New Hampshire Bar Journal
2011 Fall, Pg. 20.
A PRIMER ON NEW HAMPSHIRE FIRST-PARTY PROPERTY INSURANCE
New Hampshire State Bar JournalVolume 52, No. 3Fall 2011A PRIMER ON NEW HAMPSHIRE FIRST-PARTY PROPERTY INSURANCEBy Caryn L. Daum(fn*)I. GENERAL DIFFERENCES BETWEEN GENERAL LIABILITY AND PROPERTY INSURANCE POLICIES
Property insurance policies come in many different forms, but all have one thing in common: they insure the property of the policyholder For example, a homeowners policy provides coverage in the event of damage to the insured's home and personal property. A commercial property policy provides coverage in the event of damage to business property and business personal property These types of policies are considered "first party" policies since they directly provide insurance for the benefit of the policyholder Contrast that with general liability policies, which provide insurance mainly for the benefit of a third party. For example, you hire a contractor to remodel your kitchen, but the contractor makes a mistake. The contractor's general liability insurance policy would reimburse you for the damages caused by the contractor's negligence, assuming no policy exclusions apply Liability insurance may provide coverage for these types of third-party situations, and as such, are commonly referred to as "third party" insurance policies. While many policies, such as homeowners and commercial insurance policies may contain both property and liability components of coverage, this article will only discuss some of the basics involving property insurance law in New Hampshire.
II. THE CONSTRUCTION OF INSURANCE POLICIES
A. Principles of contract interpretation
The interpretation of insurance policy language is typically a question of law for a court to decide. "The fundamental goal of interpreting an insurance policy is to carry out the intent of contracting parties."'(fn1) "In interpreting policy language, [courts] look to the plain and ordinary means of the policy's words in context. [Courts] construe the terms of the policy as would a reasonable person in the position of the insured based upon more than a causal reading of the policy as a whole."(fn2) "Policy terms are construed objectively and where the terms of the policy are clear and unambiguous, [courts] accord the language its natural and ordinary meaning."(fn3) "Absent ambiguity, [a court's] search for the parties' intent is limited to the words of the policy"(fn4) "The fact that the parties may disagree on the interpretation of a term or clause in an insurance policy does not create an ambiguity."(fn5) The parties' dispute must be based upon reasonable differences about the language's interpretation.''(fn6) Reasonableness is the cornerstone of the inquiry into whether there is a genuine ambiguity.(fn7)
B. New Hampshire Standard Fire Insurance Policy
Like most states. New Hampshire has a "Standard Fire Insurance Policy", the terms of which are statutorily adopted by New Hampshire R.S.A. 407:2 and R.S.A407:22. The terms of the Standard Fire Insurance Policy must be included in any insurance policy which covers the peril of fire, which is essentially any type of New Hampshire property insurance policy typically the terms are included in an insurance policy by way of a New Hampshire endorsement. The Standard Fire Insurance Policy includes, among other things, special provisions relating to the following: (a) concealment, fraud; (b) notice requirements; (c) uninsurable and excepted property; (d) perils not included; (e) other insurance; (f) conditions suspending or restricting insurance; (g) other perils or subjects; (h) added provisions; (i) waiver provisions; (j) cancellation of policy; (k) mortgagee interests and obligations; (1) pro rata liability; (m) requirements in case loss occurs; (n) appraisal; (o) company's options; (p) abandonment; (q) when loss payable; (r) suit limitation; and (s) subrogation.(fn8)
III. WHAT KIND OF DAMAGE DOES A FIRST-PARTY PROPERTY INSURANCE POLICY COVER?
A typical property insurance policy insures against "direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss."(fn9) Covered Property can include both real and personal property. It depends on the terms of the insurance policy and what is listed on the policy's declarations page.
When determining whether a loss is a Covered Cause of Loss, it is important to look to the language of the policy to determine whether it is an "all risk" policy or a "named peril" or "specifed peril" policy An "all risk" policy typically covers any risk of direct physical loss or damage that is not specifcally excluded or limited by the terms of the policy To the contrary, "named perils" or "specifed peril" policies only provide coverage for any loss caused by the perils specifcally named in the policy.
IV. CAUSATION ANALYSIS
When a loss occurs, one of the inquiries to be made is whether the damage occurred by a Covered Cause of Loss, as defned in the insurance policy In some cases, the cause of damage may be clear, such as when a fre occurs. However, in some instances, a loss may be caused by both a covered cause of loss and an excluded cause of loss. In that situation, an inquiry must be made into the chain of events that lead to the damage, to determine if the loss is a covered loss or uncovered.
New Hampshire, like many jurisdictions, follows the "effcient proximate cause" doctrine in evaluating the cause of a loss for insurance purposes.(fn10)
The effcient proximate cause doctrine has been applied under those circumstances in which two or more identifable causes, at least one of which is covered under the policy and at least one of which is excluded thereunder, contribute to a single loss. If the cause which is determined to have set the chain of events in motion, the...