# THE FINCH FAMILY HOMEOWNERS CONTRACT

PROBLEM

THE FINCH FAMILY HOMEOWNERS CONTRACT

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Assume the Finch family of Charlotte, North Carolina, purchased their home in 1966 for \$50,000.  Since then, comparable homes in their neighborhood have most recently sold for \$150,000.  The cost to replace the home would be \$169,500.  It is estimated that the house is one third (1/3) depreciated.  The Finch’s have a \$135,600 (Coverage A) Homeowners policy in force, similar to the policy shown in the Appendix.  Answer the following questions as if eachquestion were a separate event.  (Assume no deductible)

• How much will the Finch’s collect for a total covered fire loss under coverage A?

• How much will be collected for a \$20,000 partial loss under coverage A?

• What would be your answer to questions 1 above if the Finch’s had only \$101,700 of insurance for Coverage A?

• What would be your answers to question 2 above if the Finch’s had only \$101,700 of insurance for Coverage A?

POLICY QUESTIONS

HO-2 AND PAP

Mr. Tibbs owns the Homeowners (HO-2) and the Personal Auto Policy found in your text’s

appendices. The following limits apply.

HOMEOWNERS LIMITS:                                        PERSONAL AUTO POLICY LIMITS:

A = \$65,000                                                               A = \$100,000/\$300,000/\$50,000

B = \$6,500                                                                 B = \$1,000

C = \$32,500                                                               C = \$100,000/\$300,000

D = \$13,000                                                               D = ACV \$250 Ded. Collision

E = \$300,000                                                                                 ACV \$500 Ded. Other Than Collision

F = \$500

\$500 flat deductible Section I

Replacement cost of the dwelling is \$72,000.                    One vehicle listed on policy

Replacement cost of the other structure is

\$10,000 If a loss occurs to real or personal

property, 1/3 depreciation applies, therefore,

ACV = 2/3 replacement cost.

Your assignment is to determine if the following situations are covered by the above policies.  If there is coverage how much should be paid?  The two policies above are the only ones in existence.  No other contracts are to be considered.  Each event is a separate

occurrence.

1. Mr. Tibbs rents out a room to two students. One of the students falls down the stairs. Hospital costs equal \$10,000.  In addition, tuition costing \$2,500 was lost due to the inability to complete the semester.  The student sued Mr. Tibbs for \$12,500.
2. Mr. Tibbs wakes up one morning and discovers a large tree leaning on the house due to a windstorm. Mr. Tibbs knew that the tree was dead and should have removed it two years ago.  The cost to repair the dwelling is \$10,000; to remove the tree \$750; and the cost to plant a new

tree \$300.

1. The insured is found to be legally obligated to pay \$170,000 because of bodily injury to a neighbor (a fishing partner) caused by an accident involving Mr. Tibbs’s 24.9 horsepower outboard motor boat.

1. A 35 horsepower outboard motor boat was rented to Mr. Tibbs. The owner of the boat sues Mr. Tibbs for \$3,000 in property damage because the boat sank due to Mr. Tibbs’s negligence.

1. Mrs. Tibbs leaves a suitcase filled with clothing in a motel room. Twenty miles down the road, she remembers, and returns to collect it.  Upon entry, she discovers that the suitcase is missing. Replacement cost of goods and suitcase is \$4,000.

1. Mr. Tibbs fails to trim his bushes near the street. The bushes obstruct the view of traffic turning the corner. A motorist, when inching out to see around the bushes, is struck by a car.  Both cars are “totaled,” and each driver sues Mr. Tibbs for \$150,000 in bodily injury and \$20,000 in property damage.

1. Dr. Tibbs is a medical doctor who operates out of an office in his house. A patient comes to see Dr. Tibbs.  While sitting in a chair in the waiting room, the chair breaks causing back injuries to the patient.  The patient sues for medical expenses of \$7,000, loss of wages of \$16,000, and pain and suffering of \$20,000.

1. Mr. Tibbs takes his car to a repair shop. While the mechanic is test driving the car, he negligently rear ends a car driven by John while stopped at a red light.  The mechanic and Mr. Tibbs are both sued separately by John for his injuries of \$80,000 and property damage (John’s car) for \$15,000.

1. A tornado causes an unattached garage to collapse on the owned car. The shed and the automobile are total losses. How much is covered under the two contracts?

1. Mr. Tibbs has an argument with his wife and goes bar hopping. On the way home, he loses control of the car and injures three people.  The police find that Mr. Tibbs is legally intoxicated.  Each claim \$120,000 in bodily injury.  Their \$60,000 SUV is totaled. Mr. Tibbs’ car requires \$12,000 in repairs.

1. Mr. Tibbs decides to sell cars. One day, while he is demonstrating a new car, an accident occurs and the prospective buyer is injured.  Mr. Tibbs and the auto company are each named in the suit claiming \$150,000 of bodily injury.
2. Mr. Tibbs decides to move to Nevada, so he rents a large (18-wheel) moving truck. During the trip, he flips the truck on an icy road.  The rental company sues Mr. Tibbs for \$175,000 of property damage liability.

1. In question 12, instead of moving his own property, Mr. Tibbs decides to move property of others for a business. The damage to the truck equals \$175,000.

1. Mrs. Tibbs’s fur coat (worth \$3,595 ACV) is stolen out of the car after it is parked by an attendant at a restaurant.

1. Mr. Tibbs’s car is at a repair shop. For transportation, he uses his son-in-law’s motorcycle.   While using it, he runs down a pedestrian in a crosswalk.  The pedestrian sues Mr. Tibbs for \$7,600.

1. In question 15, Mr. Tibbs’s uses his son-in-law’s private passenger vehicle. While using it, he runs down a pedestrian in a crosswalk.  The pedestrian sues Mr. Tibbs for \$7,600.

1. Mr. Tibbs buys a second car. Five days after the car is purchased, he collides into a telephone pole.  Damage to the car is \$5,000.  He had not told his agent about the car.

1. While driving his car under a bridge being spray painted by the Department of Transportation, the car is coated with paint. Because of the chemicals being used in the paint, the auto’s glass is permanently pitted.  Cost to repaint the car is \$3,200, and the cost to replace the glass is \$1,200.

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