My Tree Fell on My Neighbor's Porch - Whose Home Insurance Covers the Damage?

Sometimes, a tree falls in a forest and someone does hear it. Or, it falls onto your neighbor's property and damages something. When that happens, their homeowners insurance company will be the one to hear about it.

Dr. Robert Hartwig, President of the Insurance Information Institute (III) knows first-hand how homeowners insurance can become involved when one of your trees falls on a neighbor's property.

Whose Insurance Pays?

If one of your trees falls and damages a neighbor's property, "generally speaking, it is your neighbor's insurance policy that is called upon to pay the damage," points out Hartwig. "Since his insurance is being impacted," Hartwig continued, "you probably won't face an insurance premium increase as a result."

However, "your neighbor could come after you to cover his deductible. Matter of fact, when one of my trees fell on my neighbor's fence, it destroyed some of his fence and damaged fruit trees. In the interest of neighborly relations, I voluntarily paid for a new pear tree, so between what the insurer paid and what I paid, he didn't have any out-of-pocket expense," says Hartwig.

The upshot? "My neighbor and I are still on speaking terms, which is a good thing. I paid for the new fruit tree, because I thought it was the right thing to do, although I was not obligated to do that." Hartwig's story underlines the fact that, in general, your neighbor's insurance covers your neighbor's property. However, although you and your insurance company may not legally have to make a payment, it's usually best to maintain good relations with those around you.

Negligence Liability

The major exception to the rule of thumb that your neighbor's insurance will pay is the case of negligence on your part. If your tree was dead or diseased, and a judgment or settlement finds that you knew or should have known about that, you could be legally liable for the damages. This is especially true if your neighbor has documentation proving that he or she complained to you or the city about the state of your tree.

Section two of most homeowners insurance policies covers liability, including the cost to defend you in a lawsuit. Your neighbor could submit a claim to your insurance company if they believe you are at fault. If your neighbor sues you, claiming that you were negligent in failing to take care of your tree, your insurance company will pay to defend your case, and will pay for damages if you're responsible. The cost of legal defense is in addition to policy liability limits, although the amount of damage paid for is subject to these limits.

Prevention is the Best Cure

To avoid this situation, have your trees trimmed and inspected periodically to make sure they're not dead or falling down. If you're worried about trees on your property falling during a storm, have them trimmed or removed. If you are concerned about a neighbor's tree, write a polite letter to your neighbor and the city, but realize that it may cause a disagreement.

Other Homeowners Insurance Options

Another option under your own homeowners insurance policy is the Damage to Property of Others coverage in the Other Coverages portion of the liability section. This coverage does not have a deductible and it can be used without a judgment or admission of legal liability, which can help speed up the payment process. The amount of coverage for Damage to Property of Others, typically $1,000, is in addition to the policy's liability limits. However, remember that using your own insurance constitutes a claim against it and a possible premium increase. Therefore, only use this type of coverage if you can't afford to pay for the damage yourself.

If your tree falls on your neighbor's porch, your neighbor's homeowners insurance will usually pay for the damage. However, remember that each area has different laws, and each policy has exclusions explaining what is not covered.

Custom Auto Insurance for Custom Cars

With the popularity of custom car TV shows such as "Pimp My Ride," personalized cars became hotter than ever. Accessories also came a long way from simple paint jobs and fuzzy dice. Today, drivers want their cars to stand out from the crowd, and to express their personality and style. As a result, car owners are adding chrome rims and grills, customized murals, spinners, pipes, LCD monitors, DVD players, expensive stereo systems, ground effects, and hydraulics.

But what is the cost to insure these hot new accessories? And do you know if your auto insurance company will cover these often-expensive enhancements?

If you're thinking of improving your car, these are some very important questions to ask! Modifying your car can be a huge investment, and you don't want to find out after the fact that your vehicle is not covered.

Ask first, change your car later.

The best course of action is to consult your insurance company before you start modifying your car. This will help you find out what your auto insurance company does and doesn't cover, if they are willing to insure your new car, and the total cost of keeping your customized auto covered.

Most insurance companies will ask if your car has "substantial customization" that you would like to insure at an additional cost. If so, you can add an endorsement to your comprehensive and collision coverage for custom parts and equipment. An endorsement is a change to your auto insurance policy, and it can extend coverage to include your modifications.

Check the amount covered under your endorsement, because it can vary for different companies. If your new parts cost more than the covered cost, you may want to consider shopping around to explore your coverage options. Keep in mind that standard insurance companies insure the actual value of the parts, meaning that they will pay you what the parts are worth, not what it costs to replace them.

Safety is key.

Always make sure that your parts are installed safely by a knowledgeable professional. Many drivers attempt to do the work themselves. As a result, parts could be installed improperly.

Your best bet is to have a professional do the work for you. It will save you a lot of money in the long run, in addition to keeping you safe.

Even if you don't have a custom car, you can still get free car insurance rate quotes from multiple companies by filling out a single application. If you do have a custom car, most companies will cover you. Just make sure to select "Yes" for the question about substantial customization in the vehicle information section of the application, or call for assistance.

Swiss Re Sigma Study Scopes Scenario Planning

By Alex Vorro February 24, 2009

Scenario analysis is rapidly becoming the method of choice to evaluate multiple risks for many insurers, says a new sigma study by Swiss Re. But despite its prevalence, Swiss Re feels carriers could do more to fully exploit these state-of-the-art approaches.

Scenario analysis helps insurers make business decisions by considering a number of potential future developments, allowing them to manage a broad range of often-interrelated risks, according to the Zurich-based reinsurer. It is used most frequently in areas such as strategic planning, risk management and underwriting.

"Events like the financial crisis will accelerate the adoption of these approaches and encourage insurers to use state-of-the-art scenario analysis to evaluate risks," says Kurt Karl, a Swiss Re economist.

A state-of-the-art approach, Karl says, would see insurers excelling in the following types of scenario analysis:

• A global model of assets and liabilities that can be stress tested with insurance, economic and financial market shocks

• A regular program of internal scenario tests related to shocks such as natural catastrophes and pandemics, as well as economic and financial market shocks

• Models that capture how these shocks affect each major asset class and business line

Because insurers face such a vast number of risks, including natural catastrophes, mortality risks and investment volatility, these risks can often interact in complex ways.

In the case of a pandemic, for example, thousands of people may lose their lives, resulting in a sharp increase in life insurance claims. In addition, as people shop, work and travel less to avoid becoming infected, businesses may suffer, causing corporate bond defaults to rise. A related impact on the business landscape is faltering share prices.

Because carriers have to price and manage these risks, they need a deep understanding of the risks and how they interact.

"The insurance industry, unlike some other industries, tends to focus on unlikely events," Karl says. "They use models provided by regulatory authorities or their own in-house models, which are then 'shocked' with a wide range of scenarios to evaluate tail risk. The better models take into account the benefits of diversifying insurance and asset risks."

In order to illustrate how scenario analysis works, the Swiss Re study suggests how an insurer might evaluate a complex scenario like a pandemic. Medical experts are needed to understand how pandemics spread and to help determine infection, mortality and morbidity rates. Economists are needed to assess the impact on different parts of the economy and capital markets. Underwriters are needed to gauge the costs to various insurance lines.

When the analysis is complete, insurers must then review mitigation strategies: Is additional reinsurance required? Should more restrictive clauses be imposed on, for example, business interruption insurance?

"Insurers must also evaluate how a pandemic would impact asset returns,” Karl says. “One must be prepared to de-risk the asset portfolio quickly, if the risk of a severe pandemic escalates."

But, while Swiss Re feels the use and sophistication of scenario analysis in insurance has improved, it is far from perfect. The industry is not yet fully applying state-of-the-art standards.

"The current financial crisis will definitively advance the use of scenario analysis by insurers," Karl adds. “This sigma aims to improve the understanding and use of scenario analysis and modeling in insurance.”

Gartner: I.T. Spending to Grow 2.6%

By Howard Anderson, Health Data Management February 24, 2009

The U.S. health care industry will increase spending on information technology by 2.6% to $28.4 billion in 2009, according to Gartner Inc., a Stamford, Conn.-based research and consulting firm.

Because of the recession, the rate of growth will be down substantially from 2008, when health I.T. spending grew 6.6%, and 2007, when it grew 7%, says John Lovelock, Gartner’s research VP for health care. Nevertheless, I.T. spending will grow more in health care during 2009, than any other sector of the U.S. economy, he says.

One significant reason for the continued growth, Lovelock says, is the expectation of federal financial incentives for electronic health records under the economic stimulus package in the coming years. Another, he says, is that health care is playing “catch up” after years of spending less on I.T. than other sectors. “Only in the last few years has clinical software been as functional as advertised,” he adds.

U.S. health care I.T. spending will grow more rapidly in the years ahead as the economic stimulus’ impact is felt more profoundly, Lovelock says. By 2011, he predicts spending growth will return to the 6.6% level achieved in 2008.

For more information on Gartner’s latest I.T. spending report, “Dataquest Alert: Utilities, Healthcare and Government Lead IT Spending Growth in Challenging 2009,” visit gartner.com.

Investment Returns Insurers’ No. 1 Concern

By Alex Vorro February 24, 2009

Investment performance is being hailed as the most pressing concern of insurers during this economic crisis, according to a recent survey from PricewaterhouseCoopers LLP.

When PricewaterhouseCoopers last polled insurers in its 2007 “Insurance Banana Skins” survey, investment returns failed to crack the top 10 concerns. But in 2009, investment performance, equity markets and capital availability topped the list. Overregulation—the No. 1 risk in 2007—fell to fifth place.

Respondents to this year’s survey are anxious about Solvency II, which some said would raise capital requirements during these “demanding times.” They also are apprehensive about a regulatory knee-jerk reaction to the banking crisis, the report says.

Exposure-led risks, such as pollution, catastrophe exposures, terrorism and climate change, also dropped in the rankings, as risks related to the financial downturn rose to the forefront.

New York-based Centre for the Study of Financial Innovation worked in conjunction with PricewaterhouseCoopers on its “Insurance Banana Skins 2009” survey. They interviewed 400 companies in 39 countries.

AIG May Face Bankruptcy, Evaluating Alternatives

By INN Editorial Staff February 23, 2009

American International Group Inc. said yesterday that it's weighing "potential new alternatives" with the Federal Reserve Bank of New York in response to its continued struggles, according to a MarketWatch report.

"We continue to work with the Federal Reserve Bank of New York to evaluate potential new alternatives for addressing AIG's financial challenges," company spokesman Joseph Norton said in a statement. "We will provide a complete update when we report financial results in the near future."

AIG's issued its statement after CNBC said yesterday that the company will report a $60 billion loss next Monday, and is seeking further governmental support. According to the New York Times, under the U.S. Federal TARP program, the government has already lent AIG $150 billion.

The insurer’s massive losses are due to writedowns on commercial real estate and other assets, CNBC reported. AIG's board will meet Sunday to work out an agreement with the government, the news outlet said.

Additionally, the loss may trigger more ratings downgrades, which would leave AIG needing to raise more collateral, according to CNBC's David Faber. The law firm of Weil, Gotshal & Manges is preparing a bankruptcy filing for AIG, but that outcome is unlikely, he said.

The talks with the government include the possibility of additional funds for the insurer and trading debt for equity, a source familiar with the matter told Reuters.

Today, the Wall Street Journal and Financial Times ran separate stories on talks between the government and AIG over a new rescue deal. Unnamed sources said a revised arrangement could involve swapping the $60 billion federal loan for equity, other debt, and pieces of some of the insurance giant's businesses.

According to the Journal, the government could receive "major stakes" in spun-off businesses, probably including some in Asia, and the unnamed sources now say AIG is likely to post a fourth-quarter net loss of more than $60 billion on Monday.

3 Major Insurers’ Ratings Plummet

By Carrie Burns and Retirement Income Reporter Editorial Staff February 23, 2009

The beleaguered life insurance industry continues to take a beating from the rating agencies as Genworth Financial and Prudential Financial both were both downgraded.

Prudential’s downgrade by Fitch Ratings was especially harmful, as the second-largest insurer lost eligibility for the U.S. commercial paper program, reducing the company’s access to short-term debt markets. Both Genworth and Hartford Financial Services have already lost access to the commercial paper program because of downgrades.

Prudential’s holding company will lose out on $1.3 billion in total Commercial Paper Funding Facility, but the company maintains it has sufficient resources to repay debt when it is due at the end of April. Prudential is selling its stake in Wachovia Securities after halving the quarterly dividend and suspending share buybacks to preserve capital amid investment declines, Bloomberg reported.

“We no longer have the ability to borrow funds from the Commercial Paper Funding Facility,” Bob DeFillippo, a spokesman for the Newark-based insurer, told Bloomberg in an interview. “The company’s liquidity requirements are not dependent on access to the commercial paper market or to debt capital markets.”

Fitch downgraded Prudential’s short-term debt rating to F2 from F1 after the insurer posted two straight quarterly losses. It posted an $878 fourth-quarter loss.

Meanwhile, A.M. Best Co. downgraded Genworth’s key life/health financial strength rating to “A” from “A+,” and issuer credit ratings from “a” from “aa-”. All ratings have been removed from under review with negative implications and assigned a negative outlook.

The rating actions reflect the impact that the current market has had on Genworth’s holding company liquidity and overall financial flexibility, the significant unrealized loss positions maintained within its fixed income investment portfolio and the narrowing of its business profile as a result of sales and earnings declines within its various product lines.

P&C insurers are not immune to the downgrades. After CNA Insurance Cos. announced fourth quarter 2008 results, which included a net operating loss for the fourth quarter of 2008 of $21 million, or $0.15 per share and net loss for the fourth quarter of 2008 of $336 million, or $1.31 per share, Fitch Ratings and A.M. Best announced downgrades of the insurer.

Fitch downgraded the insurer financial strength ratings of CNA's property/casualty insurance subsidiaries to “A-“ from “A.” The Rating Outlook is Negative. Fitch says its rating actions reflect its updated review of CNA's exposure to the volatile credit and investment market conditions, which are having a negative impact on its asset portfolio, earnings and capital position. Fitch believes that CNA's negative earnings demonstrate a higher level of financial volatility than what was anticipated at the prior rating level.

A.M. Best Co. revised CNA’s outlook to negative from stable. A.M. Best’s negative outlook reflects CNA’s fourth quarter 2008 results, which were strained by significant investment losses, both realized and unrealized, as well as declining net investment income due to losses from limited partnership investments. Given the magnitude of investment losses already reported, continued turmoil in capital markets and CNA’s sizeable investment in mortgage and asset-backed securities, uncertainties exist regarding the potential for continued investment losses and the further strain that may place on risk-adjusted capitalization, according to the rating agency.