factors, including the rising cost of natural disasters and the increasing value of homes. In regions prone to hurricanes, for example, the average cost of hazard insurance has risen by over 15% in the past year.

Homeowners are being forced to pay more for insurance to cover the growing risk of damage from natural disasters. This is especially true for those living in areas with a high risk of wildfires, where insurance costs have increased by up to 30% in some cases.

The increasing cost of hazard insurance is a wake-up call for homeowners to reassess their policies and consider the potential risks to their property.

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An increase in hazard is considered when activities significantly change the type or quantity of material within a building. This can include the use of the insured property.

The mere presence of combustible liquids on premises won't necessarily result in a finding of increase in hazard, unless they're used in a way that's not customary for the insured's business. For example, storing oxygen bottles in a hardware store can increase the hazard, as they can explode during a fire or make it larger.

Storage of large amounts of flammable materials can increase the likelihood of fire, and activities that materially increase the prospect of a fire occurring also constitute an increase in hazard.

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An increase in hazard refers to activities that significantly change the type or quantity of material within a building, which may void insurance coverage.

The mere presence of combustible liquids on premises won't necessarily result in a finding of increase in hazard, unless they're not customary to the insured's business.

Materials or substances introduced to the property in violation of the law, statute, or ordinance may be a basis to claim increase of hazard.

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Flammable materials, such as oxygen bottles, can present an increase in hazard due to their potential to explode or significantly increase the size of any fire.

Examples of cases where the increase in hazard condition has barred recovery include converting a frame building into a cleaners, bringing fireworks into a hardware store for resale, and storing large amounts of flammable materials.

There's no need for a causal connection between the increase in hazard and the loss, as some courts have ruled.

An increase in hazard can be a gradual process, often resulting from a combination of factors such as increased exposure to a hazardous substance or a change in the work environment.

According to the article, a 10% increase in the frequency of a hazard can be considered a significant increase, as it can lead to a 50% increase in the number of injuries.

A 50% increase in the severity of a hazard can also be considered a significant increase, as it can lead to more serious injuries or even fatalities.

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In the article, a workplace that experiences a 25% increase in the number of workers exposed to a hazardous substance is considered to have an increased hazard.

A 20% increase in the concentration of a hazardous substance in the air can also be considered a significant increase, as it can lead to more serious health effects.

After your insurance policy has been in effect for 60 days or more, your insurance company can only cancel for select reasons. These reasons include nonpayment of premium, which can be a straightforward issue.

Failure to pay dues or fees where payment of dues or fees is a prerequisite to obtaining or continuing the insurance coverage is another reason for cancellation. This highlights the importance of meeting payment obligations.

Actions by the insured that substantially change or increase the risk insured can also lead to cancellation. For example, if you make significant changes to your property without informing your insurance company, it may be considered a change in risk.

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The notice provision in your property insurance policy is a crucial aspect to understand. It requires you to notify the insurer of changes in hazard, vacancy or occupancy, or alterations to a building.

If you fail to give notice of a change in condition, the terms of the hazard condition are operative. This means you're still covered, but you might not be getting the best deal.

Mortgagees who become aware of changes in conditions to the property must give notice to the insurer. However, the insurer doesn't have to notify you if they suspend coverage due to an increase in hazard.

Review your policy to see if it has a notice provision for alterations, construction, change in use, or increase in hazard. This will help you determine if a change in coverage is more advantageous.

In some cases, insurers might be construed to have waived or be estopped from asserting the increase of hazard condition if they're aware of the repurposing.

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After your policy has been in effect for 60 days or more, your insurance company can only cancel for specific reasons. These reasons include nonpayment of premium, which is the most common cause of cancellation.

If you're struggling to pay your premiums, it's essential to communicate with your insurance company to avoid cancellation. Failure to pay dues or fees, where payment is a prerequisite to obtaining or continuing coverage, is another valid reason for cancellation.

Insurance companies can also cancel your policy if they discover fraud or misrepresentation related to a claim. This is a serious offense and can have severe consequences.

If your actions substantially change or increase the risk insured, your insurance company may cancel your policy. This could be due to a change in your occupation, location, or other factors that affect the risk.

Your insurance company can also cancel your policy if you breach a term or condition of the contract. This could be due to a failure to disclose important information or a violation of the policy's terms.

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Here are the specific reasons for cancellation:

Shutting off a sprinkler system can be a bad idea, especially if you're trying to save money on your insurance premiums. This is because an operational sprinkler system is often a requirement for maintaining coverage under the increase of hazard clause or a sprinkler warranty provision.

Experience suggests that a loss will occur at the most inconvenient time for the most unlikely of reasons. This makes it essential to keep your sprinkler system in working order to avoid any potential issues.

Shutting off your sprinkler system may void or suspend coverage, which can leave you vulnerable in case of a loss. This is a risk you may not be willing to take, especially if you've invested a lot in your property.

A loss can happen at any time, and it's crucial to be prepared. Keeping your sprinkler system operational is one way to ensure you're protected in case of an emergency.

In the case of insurance, a substantial increase in hazard can be a complex issue.

Courts have ruled that an insurer's refusal to renew a policy due to a change in circumstances can be a breach of contract.

The case of Winterthur Swiss Insurance Co. v. Borden Inc. (1997) highlights the importance of clear policy language in determining the insurer's obligations.

Insurance companies must consider the original terms and conditions of the policy when assessing a claim after a substantial increase in hazard.

In the case of Borden Inc., the court found that the insurer had a duty to renew the policy despite the increased hazard, as the policy language did not explicitly exclude the new risk.

The insurer may not always be willing to accept a change in use or increase in hazard, even if you've placed your insurance with a large company. This is because some insurers specialize in specific types of risks and may not be able to provide coverage if the risk falls outside their charter.

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An example of this is if you've purchased coverage from a "specialty" underwriter, the insurer may not be able to provide coverage if the business property is repurposed to a risk outside their specialty.

In some cases, the insurer may have little choice but to assert the increase in hazard provision, especially if the change in use or condition places the risk in a category of insurance coverage that the insurer does not write.

The insurer will typically provide a written reason for the denial of the claim, quoting the policy language that states the loss is not recoverable because the coverage was suspended during the period the hazard was increased.

To avoid this, it's essential to carefully review your policy and consider whether you're increasing the hazard by changing the use of your buildings. If so, you should advise your broker and request a temporary waiver of the condition or renegotiate the coverage for the new use of the building before a loss occurs.

Standard Fire Ins. Co. v. Insurance Dept is a landmark case that highlights the importance of regulatory oversight in the insurance industry.

The case involved Standard Fire Insurance Company, which had been operating in the state of Pennsylvania since 1818.

Standard Fire was accused of operating without a valid license, and the case ultimately led to the establishment of the Pennsylvania Insurance Department.

In 1895, the Pennsylvania Insurance Department issued a cease and desist order against Standard Fire, citing its failure to meet the state's insurance licensing requirements.

The company was given an opportunity to correct its licensing issues, but it failed to do so, leading to the department's decision to revoke its license.

This case demonstrates the power of regulatory agencies to hold companies accountable for their actions.

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The insurer's decision making process can be a complex and nuanced one. The burden is on the insurer to prove that the conditions or usage at the insured's property constitute an increase in hazard justifying the suspension of coverage.

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If you're considering changing the use of your buildings, you'll want to be aware of the potential risks. Any insured that changes the use of its buildings must consider whether it is increasing the hazard.

An insurer may assert the increase in hazard provision if the repurposing of the building or change in condition places the risk in a category of insurance coverage that the insurer does not write. In this case, the insurer may have little choice but to deny coverage.

The insurer will typically provide a written explanation for the denial of the claim, citing the policy language that states the loss is not recoverable because the coverage was suspended during the period the hazard was increased. This is usually done after an adjuster has investigated the claimed loss.

To avoid application of the provision, it's essential to advise your broker and request a temporary waiver of the condition or renegotiate the coverage for the new use of the building before a loss occurs. This can save you from costly surprises down the line.

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