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3. HO-04-61

Form HO 04 61: Scheduled Personal Property Endorsement (with Agreed Value Loss Settlement)

The HO 04 61, Scheduled Personal Property Endorsement, is a crucial addition to a standard homeowners (HO) policy (like HO 00 03, HO 00 04, HO 00 05, HO 00 06) for insureds who own valuable items that may exceed the typically modest coverage limits and covered perils of an unendorsed policy. This endorsement allows homeowners to list, or "schedule," specific high-value items, thereby providing broader, "open perils" coverage for these articles and ensuring they are insured for their appraised or agreed-upon value. A significant feature is that coverage provided by this endorsement is not usually subject to the basic policy's deductible.

Classes of Business/Coverage Scenarios:

This endorsement is exclusively for personal lines homeowners insurance and applies when an insured possesses valuable personal articles that warrant more comprehensive coverage than the standard homeowners policy provides. Examples include:

• Jewelry: Engagement rings, valuable watches, necklaces, and other fine jewelry. For instance, a homeowner with a $15,000 diamond ring would want to schedule it to ensure full coverage, as a standard HO policy might only cover jewelry theft up to $1,500-$2,000.
• Furs: Fur coats and garments consisting principally of fur.
• Cameras: High-end photographic equipment, including cameras, projection machines, films, and related accessories.
• Musical Instruments: Valuable instruments like pianos, violins, or guitars. However, instruments used professionally are typically excluded under this endorsement. For example, if a concert violinist's rare instrument is damaged, this endorsement would provide coverage if it's scheduled, but not if it's used for paid performances unless specifically provided.
• Silverware and Goldware: Sterling silver flatware, gold-plated items, and pewterware. Note that items like pens or flasks containing silver are not typically considered part of this class.
• Golfer's Equipment: Golf clubs, clothing, and accessories.
• Fine Arts: Paintings, sculptures, valuable antiques, and other art pieces. It's important to note that while the HO 04 61 offers agreed value for fine arts, the HO 04 60 endorsement provides agreed value for a broader range of categories. For example, if a scheduled painting valued at $10,000 is destroyed, the insured receives $10,000. Breakage of fragile fine art items may have limited coverage unless caused by specific perils like fire, windstorm, or theft.
• Postage Stamps and Rare Coins (Philatelic and Numismatic Property): Valuable stamp or coin collections.

Special Considerations:

• Agreed Value vs. Actual Cash Value/Replacement Cost: A key benefit for Fine Arts under HO 04 61 is often the "agreed value" loss settlement. This means that if a covered loss occurs, the insurer will pay the amount listed on the schedule for that item, which was agreed upon when the policy was written (often based on a current appraisal). For other categories of property on the HO 04 61, the loss settlement is typically the least of the actual cash value, the cost to repair or replace, or the scheduled amount of insurance. This differs from the HO 04 60 endorsement, which provides agreed value for more classes of property.
• Appraisals: For many scheduled items, particularly high-value jewelry and fine arts, insurers will require a current appraisal (e.g., within the last 3-5 years) to establish the item's value. This helps ensure the item is insured for its proper worth. Some insurers may not require appraisals for items below a certain value, for example, $2,500.
• Newly Acquired Property: The endorsement typically provides automatic temporary coverage for newly acquired items in a class of property already scheduled (e.g., jewelry, furs, cameras, musical instruments). This coverage is usually limited to a percentage (e.g., 25%) of the existing coverage for that class or a specific dollar amount (e.g., $10,000), whichever is less, and must be reported to the insurer within a specified timeframe (e.g., 30 days for jewelry, 90 days for fine arts).
• "Open Perils" Coverage: Scheduled items are generally covered on an "open perils" or "all-risk" basis, meaning they are covered for all direct physical losses except those specifically excluded in the policy. This is broader than the "named perils" coverage found in many standard homeowners policies for personal property. Common exclusions include wear and tear, gradual deterioration, insects, vermin, and inherent vice.
• Property Location: Underwriters may have concerns if scheduled property is kept at a location different from the insured's home address, as this could indicate other ownership interests or uses that might disqualify coverage under a homeowners policy.
• No Deductible: Typically, losses to property scheduled under the HO 04 61 are not subject to the homeowners policy deductible.
• Business Use: Property used for business purposes is generally not covered. For example, musical instruments played professionally are excluded.

Key Information for Agents and Underwriters:

• Risk Assessment: Underwriters need to carefully assess the type and value of property being scheduled. Factors like storage (e.g., in a vault vs. at home), security measures (e.g., central station alarms for high-value schedules), and the insured's loss history are important. For example, schedules exceeding $25,000 may require a central station fire and burglar alarm.
• Documentation: Ensure the insured provides detailed descriptions and, where required, current appraisals from qualified appraisers (e.g., GIA for jewelry). Bills of sale may be acceptable for recently purchased items.
• Coverage Gaps: Agents should explain the limitations of standard homeowners coverage for valuables and the benefits of scheduling. It's crucial to discuss the difference between agreed value (primarily for fine arts on this form) and other loss settlement provisions to manage client expectations.
• Pricing: Premiums for scheduled property are based on the type of property, its value, and the level of risk. Rates are typically applied per $100 of value.
• Pair or Set Clause: If part of a pair or set is lost or damaged, the insurer may pay the full amount of the set as shown in the schedule, with the insured surrendering the remaining article(s) to the insurer, or they may have options to repair/replace the part or pay the difference in actual cash value before and after the loss.
• Fine Arts Specifics: For fine arts, coverage for breakage of fragile items like glassware or statues might be limited unless caused by specific perils. Property on exhibition at fairgrounds or expositions is typically not covered unless the premises are specifically covered.
• Territorial Limits: The HO 04 61 generally provides worldwide coverage for scheduled items, which is a significant advantage over the more limited territorial scope of standard homeowners coverage for certain perils. However, fine arts coverage may be limited to the U.S. and Canada.