Montemayor Approves ISO Homeowners Policy Form for Texas

Texas Insurance Commissioner Jose Montemayor has approved homeowners policy forms from the Insurance Service Office (ISO) similar to policies used by insurers in other states.

Insurers wanting to use the ISO form in Texas must file for approval and show that they are reducing rates to reflect coverage differences between the new forms and the Texas standard policies sold in the past. This is the same requirement that Montemayor applied to approval of State Farm’s national policy on March 8 and USAA’s national policy on May 22.

Montemayor approved ISO’s application for six residential property policy forms, plus 93 endorsements, for use in Texas. Insurers that do not have their own national forms commonly use ISO policies in most other states.

The Commissioner’s approval is predicated on information and representations provided by ISO that policyholders purchasing the new basic policy forms and endorsements can reduce their homeowners premiums from 8 percent to 39 percent of the amount they otherwise would have paid for the basic HO-B. The amount of savings depends upon geographic location of the home and coverage selection.

ISO’s Homeowners 3-Special Form is analogous to the Texas Standard HO-B policy form. ISO’s policy, however, doesn’t cover losses caused by constant or repeated seepage or leakage of water from plumbing or appliances or by a sewer or drain back up.

The approved ISO policies provide limited mold coverage similar to that adopted by Montemayor last November for Texas Standard Policies. Among ISO’s approved endorsements is one that will give consumers the option of buying full mold remediation coverage up to policy limits. As with the State Farm and USAA policies, the primary differences between the ISO policy forms and the Texas standard forms are in coverage of water-related damage. The basic ISO policy would cover damage from sudden and accidental water discharge.

Unlike the HO-B, the basic ISO policy would not cover losses, including slab foundation damage, caused by constant or repeated seepage or leakage of water or by sewer backup.

“Buy-back” endorsements in the ISO package would enable policyholders to add:

• Coverage in an amount equal to 15 percent of the dwelling limits of liability in coverage for slab or foundation damage resulting from accidental water discharges, including constant and repeated seepage. The 15 percent limit of liability would include tear-out costs.
• Coverage for direct physical loss caused by constant or repeated seepage or leakage of water, including the cost of tearing out and replacing any part of the building necessary to access the system or appliance from which the seepage or leakage occurred.
• Coverage to remediate mold resulting from a covered water loss, with limits of 25 percent, 50 percent or 100 percent of the Coverage A-Dwelling limit of liability. The purchase limits would include additional living expenses.

The slab or foundation coverage, water damage coverage and mold coverage endorsements would be offered to all applicants for new policies and to current policyholders when their HO-B policies are converted to the new forms.

Insurers wanting to use the ISO forms must apply for the Texas Department of Insurance’s prior approval. One condition would be to offer the ISO endorsements providing coverage for constant or repeated seepage or leakage, foundation damage and mold remediation coverage, subject to underwriting.

Other conditions include disclosure of coverage changes to existing customers, rate reductions to reflect coverage changes and the filing of rate information with TDI for two years after a company starts using the ISO forms.

Topics Texas Homeowners