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Pennsylvania Restricts Exclusions in Homeowners Earthquake Endorsements

April 19, 2015 AAIS Advisory notice

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A recent notice from the Pennsylvania Insurance Department prohibits insurers from excluding coverage for earthquakes caused by human activity in homeowners endorsements providing earthquake coverage.

In the notice, Acting Director Teresa Miller states that some insurers assert that such exclusions are required to address the potential for human-induced activities such as hydraulic-fracturing ("fracking").

She adds that: "Determining with certainty that human activity caused an earthquake is very difficult, and insurance claims by homeowners should not go unpaid during a long and arduous investigative process that will likely uncover no definitive proof linking the earthquake to human activity."

The notice directs insurers to cover damage from all earthquakes under homeowners earthquake coverage endorsements. Any insurers using endorsements with exclusions for human-induced earthquakes are instructed not to enforce those provisions, and to file revised earthquake endorsements by July 1, 2015.

The notice does not affect "earth movement" exclusions in mandatory homeowners endorsements filed by AAIS and approved in Pennsylvania and most other states in 2014-15. Those exclusions exclude coverage from earth movement, whether it arises from natural or man-made causes.

AAIS Advisory notices are posted periodically to announce AAIS product developments, and to provide news items that are relevant to our program users. Advisory notices are news summaries that paraphrase documents which should be consulted directly for complete, authoritative information.