ncjua fair plan rp fair plan... · i doi approved 11/07/12 ncjua fair plan (fair access to...

i DOI Approved 11/07/12

NCJUA FAIR Plan

(Fair Access to Insurance Requirements)

Rules and Regulations Manual

i DOI Approved 11/07/12

Table of Contents

MISSION STATEMENT .............................................................................................................................................. 1

DISCLAIMER STATEMENT ....................................................................................................................................... 2

SECTION I GENERAL INFORMATION...................................................................................................................... 3

FACTS ABOUT THE PLAN ..................................................................................................................................... 4-5

SECTION II THE APPLICATION PROCESS ............................................................................................................. 6

DYNAMIC WEB APPLICATIONS ............................................................................................................................... 7

MANUAL APPLICATIONS .......................................................................................................................................... 7

SECTION III PROCEDURES FREQUENTLY ASKED ABOUT.................................................................................. 8

CONDOMINIUM ASSOCIATION – PROCEDURES AND REQUIRED APPLICATIONS .......................................... 9

HURRICANE COVERAGE WRITING RESTRICTIONS............................................................................................. 9

MANUFACTURING RISKS ....................................................................................................................................... 10

REPLACEMENT COST COVERAGE GUIDELINES........................................................................................... 10-11

BROAD PERILS POLICY WITHOUT REPLACEMENT COST COVERAGE...................................................... 11-12

SHORT TERM POLICIES GUIDELINES .................................................................................................................. 12

TRAVEL TRAILER GUIDELINES ............................................................................................................................. 12

VACANT, UNOCCUPIED OR PROPERTIES UNDERGOING RENOVATIONS ..................................................... 13

DEDUCTIBLE REQUIREMENTS ............................................................................................................................. 14

SECTION IV DEFINITIONS ................................................................................................................................. 15-20

SECTION V THE PLANS IN DETAIL ....................................................................................................................... 21

INTRODUCTION AND BACKGROUND ................................................................................................................... 22

AUTHORITY OF AGENTS AND BROKERS ....................................................................................................... 22-23

PURPOSE OF THE FAIR PLAN............................................................................................................................... 23

ANTI-ARSON ACTION PLAN ................................................................................................................................... 23

ELIGIBILITY .............................................................................................................................................................. 23

A. ELIGIBLE APPLICANT ........................................................................................................23-24 B. INELIGIBLE APPLICANT .......................................................................................................... 24 C. ELIGIBILE PROPERTY ............................................................................................................ 24 D. INELIGIBLE PROPERTY.......................................................................................................... 24

UNDERWRITING STANDARDS .............................................................................................................................. 24

A. GENERAL FAIR PLAN .........................................................................................................24-26 B. PROCEDURES WHEN A HURRICANE IS WITHIN CERTAIN DESCRIBED COORDINATES 26 C. FARM PROPERTY ..............................................................................................................26-27 D. MOBILE HOMES ...................................................................................................................... 27 E. VACANT, UNOCCUPIED OR PROPERTIES UNDERGOING RENOVATIONS ...................... 28 F. APPLICATIONS WHERE THE PROPERTY HAS UNREPAIRED DAMAGE .......................28-29 G. OTHER STRUCTURES IN POOR CONDITION..................................................................29-30

FAIR PLAN NEW BUSINESS REQUIREMENTS..................................................................................................... 30

ii DOI Approved 11/07/12

POLICY WRITING AND POLICY PROVISIONS ...................................................................................................... 30

A. EFFECTIVE DATE OF COVERAGE ......................................................................................... 30 B. COVERAGE(S) PROVIDED ..................................................................................................... 30 C. NOTIFICATION WHEN APPLICATIONS ARE APPROVED WITH CHANGES...................30-31 D. POLICY FORMS ....................................................................................................................... 31 E. CONTINUATION OF COVERAGE CERTIFICATE ................................................................... 31 F. DEDUCTIBLES ......................................................................................................................... 31 G. COINSURANCE ....................................................................................................................... 31 H. POLICY TERM .......................................................................................................................... 31 I. OTHER INSURANCE ...........................................................................................................31-32 J. PRIMARY/EXCESS PROCEDURE ........................................................................................... 32

MAXIMUM LIMITS OF LIABILITY............................................................................................................................. 32

IMMEDIATE AND INTERIM COVERAGE ................................................................................................................ 32

A. COMMERCIAL, VACANT, UNOCCUPIED OR FAIR PLAN SEASONAL DWELLING RISKS 32-32 B. APPLICANT’S RESPONSIBILITY ............................................................................................ 33

INSPECTIONS .......................................................................................................................................................... 33

A. REQUEST FOR INSPECTION ................................................................................................. 33 B. INSPECTION PROCEDURE ...............................................................................................33-34 C. REINSPECTIONS..................................................................................................................... 34 D. INCOMPLETE INSPECTION (LOCKOUTS)........................................................................34-35

PROCEDURES AFTER INSPECTION ..................................................................................................................... 35

PAYMENT OF PREMIUMS (POLICIES) .................................................................................................................. 36

A. PREMIUM PAYMENTS............................................................................................................. 36 B. APPROVAL NOTICE ................................................................................................................ 37 C. RETURN PREMIUMS ..........................................................................................................37-38 D. WAIVER OF ADDITIONAL OR RETURN PREMIUM ............................................................... 38 E. COMMISSIONS ........................................................................................................................ 38

REQUEST FOR CHANGE ........................................................................................................................................ 38

A. POLICY CHANGES .................................................................................................................. 38 B. POLICY ASSIGNMENT ............................................................................................................ 39 C. CHANGE OF PRODUCER ....................................................................................................... 39 D. CHANGE OF LOCATION.......................................................................................................... 39 E. ADDING A LOCATION TO EXISTING DWELLING PROPERTIES .....................................39-40 F. WILLFUL CONCEALMENT OR MISREPRESENTATION ........................................................ 40

CANCELLATIONS .................................................................................................................................................... 40

A. CANCELLATION AT INSURED’S REQUEST........................................................................... 40 B. CANCELLATION INITIATED BY THE FAIR PLAN ..............................................................40-41

APPEALS .................................................................................................................................................................. 42

RATES, RATING PLANS AND RATE RULES ......................................................................................................... 42

PUBLIC RELATIONS ................................................................................................................................................ 42

A. SPEAKERS ............................................................................................................................... 42 B. OFFICE TOURS........................................................................................................................ 42

1 DOI Approved 11/07/12

MISSION STATEMENT

North Carolina Joint Underwriting Association is an insurance industry supported organization committed to providing a basic property insurance market to protect policyholders while offering quality products and services to producers and insured's, as well as protecting the assets of our member companies.

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DISCLAIMER STATEMENT This manual provides information regarding Association procedures and general information about the FAIR Plan. For easy reference, we would suggest you keep your Manual close at hand and refer to it should a question arise.

While the FAIR Plan follows the procedures described in this Manual, they are subject to change. The Plan reserves the rights to modify, revoke, suspend, terminate or change any or all procedures and applications in whole or in part, with the approval of the Department of Insurance. The Plan will attempt to give producers at least thirty (30) days advance notice of all changes approved by the Department of Insurance.

The language used in this Manual is not intended to create, nor is it construed to constitute a contract between the North Carolina Joint Underwriting Association and any insurance agent, producer, broker, applicant, insured, or any agent or legal representative acting on their behalf.

Gina Schwitzgebel Manager, NCJUA/NCIUA


SECTION I

GENERAL INFORMATION


FACTS ABOUT THE PLAN The FAIR and Beach Plans are not facilities of the North Carolina State Government.

FAIR PLAN The property must be located within the State of North Carolina but not

located in the “Beach area” as defined in G.S. 58-45, 45-5 (2 & 2a).

AUTHORITY OF AGENTS & BROKERS

The North Carolina Joint Underwriting Association does not have its own agents. The use of the term “Agent” or “Producer” does not indicate any relationship, express, implied or apparent between the Association and any individual entity.

COVERAGE AVAILABLE IN

Basic and Broad coverage as offered by the DP-1 or DP-2 for dwelling and commercial CP-0099 with Endorsement PF-1002 for Broad Perils.

COVERAGE EFFECTIVE DATE

Producers have no binding authority. Immediate or immediate interim coverage on dwellings will be effective at 12:01 am the day following the “Post Office” postmark date on the envelope in which a properly completed application and appropriate premium is mailed to the Association. Applications mailed by postal meters will be effective the date a properly completed application and premiums are received in the Association’s office.

CRIME Crime coverage is available on a separate policy that provides burglary and robbery protection. This coverage is available on both dwellings and commercial properties.

ELIGIBILITY See The Plan In Detail for full information.

INSPECTIONS FAIR Plan- Inside and outside property inspections are completed by

inspection vendors, normally within twenty (20) days of receipt of an application.

MARKET OF LAST RESORT

The North Carolina General Assembly declare by 58-46-1(a) (FAIR Plan) that the market provided by this article not be the first market of choice, but the market of last resort.

MAXIMUM LIMITS WRITTEN BY THE PLAN

FAIR Plan Habitational - $750,000 FAIR Plan Commercial - $2,500,000 per location ($6,000,000 aggregate applies on multi-fire division buildings)

Crime: Residential - $10,000

Commercial - $15,000 (Separate Crime Policy)

MOBILE HOMES Must be at least 8’ x 40’ in size and built on a permanent chassis affixed to land, be connected to the required utilities, including plumbing, heating, air conditioning and electrical systems. They shall be properly tied-down and meet all required minimum regulations, have all wheels removed and have continuous skirting. (See The Plans In Detail for full description.)


PHOTOGRAPHS The Plans will accept either standard or digital photographs for underwriting purposes. Digital photographs must be in color and of such quality to show in good detail the features of the building or structure.

POLICY TERMS FAIR Plan policies are written for either a one (1) or three (3) year term.

Refer to the Three-Year Policy Procedure for additional details.

PREMIUM PAYMENTS

FAIR Plan premiums are payable on a gross basis under the policyholder billed program and commissions are reconciled and paid monthly. Semiannual and quarterly pay plans are also available. Payments can be made by credit card over through the Association’s website.

PRIMARY Primary insurance is available on Habitational and Commercial properties. This coverage is provided when the Plan write its maximum limit as a primary layer of coverage with a licensed standard carrier (approved by the Department of Insurance) excess carrier providing excess layer coverage up to the full value of the property. Rating is based on the total property value. The Lloyd’s Table (see Exhibit in Applications Section of this Manual) is used to determine applicable premiums based on the percentage the primary layer is to total property value for commercial policies. Habitational properties are rated using the “First Loss Table” and rules provided by the North Carolina Rate Bureau. This coverage provision can apply to Basic, Broad or Windstorm and Hail Only submissions.

VACANT/ UNOCCUPIED PROPERTIES

Properties which have been vacant or unoccupied for more than sixty (60) day normally do not meet the Plan’s underwriting standards. Refer to The Plans In Detail. All exceptions require underwriter approval. Note: In some cases, photographs sent along with FAIR applications may allow the underwriter to fully assess acceptability of a risk and therefore, waive the need for an inspection.

UNDERWRITING STANDARDS

Both plans have reasonable underwriting standards which must be met. These are basic issues, which most people would have done already to make their properties safe to eliminate substandard physical conditions. See The Plans In Detail for full description. Commercial, vacant and unoccupied or seasonal properties may not be eligible for coverage for up to twenty (20) days since they will usually need to be inspected before coverage can be approved. In all instances, coverage cannot be placed into effect until the estimated annual premium is received in the Association’s office.


SECTION II

THE APPLICATION PROCESS


THE APPLICATION PROCESS

Dynamic Web Applications – Preferred Method A Certified Producer may be authorized to submit Applications through the Dynamic Web, please contact the Association for authorizations.

Manual Applications The NCJUA will accept either the ACORD Application Forms or the Plan specific applications. If ACORD forms are used, there is no need to submit Plan specific supplemental applications except for the Condominium Association Supplemental Application, AP105. The vacancy and unoccupancy questionnaire Application AP17 and Builders Risk Supplemental Application, AP15 with the ACORD Forms, in order to fully explain their risk.

The Plan needs full details on submissions so that a proper decision and rating can be completed. However, if the ACORD Application is property completed (including utilization of the “Remarks” section for descriptive details, no Plans Specific Supplemental Application should be needed.

The following Basic and Supplemental Applications are accepted:

A. Plans Specific Applications 1. Fair Plan Basic Application – F-A-3 2. Supplemental Applications (applicable to both Plans)

a. Builders Risk (AP-15) b. Vacancy/Unoccupancy questionnaire (FP-17, BP-17 – same form) c. Corporate Applicant questionnaire (FP-18). Instead of the FP-18 form

a copy of the Corporation’s Annual Report can be submitted. d. Replacement Cost Application (AP-42) e. Mobile Home Supplemental application (AP-30) f. Condominium Association Supplemental Application (AP-105).

Applies to Commercial Risks only. B. ACORD

1. Applications a. Dwellings (ACORD 84) b. Homeowner (ACORD 80) c. Mobile Homes (ACORD 85) d. Farm Property (ACORD 401, 402, 403) e. Commercial Property (ACORD 125, 140) f. Builders’ Risk (ACORD 84 or ACORD 125 and request Builders’ Risk g. Important Instruction and Information (ACORD 62) h. Supplemental Property Application (ACORD 190). Required with

dwelling or commercial submissions.

C. Crime Applications 1. Residential

a. FAIR Plan (FPCI-3) 2. Commercial

a. FPCI-2/BPC1-2 FAIR Plan application


SECTION III

PROCEDURES FREQUENTLY ASKED ABOUT


CONDOMINIUM ASSOCIATION – PROCEDURES AND REQUIRED APPLICATIONS Effective 11/1/97, the NC Commissioner of Insurance gave the FAIR Plan approval to implement Condominium Association Underwriting Procedures and require submitting a completed Condominium Unit Owners Supplemental Application. The Supplemental Application must accompany either the ACORD or FAIR Plan basic applications. The Supplemental Applications will also be required with all applications for continuation of coverage or three-year policy adjustment notices.

The required Condominium, Unit Owners Supplemental Application, AP 105, requires that an authorized representative of the Condominium/Townhouse Association specify the type of coverage which is desired. The selected coverage should correspond with the applicant’s articles of declarations or bylaws and any addenda approved by the Unit Owners or their Board of Directors. The available selections are All-In, Original Specifications with Bare Walls. These selection’s categories are consistent with the terminology provided within Condominium/Townhouse Associations documents. Once the coverage option has been selected, the policy issued by the Plans will show the applicable endorsement on the policy declarations and update the appropriate endorsement with the policy.

The following procedures apply to applicants requesting Condominium/Townhouse Association coverage:

1. Applicants requesting coverage for Condominiums and Townhouse Associations must provide a copy of the Association declarations and bylaws and a Condominium Unit Owners Supplemental Application in addition to the basic applications.

2. The Condominium Unit Owners supplemental Application must be signed by an

authorized representative of the Condominium or Townhouse Association. The specified coverage option will apply to each Continuation or until a revised Condominium Unit Owners Supplemental Application is submitted to the Plan.

3. The endorsement specifying the chosen Condominium or Townhouse coverage option will be made a part of the policy.

4. Not providing the declaration and bylaws or Condominium Unit Owners Supplemental

Application will be sufficient grounds to decline new business and policy continuation requests.

HURRICANE COVERAGE WRITING RESTRICTIONS No new or increased coverage shall be bound or application for new or increased coverage accepted after 12:01A.M. the following day when the center of a designated tropical storm or hurricane is located within Longitudes 65° West and 85° West, and Latitudes 20° North and 37° North. The term “designated tropical storm or hurricane” is a windstorm designated as a tropical storm or hurricane by the National Weather Service.

If active watches or warnings are not posted for North Carolina and the National Hurricane Center has clearly outlined a projected path away from North Carolina, the General Manager may lift restrictions prior to the tropical storm or hurricane leaving the designated coordinates.


MANUFACTURING RISKS Limited classes of manufacturing are eligible for coverage in the FAIR Plan if they meet occupancy and other underwriting stands. Following is the definition of appropriate classes and the general rules that will apply for manufacturing risks:

APPROPRIATE CLASSES OF MANUFACTURING RISKS

1. Buildings that are 10,000 square feet, or under, in size.

2. Where there is more than one building on premises, only the square footage of the building being insured will be used in determining eligibility.

3. Contents coverage is subject to the same criteria as building except that only the square

footage actually used for manufacturing shall be included in determining eligibility.

4. Any submission not qualifying under items 1, 2 or 3, may be submitted to the Association for consideration as an exception.

MANUFACTURING RISKS UNDERWRITING GENERAL RULES

1. Commercial surcharges for substandard physical conditions will be applicable.

2. Properties will be inspected every year, unless the Association, in its judgment, is in possession of

sufficient current inspection information.

3. The applicant or insured must institute reasonable loss control measures that materially affect the insurability of the risk after written notice by the Association.

REPLACEMENT COST COVERAGE GUIDELINES The following guidelines for eligibility and application have been established by the FAIR Plan for Replacement Cost Coverage.

APPLICATION FOR REPLACEMENT COST COVERAGE GUIDELINES

1) Producer must inspect the property before submitting the Application in order to determine if Replacement Cost Coverage is applicable.

a. Not available to properties with existing substandard conditions. b. Not available to vacant and/or unoccupied properties. c. Not available on mobile homes unless the mobile home is owner-occupied and affixed

to a permanent foundation. Applicant must provide sufficient proof with application indicating the mobile home is real property.

2) Coverage must be for at least 90% of replacement cost, with strong suggestion that it be for 100%.

3) Not applicable to contents, personal property, mobile homes (except as indicated in 1.c), farm property

(except dwellings) or crime coverage. 4) Building should be twenty (20) years old or less. If over twenty (20) years old, it must be in very good

physical condition, with proper documentation of renovations. If the application for replacement cost coverage shows building systems that are more than twenty (20) years old, verification of the building systems being updated or checked by a licensed contractor may be required


5) Applying for Coverage a) FAIR PLAN APPLICATION FOR COVERAGE

An AP-42 form, Application for Replacement Cost Coverage, is required for all FAIR Plan properties requesting Replacement Cost Coverage. The AP-42 form is required only at the initial request for Replacement Cost Coverage. Application must include at least two (2) viable, clear photographs (front and rear) of the building to be insured. These photographs must include a view of at least two (2) roof slopes and, if applicable, a view of any adjacent buildings. More than two (2) photographs should be sent, if necessary, to provide a full representation of the structure and its exposure.

b) When the building and/or building systems reach twenty (20) years of age with no documentation on file to indicate proper maintenance, the Underwriter may require verification of continued building system(s) acceptability. Completion of an AP-42 form by the policyholder or written verification from a licensed contractor, are examples of sufficient documentation.

6) Building(s) must comply with North Carolina Building Codes.

7) Replacement cost coverage will be effective by attachment to the policy endorsement PF-0420, for

commercial properties, and use of the form DP0002 for dwelling properties. 8) Applications not qualifying under any of the above listed guidelines may be submitted to the

Associations for consideration as an exception.

BROAD PERILS POLICY WITHOUT REPLACEMENT COST COVERAGE GUIDELINES FOR PROPERTIES ELIGBILE FOR BROAD PERILS BUT NOT REPLACEMENT COSTS.

The FAIR Plan has established the following guidelines for eligibility for Actual Cash Value Loss Settlement Endorsement DP0476 when added to the DP0002 policy form. The DP0476 Endorsement and Procedures form replaces the discontinued DP3251 Endorsement and Guidelines form.

IMPORTANT NOTE: Producers should closely review the Dwelling ’89 Program Manual when using this endorsement. Dwellings (other than mobile homes) require rating by using factors based on percentage of replacement value. Mobile Homes are rated differently.

A. Stick-Built Homes and Modular Homes: Stick built homes and modular homes qualifying for DP0002 (Broad Form) with DP0476 must meet the following criteria; alternatively, it will be written on a DP0001 (Basic Form):

1. The property cannot reflect any substandard conditions requiring surcharges.

2. Vacant and/or unoccupied properties and unoccupied properties undergoing renovations do not

qualify for the DP0476 Endorsement.

3. The property (new or continuation) cannot reflect more than two (2) Additional Extended Coverage claims exceeding a total of $1,000 within the past two (2) years. (The Association will attempt to use deductibles whenever possible to respond to this criterion.)

4. Request for Endorsement DP0476, not qualifying under the above, may be submitted to the Association for consideration as an exception.

B. Mobile Homes. Mobile homes qualifying for Endorsement DP0002 (Broad Form) with DP0476 (5/96) must meet the following criteria, alternatively, it will be written on a DP0001 (Basic Form):

1. Same requirements indicated in 1, 2 and 3 for Stick Built Homes.


2. Must be owner-occupied.

3. Cannot be over 20 years old.

4. Must be skirted and properly secured, meeting all set-up and tie-down requirements of the county and/or municipal government where located.

5. Request for Endorsement DP0476 not qualifying under the above may be submitted to the Association for consideration as an exception.

SHORT TERM POLICIES GUIDELINES The following guidelines for eligibility and applications have been established by the FAIR Plan and approved by the NC Commissioner of Insurance for issuance of a short-term policy:

1. An acceptable reason for providing a short-term policy would be to allow the insured/applicant the ability to secure a common anniversary date for all insurance policies. (Example: The applicant needs a common anniversary date for a premium financing agreement).

2. The insured/applicant must provide the following documentation in order to qualify for issuance of a short-term policy:

a. Copies of the declarations for the policies that reflect the desired anniversary date. b. A copy of a premium finance agreement, signed by the applicant, which reflects the

common expiration date for all of the financed policies. Exceptions to these guidelines must be made in writing and directed to the underwriter. However, only approved, unique or unusual circumstances will be considered a valid reason for allowing exceptions.

TRAVEL TRAILER GUIDELINES Travel Trailers located in the State of North Carolina may qualify for property coverage through the Plans. The Travel Trailer Special Conditions Endorsement will apply to policies covering travel trailers written in the Plan

1. Travel trailers must be at least 8 x 24 (192 square feet inside).

2. The applicant must certify that the travel trailer will be properly set-up and tied-down while at a fixed location.

3. The Association must be provided with the specific dates the travel trailer will be at a designated site. There will be no coverage provided for a travel trailer when it is not properly set-up and tied- down at a fixed location.

4. Only the DP-1 (Basic) Form and only the Perils of Fire and Extended Coverage are available for travel trailers written in the FAIR Plan.

5. Travel trailers cannot be more than fifteen (15) years old when initially written.

6. The minimum deductible available is $500.

7. The premium will be considered fully earned at the time the policy is written; however, in the case where the policyholder no longer has an interest in the travel trailer and with proper request for cancellation, the pro-rate unearned premium will be returned.

8. Request for coverage not qualifying under Item(s) 1-7 may be submitted to the Association for consideration as an exception.


NOTE: Travel Trailer Special Conditions Endorsement, TT001, is added to all policies covering Travel Trailers.

VACANT, UNOCCUPIED OR PROPERTIES UNDERGOING RENOVATIONS Properties that are vacant or unoccupied for more than sixty (60) days are generally not eligible for the FAIR Plan.

Legitimate extenuating circumstances that may be considered for coverage are:

1) Estate property waiting on estate settlement or sale. 2) Renovation/rehabilitation of the structure. 3) The vacancy/unoccupancy will be temporary as under contract to sell or rent. 4) Historical properties registered by the preservation of historical organizations.

Note: Dwellings that have been vacant for more than sixty (60) days with the same owner and undergoing cosmetic updates are not considered as being renovated or rehabilitated.

Full details of the vacancy/unoccupancy are required at time of application and submission of the supplemental Unoccupancy/Vacancy Questionnaire FP-17 is required.

Each risk will be underwritten under its own merits; however, the Plan does typically expect occupancy within sixty (60) days of ownership; date of last tenant; after completed renovation/rehabilitation; or original construction completion. Long-term renovations should not exceed six (6) months and then occupied within sixty (60) days of completion. Due to the vacancy hazard, the Plan would typically require a twenty (20) day wait, no vandalism coverage, and a higher than normal deductible. Policy surcharges are available for use in the case of a vacancy hazard. The property must be secured from unauthorized entry.

The FAIR Plan reserves the right to cancel a policy for misrepresentation during the vacancy period if the actual renovation progress falls short of the estimates provided by the applicant at the time of application. If requested, the Association will waive the waiting period for a real estate closing with full payment and photographs of the property.

With the exception of historical properties, it would be unusual for the Plan to continue for an additional term a policy that was unoccupied when it was originally submitted. If these situations arise a new FP 17 supplement, or equivalent information, would be required at time of continuation and the underwriting decision will be based on the individual circumstances presented for the risk.

Historical Properties were previously defined. We ask that the submissions for organizations include photographs, as they are generally available as part of the sales activity and this may allow us to waive or postpone an inspection of the property. If the property is secured from entry, we will allow the property to be vacant or as a property being held for sale for one policy term.

In the situation of rehabilitation or renovation, the application should include the FP-17 supplement and a detailed schedule for completion. This helps us determine the resources and commitment the owner has to the project and the approximate length of time we can expect to write the property under this situation. We will not provide coverage if the historical property is open to trespass, as this is our practice with all properties.


DEDUCTIBLE REQUIREMENTS

Residential Inland, All Other FAIR Plan Territories

Amount of Building Coverage Minimum All Perils Less than $100,000 $500 $100,000 up to $250,000 $1,000 $250,000 and above $2,500

Residential Coastal, FAIR Plan Territories 42 and 43

Amount of Building Coverage

Minimum All Peril or All Other Peril Deductible if Named Storm Applies

Minimum Named Storm Deductible (NSD)

Less than $50,000 $500 NSD Does Not Apply $50,000 up to $100,000 $500 1% $100,000 up to $250,000 $1,000 1% $250,000 and above $2,500 1%

Commercial, All FAIR Plan Territories

Amount of Combined Coverage per Building (Building plus Contents)

Minimum All Peril or All Other Peril Deductible if Named Storm Applies

Minimum Named Storm Deductible (NSD)

Less than $100,000 $500 NSD Does Not Apply $100,000 up to $250,000 $1,000 1% $250,000 and above $2,500 1%


SECTION IV

DEFINITIONS


DEFINITIONS ACTUAL CASH VALUE: An amount, which limits the company’s payment to the actual cash value of an item at the time of loss or damage. Usually includes a deduction for depreciation.

APPROVAL NOTICE: Notice sent to the producer/insured or applicant advising application has been accepted and premium is required to put coverage into effect.

APPLICANT: A person who fills out and signs a written application for insurance. Insurable interest is required.

APPLICATION: A questionnaire providing space for information to be used to determine the insurance coverage required, as well as the acceptability of the insurance risk and the amount of premium. A questionnaire, which must be filled in, when required by the person seeking insurance. It gives the company full information about the proposed subject of insurance and the person to be insured, for the purpose of determining whether the company will issue the policy. In some types of insurance, it becomes part of the policy.

APPRAISAL: Determination of the value of property, or of the extent of damage, usually by impartial experts. Provided for by a clause, in some types of insurance contracts.

ARSON: The willful and malicious burning of, or attempt to burn, any structure or other property, often with criminal or fraudulent intent.

BASIC PERILS: The perils of fire, extended coverage, vandalism and malicious mischief.

BROAD FORM PERILS: Additional causes of loss beyond Fire, Extended Coverage and Vandalism. These additional causes of loss including breakage of glass, falling objects, weight of snow, ice or sleet, water damage and freezing of plumbing (refer to the policy for full details on each peril).

BURGLARY: Burglary” or “Burglary and larceny incident thereto” means the felonious abstraction of insured property from within the premises by a person making felonious entry. CANCELLATION: Termination of an insurance contract before the end of the policy period, by the insured or insurer, usually in accordance with provisions in the contract.

CATASTROPHE: A sudden event, which causes a loss of an extraordinary amount. Most often associated with natural disasters, the term usually is used when there is concentrated or widespread damage.

CLAIM: demand by an individual or corporation to recover under a policy of insurance for loss arising out of events covered by the policy. Claims are referred to the insurance company for handling on behalf of the insured in accordance with the contract terms. A demand for payment under an insurance contract or bond. The estimated or actual amount of a loss.

COASTAL TERRITORY: All areas of the State of North Carolina comprising the following counties: Beaufort, Brunswick, Camden, Carteret, Chowan, Craven, Currituck, Dare, Hyde, Jones, New Hanover, Onslow, Pamlico, Pasquotank, Pender, Perquimans, Tyrrell and Washington. “Coastal Area” does not include the portions of these counties that lie within the beach area. This territory is part of the Beach Plan for Wind and Hail policies. Fire policies are written in the FAIR Plan for this territory.


COMMERCIAL LINES: A general term used to refer to any type of insurance (property, etc.) purchased by businesses, organizations, institutions or other commercial establishments to protect risk associated with their operations.

CONFIRMATION: Notice sent to the Producer/Insured advising application has been received and listing property for inspection and effective date if premium is submitted with application.

COINSURANCE: clause contained in some fire and burglary policies, requiring the insured to carry insurance equal to a stated percentage of the value of the insured property in order to collect the losses in full, up to the limits of the policy.

CONTINUATION: The Association does not offer renewals. Each policy term requires approved re-application and the full premium payment for a policy to remain in effect.

CONCURRENT: Insurance under two or more contracts, all the terms of which are as identical as possible, i.e. effective dates, limits, deductibles, etc.

CONDITIONS: That portion of the insurance contract, which outlines the duties and responsibilities of both the insured and the insurer.

CONTRACT: A legal agreement between two parties, for consideration. Insurance policies are contracts.

DECLARATIONS PAGE: That portion of the insurance contract which contains such information as: name and address of the insured, description of the property, coverage and premium amounts.

DEDUCTIBLE: An amount of a loss a policyholder agrees to pay, per claim or per accident, before an insurance policy provides coverage. The deductible amount can either be a fixed dollar, percentage of covered property value or combination of both, i.e., fixed for all perils except for a hurricane loss where a percentage deductible applies. The insurance provider normally reserves the right to decide the appropriate deductible for a particular risk.

DRAFT: An instrument having the external characteristics of a check, but differing in that the bank is authorized to transfer check funds on presentation of the instrument. They may transfer draft funds only when the draft has been accepted by the drawer and acknowledged by acceptance of the instrument as valid.

ENDORSEMENT (Amendatory Endorsement): An amendment in writing (including printing stamping) added to and made a part of the insurance contract for the purpose of changing the original terms – to either restrict or expand coverage.

ESSENTIAL PROPERTY CARRIER: A Member Company which writes coverage for all perils except wind. That policy is also called a wraparound policy, since it participates or wraps around the Beach Plan’s Windstorm and Hail policy. Non-admitted companies cannot be the wraparound carriers.

ESSENTIAL PROPERTY INSURANCE: “Essential Property Insurance” means insurance against direct loss to property as defined in the standard statutory fire policy and extended coverage, vandalism and malicious mischief endorsements thereon, or their successor forms of coverage, as approved by the Commissioner.


EXPIRATION: The date on which the insurance protection on a policy will end, e.g., coverage will cease on an annual policy at the end of 12 months from the effective date.

EXPIRATION NOTICE: A form sent to the agency indicating that expiration of a policy is imminent. Often returned to the company by the producer as an order for Continuation of the Policy.

FAIR PLAN (Fair Access to available to those risks who have difficulty obtaining Insurance Requirements): Property Insurance Plans, which make property insurance coverage through the voluntary market, providing those properties complying with applicable minimum underwriting standards. Property insurers participate in each FAIR Plan according to their proportionate share of total voluntary market premiums written in that state.

FACSIMILIES (Fax): Faxed correspondence and signatures will be treated the same as normal correspondence. However, no coverage can be activated or rescinded by faxed notice of payment of premiums to the Association.

FIRE INSURANCE: Coverage for losses caused by fire, lightning and the removal of property from endangered premises; in addition, resultant damages caused by smoke and water.

FRAUD: Deception or strategy used to deceive or cheat including misrepresentation or concealment. Proof of willful fraud is grounds for voiding a policy.

HURRICANE: A tropical storm marked by extremely low barometric pressure and circular winds with a velocity of 75 miles an hour or more. The hurricane’s path begins in the ocean as a violent whirlwind with hurricane-force winds which cover thousands of square miles and moves over the warm water toward land.

INSPECTION: The investigation of certain risks, which may be made by independent inspection firms or by a company before issuance or during the term of the policy.

INSURABLE INTEREST: Relationship or condition such that loss or destruction of property would cause a financial loss. In the case of property insurance, such interest must exist at the time of the loss.

INSURING AGREEMENTS: That portion of the insurance contract that states those perils insured against by the coverage afforded in the policy.

INTERIM ADJUSTMENT NOTICE: A three-year policy annual premium notice requiring confirmation of occupancy and advising that premium payment is needed for policy to remain in effect.

INVESTIGATION: The adjuster’s activity in checking the manner in which damage occurred, securing the facts in connection with damaged property.

MANUAL OF RULES & PROCEDURES: A book published for the guidance of its users. In it are specifications and rules governing the subjects covered.

MINIMUM PREMIUM: The lowest amount of premium required to issue certain policies. Anything less than the minimum would not even cover the expense of handling the policy.


MISREPRESENTATION: To make written or verbal statements that is untrue or misleading. NON-ADMITTED COMPANY: A Non-Admitted Company is an excess-surplus lines carrier not admitted in North Carolina. Nonmembers of either Association cannot provide Wrap-Around Coverage for Windstorm and Hail policies in the Beach Plan. If on the North Carolina Department of Insurance’s “NON-ADMITTED COMPANY LIST” of Non-Admitted Companies eligible for the placement of Surplus Lines Business, these companies can write Excess Insurance over either Association’s Primary Commercial Coverage’s.

PERIL: The potential cause of a loss. Perils include causes such as fire, wind, lightening, vandalism, smoke, etc.

POLICY: A written contract of insurance between an insurer and the policyholder.

POLICYHOLDER: A person who pays a premium to an insurance company in exchange for the insurance protection provided by a policy of insurance.

POWER OF ATTORNEY: The written instrument by which the authority of one person to act in the place and stead of another as attorney in fact is set forth. Authority given a person or corporation called an attorney in fact, to act for and obligate another to a specified extent.

PREMIUM: A sum of money paid for an insurance policy; the amount of money an insurer charges to provide coverage.

PRIMARY INSURANCE: Provides the first layer of coverage. Excess insurance is written as an additional layer. The Association provides primary coverage for commercial property when the insured values exceed our maximum limits and an approved company will write the excess.

PROOF OF LOSS: A statement signed by the policyholder making formal claim against the company for damage to or loss of the property insured.

RATING BUREAU: An organization, supported by insurers, which provides advisory, rating, statistical and other services. The bureau may also act as a collection point for actuarial data and to survey individual risks.

REINSTATEMENT: Putting coverage back into effect after a lapse has occurred.

REPLACEMENT COST: Coverage of household destruction up to the policy face value, with no deduction for depreciation.

RESIDUAL MARKET: A type of insurance mechanism designed to assume risks that are generally unacceptable to the voluntary insurance market. Examples include assigned risk plans, property insurance plans and government insurance programs.

RESCISSION: The rescinding of a Notice of Cancellation before its date of effect.

ROBBERY: “Robbery” or “robbery, including observed theft” means the taking of insured property (1) by violence inflicted on an insured; (2) by putting him in fear of violence; (3) by any other overt felonious act committed in his presence and of which he was actually cognizant, provided such other act is not committed by an insured; or, (4) from the person or direct care and custody of an insured who has been killed or rendered unconscious.


SUBROGATION: The substitution of one person in the place of another with reference to a lawful claim, demand or right. In the case of insurance, this principle or law has been incorporated in all policies. The insurance company, upon payment of a loss to the insured, is entitled to the insured’s legal and equitable rights against third parties. These rights are only those related to the loss and the company is only entitled to the extent of the loss payment.

TERM: A period time for which a policy is issued.

UNDERWRITING: The process of selecting risks for insurance and determining in what amounts and on what terms the insurance company will accept the risk.

VOIDING COVERAGE ABINITIO: Policy coverage and conditions are made invalid back to the policy’s inception date. This action normally occurs when a material misrepresentation or concealment of important facts has occurred.

VOLUNTARY MARKET: When a person seeking insurance selects an insurer and the insurer’s underwriters decide to accept the application without the state’s or residual markets involvement, the business is said to be written in the voluntary market.


SECTION V

THE PLANS IN DETAIL


INTRODUCTION AND BACKGROUND The FAIR Plan mechanism was established by the Urban Property Protection and Reinsurance Act of 1968. During the middle and late 1960's rioting and looting in many urban areas had resulted in million of dollars of property damage. The Act provided for essential insurance for property determined to be eligible when such insurance was not available through the voluntary market.

The North Carolina Joint Underwriting Association (FAIR Plan) has been formulated by the insurance industry pursuant to Article 46 of the General Statutes of North Carolina. The original purpose of the Plan was to provide a facility for the placement of essential property insurance in urban areas of the state; however, use of the Plans has been broadened to include all of the state, except the Beach Plan area, and to provide the same facility for other properties which meet the underwriting.

The North Carolina FAIR Plan is an association of the insurance companies authorized to write property insurance in North Carolina on a direst basis with the exception of town and county mutual insurance association and assessable mutual companies. The Plan of Operation is administered by a Board of Directors, subject to the approval by the Commissioner of Insurance. The Board, in turn, appoints a Manager to supervise the day-to-day operations of the Associations.

The Plan is not a facility of the State. No Federal, State or local funds are used to support or subsidize the Plan. The overall operations of the Plan is administered by a Board of Directors of which, seven members are elected by the insurers and seven (four insurance agents and three public members) are nominated by the Commissioner of Insurance. The Board in turn appoints a Manager to administer the day-to-day operations of the Association. The administrative office is located in Cary, North Carolina.

Telephone: (919) 821-1299

N.C. Toll Free: 1-800-662-7048

AUTHORITY OF AGENTS AND BROKERS The FAIR Plan does not have its own agents. The use of the term “Agent” or “Producer” does not indicate any relationship, express, implied or apparent between the Association and any individual entity.

1. “An Agent who is licensed under Article 33 of this Chapter as an agent of a company

which is a member of the Association established under this Article shall not be deemed an agent of the Association”. G.S. 58-46-10(b)

2. No producer (insurance agent) has or shall have any authority to bind the Association in

any way.

3. No producer (insurance agent) may issue a policy, binder, endorsement or cancellation notice, nor assign any loss (limited authority to assign losses may be granted to Coastal producers, see Catastrophe Claims Section for application procedures), on behalf of the Association.


4. When dealing with the Association, any licensed property insurance agent or broker is acting as the designated representative of the applicant or insured, and not as an agent of the Association.

5. Commission for those producers or agents placing business through the Association is

not negotiated but is established by the Board of Directors and approved by the North Carolina Commission of Insurance.

6. The Association will recognize the ownership and confidentiality of any expiration.

PURPOSE OF THE FAIR PLAN The purposes of the program, as stated in North Carolina General Statute 58-46-1, are:

1. To provide a Program whereby adequate basic property insurance may be made

available to property owners having insurable property in eligible areas of the State.

2. To encourage the improvement of properties located in the State and to arrest the decline of properties located in the State.

3. To provide an equitable method whereby licensed insurers writing Essential Property

insurance in North Carolina are required to meet their public responsibility.

4. In 1997, the General assembly added to the Statutes the following wording to the purposes of the FAIR Plan: “The General Assembly further declares that it is its intent in creating and, from time to time, amending this Article that the market provided by this Article not be the first market of choice, but the market of last resort.”

ANTI-ARSON ACTION PLAN The North Carolina FAIR Plan has adopted and the Department of Insurance has approved an Anti-Arson Action Plan to discourage arson which has reached epidemic proportions. The adoption of the Plan has required the introduction of additional restrictions in the acceptability standards, amendments in the cancellation procedures and the requirement that applications be signed by the property owner (or designated representative may sign in the Beach Plan).

All producers are urged to cooperate in our efforts to curtail the arson activity and it is imperative you know your insured’s. If any questions of doubt exist, we request you bring this to our attention so we may satisfactorily resolve the matter.

Arson hurts everybody and we invite you to join us in our anti-arson effort.

ELIGIBILITY

A. ELIGIBLE APPLICANT Any individual, Partnership, Corporation, Association, Joint Venture, Holding Company, Fictitious Entity or Estate having an insurable interest in any real or tangible personal property at a fixed location in the State, may apply for coverage in the Plan. (See definition of Eligible Property.)

Any officer of a Corporation or Holding Company may apply for coverage in the Plan. The application must be signed by the officer and his/her title designated. A copy for the


Corporation’s Annual Report, providing the names of the company’s principal officers, must be provided at application.

Principal(s) of an Association, Joint Venture or Fictitious Entity may apply for coverage in either Plan. The application must be signed by the principal(s) and his/her designee.

Mortgagees and Loss Payees may apply for coverage on behalf of a property owner but the application must be signed by the property owner. Unusual situations may arise from time to time, which should be resolved by the Association staff.

The personal representatives of an estate may apply on behalf of the estate.

Tenants and others who have an insurable interest through contractual obligation may apply for coverage in either Plan, but the application must be in the name of the property owner and signed by the property owner.

B. INELIGIBLE APPLICANT Any person who has been convicted of, or has an outstanding indictment for the crime of arson or any crime involving a purpose to defraud an insurance company.

C. ELIGIBILE PROPERTY To be eligible for insurance in the Plan the property must:

1. The property must be real or tangible personal property (other than ineligible property) at

a fixed location in the eligible area of North Carolina.

2. The property must meet all underwriting standards and must be in an insurable condition, which is determined by the Association after inspection, pursuant to criteria specified in this manual, the Plans of Operation and the North Carolina General Statutes.

D. INELIGIBLE PROPERTY The following properties are ineligible for insurance coverage:

1. Motor Vehicles 2. Refer to Underwriting Standards for more details on ineligible properties

UNDERWRITING STANDARDS

A. GENERAL FAIR PLAN In addition to meeting the eligibility requirements set forth, properties must meet reasonable underwriting standards for consideration. These standards shall include, but are not limited to, the following:

1. Physical condition of the property, such as construction, heating, wiring, evidence of

previous unrepaired damage or general deterioration. The fact that a property does not fully comply with building code requirements would not, in itself, cause rejection.

2. Present use of the property such as housekeeping, extended vacancy or unoccupancy [vacant or unoccupied in excess of sixty (60) days], overcrowding, improper storage of rubbish or flammable materials. Properties actively in the process of rehabilitation shall not be considered vacant.


3. Use of the premises or other specific characteristics of ownership, condition, occupancy or maintenance that are violative of law or public policy and that result in a substantially increased exposure to loss.

4. Where the building has been subject to two (2) or more fires, each loss amounting to at least $500 or one (1) percent of the insurance in force, whichever is greater, in any 12 month period; or three (3) or more such fires in any 24 month period, provided the cause of such fires was due to conditions which are the responsibility and within the control of the owner or named insured.

5. Such other standards approved by the Commissioner of Insurance, which include the following as a basis for rejection. (The Association will attempt to use Risk Management as an option to avoid total rejection of any risk):

a. Building in which two or more of the following conditions exist: i. Failure to pay real estate taxes on the property after taxes have been

delinquent for one (1) year or more; however, for this purpose real estate taxes shall not be deemed to be delinquent if they are due and constitute a lien, so long as a grace period without penalty remains.

ii. Failure within the insured’s control, to furnish heat, water or electric service for thirty (30) consecutive days or more.

iii. Failure to correct conditions dangerous to life, health or safety within a reasonable time after being made known to the property owner.

b. An outstanding order to vacate the premises is in effect because of the physical condition of the building(s).

c. The property has been ordered for demolition because of the physical condition of the building(s).

d. The property has been declared unsafe under applicable law. e. The owner or occupant has been convicted or under indictment for incendiarism

against any property. f. 65% or more of the rental units are unoccupied. g. Unrepaired fire damage after a reasonable period of time has expired, which

would have permitted repairs to have been completed. h. Any indication of intent to abandon the building(s). i. The inability to explain satisfactorily the reason for removal of salvageable items

from building(s). j. Reliable information exists that the building will be intentionally burned. k. Conviction or indictment of any person, having a financial interest in the property,

for the purpose of attempting to defraud an insurance company. The Plan has a statutory obligation to encourage improvement and to arrest the decline of properties in the eligible areas of the state. In determining the eligibility of any property, it is not the intent of the Plan to decline any property that can become a viable part of the community, and Plan personnel will, for the most part, provide insurance coverage while the property owner is improving the property. We are constantly aware that risks decline must be for reasons relevant to the perils against which insurance is sought, and we guard against denying coverage unfairly to owners of insurable property.

A risk will not be declined due to the condition of the neighborhood, area location, adjoining properties or any environmental hazard beyond the control of the insured.

In the event a risk is conditionally declined due to not meeting our underwriting standards but can be improved to become acceptable, the Association shall promptly advise the applicant and producer of the improvements required for acceptance. Upon completion of the improvements,


the Association when so notified will have the property promptly re-inspected to determine insurability.

If an inspection of the property reveals the presence of one or more substandard conditions, the risk will be accepted subject to a schedule of condition charges approved for our use. If the substandard condition is corrected, we will adjust the rate upon a re-inspection to verify satisfactory correction.

If a risk is declined or if coverage is provided on a condition that improvements will be made, the Association shall within ten (10) days, send copies of the inspection report and any action report advising the corrections that must be made to the applicant and producer and shall advise the property owner of his right of appeal and the procedure to be followed.

B. PROCEDURES WHEN A HURRICANE IS WITHIN CERTAIN DESCRIBED COORDINATES No new or increased coverage shall be bound or application for new or increased coverage accepted after 12:01A.M. the following day when the center of a designated tropical storm or hurricane is located within Longitudes 65º West and 85º West, and Latitudes 20º North and 37º North. The term “designated hurricane” is a windstorm designated as a tropical storm or hurricane by the National Weather Service.

If active watches or warnings are not posted for North Carolina and the National Hurricane Center has clearly outlined a projected path away from North Carolina, the General Manager may lift restrictions prior to the tropical storm or hurricane leaving the designated coordinates.

C. FARM PROPERTY The FAIR Plan will provide coverage for farm property in accordance with the following provisions:

1. Dwellings located on farms are insured in the same manner as other dwellings located

throughout the state. 2. Farm property is written subject to the rules of the ISO Commercial Lines Manual,

including NC Exceptions. Approved general charges from that Manual will be applied where applicable.

3. Basic property coverage is written using the Standard Property Policy CP-0099, which is modified by the FAIR Plan’s Farm Property Provision endorsement, PF-0035. Available perils are:

a. BASIC Fire, Lightning & Explosion; Windstorm or Hail, Smoke, Aircraft or Vehicles; Riot or Civil Commotion; Sinkhole Collapse; Volcanic Action; and, Vandalism & Malicious Mischief.

b. BROAD (in addition to BASIC)

Breakage of Glass, Falling Objects, Weight of Snow/Ice/Sleet, Water Damage and Collapse.

NOTE: Weight of Ice, Snow or Sleet, PF-1012 is available without Broad Form Perils being provided.


4. Each building to be insured must be used during the year. In addition, the insured farm premises should develop a minimum of $1,200 annual gross receipts, including rental income from agricultural operations.

5. The income test is a guideline, but considering variations in income for farm operations

and especially hobby-type farms. It is important to consider the DP Policy limitation for other structures, Coverage B. At the time of a loss, a claims investigation may recognize operations as farming and deny coverage written for the building on DP policies. It is the responsibility of the producer and policyholder to be sure coverage is written on the proper form. If the premises are not classified as a farm, it should be submitted as a dwelling outbuilding.

Farm property includes all buildings and their contents, located on or used in connection with land devoted to any one or more of the following commercial purposes:

1. Cultivation of the soil; 2. Rearing or keeping of livestock; and, 3. Producing fruit, grain, vegetables, poultry, tobacco, hay or other produce.

Ineligible Farm Property

1. Farm property which is vacant or unoccupied; 2. Standing timber including fruit and nut trees; 3. Hay, straw and grain and other crops growing or stacked in the field; 4. Livestock; 5. Poultry; 6. Blanket farm property coverage, and, 7. Farm machinery not readily identifiable, such as by serial number. 8. Farm machinery not located at a covered location.

D. MOBILE HOMES A mobile home is a structure “which in the traveling mode is eight (8) body feet or more in width, or forty (40) body feet or more in length, or, when erected on site, is three-hundred-twenty (320) or more square feet; and, which is built on a permanent chassis and designed to be used as a dwelling, with or without permanent foundation when connected to the required utilities, including plumbing, heating, air conditioning and electrical systems contained therein.” This definition applies to all mobile homes built after June 15, 1976. Mobile homes built before that date but after July 1, 1970, must measure over thirty-two (32) feet in length and over eight (8) feet in width. These definitions are from the Regulations for Manufactured/Mobile Homes, 1989 edition, published by the North Carolina Department of Insurance.

To be eligible for coverage in the Plans, mobile homes must be tied-down, all wheels removed and located on a foundation, and have continuous skirting around the outside perimeter. They must adhere to State of North Carolina Regulations for Mobile Homes, including requirements for tie- downs and anchoring of tie-downs. All mobile homes located in the areas designated “coastal” or “beach” must meet the hurricane zone requirements.

Mobile homes not meeting standards will either be declined conditionally until condition is corrected, or will be insured with sub-standard condition charges applied. Mobile homes meeting FAIR Plan underwriting standards for fire insurance, but not for the extended coverage endorsement, may be covered for fire only.


E. VACANT, UNOCCUPIED OR PROPERTIES UNDERGOING RENOVATIONS Properties that are vacant or unoccupied for more than sixty (60) days are generally not eligible for the FAIR Plan.

Legitimate extenuating circumstances that may be considered for coverage are:

1. Estate property waiting on estate settlement or sale. 2. Renovation/rehabilitation of the structure. 3. The vacancy/unoccupancy will be temporary as under contract to sell or rent. 4. Historical properties registered by the preservation of historical organizations.

Note: Dwellings that have been vacant for more than sixty (60) days with the same owner and undergoing cosmetic updates are not considered as being renovated or rehabilitated.

Full details of the vacancy/ unoccupancy are required at time of application and submission of the supplemental Unoccupancy/ Vacancy Questionnaire FP-17 is required.

Each risk will be underwritten under its own merits; however, the Plan does typically expect occupancy within sixty (60) days of ownership; date of last tenant; after completed renovation/rehabilitation; or original construction completion. Long-term renovations should not exceed six (6) months and then occupied within sixty (60) days of completion.

Due to the vacancy hazard, the Plan would typically require a twenty (20) day wait, no vandalism coverage, and a higher than normal deductible. Policy surcharges are available for use in the case of a vacancy hazard. The property must be secured from unauthorized entry.

The FAIR Plan reserves the right to cancel a policy for misrepresentation during the vacancy period if the actual renovation progress falls short of the estimates provided by the applicant at the time of application. If requested, the Association will waive the waiting period for a real estate closing with full payment and photographs of the property.

With the exception of historical properties, it would be unusual for the Plan to continue for an additional term a policy that was unoccupied when it was originally submitted. If these situations arise a new FP 17 supplement, or equivalent information, would be required at time of continuation and the underwriting decision will be based on the individual circumstances presented for the risk.

Historical Properties were previously defined. We ask that the submissions for organizations include photographs, as they are generally available as part of the sales activity and this may allow us to waive or postpone an inspection of the property. If the property is secured from entry, we will allow the property to be vacant or as a property being held for sale for one policy term.

In the situation of rehabilitation or renovation, the application should include the FP-17 supplement and a detailed schedule for completion. This helps us determine the resources and commitment the owner has to the project and the approximate length of time we can expect to write the property under this situation. We will not provide coverage if the historical property is open to trespass, as this is our practice with all properties.

F. APPLICATIONS WHERE THE PROPERTY HAS UNREPAIRED DAMAGE We will decline any application where there is unrepaired damage and the property is not in the process of being repaired.


If the property with damage is vacant or unoccupied, but is being repaired, the guidelines outlined in E. (Vacant/Unoccupied or Properties Undergoing Renovations) apply.

For properties undergoing repairs and otherwise eligible, we will apply a twenty (20) day interim coverage waiting period and list the property for inspection.

Upon receipt of the application that states all fire damage has been removed from the property and includes a reasonable schedule for repairs which includes their scope and an estimated completion date, the underwriter with supervisory approval may approve interim coverage if the producer clearly requested immediate coverage.

We will void from inception (ab initio) any coverage on a property where we receive an inspection report and it shows unrepaired damage and the application did not show any damage.

G. OTHER STRUCTURES IN POOR CONDITION The dwelling policy provides a 10% extension of Coverage A for other structures on the insured premises. There is no such extension in the commercial policy.

If these other structures are in poor or uninsurable condition, they affect the acceptability of the risk. In some cases, the condition of the other structure is such that we may require that it be removed or repaired. These would be when the other structure presents life safety hazards or appearance liabilities for the neighborhood. We would offer conditional coverage on an otherwise acceptable dwelling if a promise was made that the structure would be either repaired or removed in a timely manner.

Structures that do not present either of the above hazards, but are still in poor or uninsurable condition may cause us to apply condition surcharges to the dwelling. In many cases, the applicant or insured would prefer not to pay the extra premium and any request that we exclude coverage for the outbuilding or outbuildings in poor condition. The applicant should indicate on the application if outbuilding(s) should not be insured.

At other times, we may originate the request to exclude an “other structure” that is in disrepair. These buildings will be at least 100 square feet in size and would appear to a reasonable person to be valued more than the policy deductible. These buildings may be better described as those that are good in some parts, but bad in others; for example, a masonry garage with good block walls, but a roof whose metal sheets are 80% loose. It is apparent that the owner is choosing to allow the building to deteriorate, or does not place much value on the structure. Yet in the event of a loss caused by a covered peril, the insured owner may be in a position to file a claim. Our underwriting standard in this instance is that, if the owner does not care to maintain the building, we do not care to cover any of it. A building in substantial disrepair is hard to value and we are attempting to eliminate potential adjustment problems with an “other structure”, but at the same time provide coverage for the dwelling. In these cases we prepare an endorsement (AP-81) which excludes the other structure and it is attached to the policy, effective the date the endorsement is signed by the applicant or the insured, or the policy effective date, if later.

The Association reserves the option to cancel the coverage for the dwelling in the event that the insured would not agree to exclude a building that is in substantial disrepair yet would have significant value above the policy deductible.


The following guidelines are given to our inspectors regarding other structures, and are how we obtain the specific information on each other structure that we specifically underwrite.

1. Only photograph those other structures (outbuildings) that are larger than 100 square

feet and in poor condition. 2. When in poor condition or repair be specific as to conditions. 3. Be specific in how outbuildings are used and how the contact identifies them.

FAIR PLAN NEW BUSINESS REQUIREMENTS The first named insured is required to sign and authorize the application for coverage.

POLICY WRITING AND POLICY PROVISIONS All policies and endorsements will be issued by the Plan. Producers may not issue or endorse policies. A separate policy may be issued for each location or schedule coverage may be written provided all scheduled locations meet the eligibility requirements of the Plan. The Plan does not provide Blanket Coverage. “Location” shall be defined as any building or structure separately rated by the North Carolina Rate Bureau or such other Rating Organization(s) having applicable jurisdiction. Mortgagee copies of Association policies will be mailed directly to the mortgagee. Policies are written for a period of either one or three years.

A. EFFECTIVE DATE OF COVERAGE Approved Dynamic Web applications are effective the date after transmission.

Approved paper applications meeting the criteria for immediate coverage and immediate interim coverage will be effective at 12:01 am the day following the “Post Office” postmark date on the envelope in which the properly completed application and appropriate premium is mailed to the Associations. Applications mailed by office postal meters will be effective the date a properly completed application and premiums are received in the Associations office. The coverage effective date will be based on the reapplication Post Office postmark date or date received by the Association if no postal postmark is provided.

B. COVERAGE(S) PROVIDED The Plan will issue a standard fire insurance policy affording coverage against direct loss caused by perils, defined and limited in the Standard Fire Insurance Policies, (including the “Readable Policy”, for dwellings, approved by the NC Insurance Department), the “Basic” and “Broad” policy coverage forms, “Optional Perils” Coverage’s and the Vandalism and Malicious Mischief Endorsement. The Association also provides crime coverage’s that were formerly provided by the Federal Crime Insurance Program.

The FAIR Plan provides coverage for farm buildings, their contents, and identifiable farm machinery. Forms used are the approved forms for farm property in North Carolina. If you have any questions regarding forms or coverage’s, please contact the Association.

Coverage against loss caused by perils other than those provided under the basic or broad policy forms are not provided by the Plans.

C. NOTIFICATION WHEN APPLICATIONS ARE APPROVED WITH CHANGES Producers and/or Policyholders will be notified of any approval, which differs from a submitted application. The notification will include the following:


a. Written Notification which clearly advises of the coverage or limit changes released to both the Policyholder and Producer; and,

b. A red Notice of Change sticker being added to the Policyholder’s policy declaration.

It is the responsibility of the Policyholder to understand fully the coverage’s, limits and all of the terms and conditions provided by the policy, endorsements and declarations.

D. POLICY FORMS Policy Forms applicable to all policies are those forms approved for use by the Insurance Department, State of North Carolina for the North Carolina Rate Bureau or other such Rating Organization in accordance with filed Rating Plans for coverage’s as provided by the Plan.

Properties in the course of construction may be eligible for coverage under Builders’ Risk Form.

E. CONTINUATION OF COVERAGE CERTIFICATE The Plan will issue a full policy and forms at the initial inception of all policies. Thereafter, the Plans will use a Continuation Certificate rather than a full policy and forms. The Continuation Certificate will advise the policyholder to make the Certificate part of the expiring policy in order to extend coverage for annual or three-year terms. A complete policy and set of forms will also be released in the event of a Program change and/or if extensive and set of forms will also be released in the event of a Program change and/or if extensive policy coverage changes are requested by the policyholder.

F. DEDUCTIBLES Plan policies are written subject to the Deductibles Clause(s) indicated on the Declarations Page of the Policy. The Plans have minimum deductible requirements. Refer to the section "Procedures Frequently Asked About" for information. Higher deductibles are available on commercial and farm properties in accordance with the Deductible Insurance Plan, of the ISO Commercial Lines Manual. Also, higher deductibles are available on residential properties, in accordance with the Deductible Insurance Plan as indicated in the North Carolina Dwelling Rate Manual. The Plan reserve the right to require higher deductibles at the appropriate rate credits where conditions warrant for farm, commercial or residential properties.

G. COINSURANCE Where there is a coinsurance rate available, the insurance must be written subject to the coinsurance clause. However, where conditions warrant, higher percentages of coinsurance may be used as provided in the ISO Commercial Lines Manual.

The Plan will not be responsible for the correctness of any values submitted by the applicant. However, the Plan reserve the right to request the substantiation of values.

H. POLICY TERM FAIR Plan policies are written for a one (1) year continuous term on a policyholder or mortgage bill basis.

I. OTHER INSURANCE The Plan is not intended to replace normal markets. Plan policies, however, may be issued, as additional insurance to existing policies, and in such cases, should be as concurrent with such other policies as is possible.


If other insurance is in force at the time of the loss caused by a peril insured under the Plan policy, the Plan will participate in the payment for such loss in accordance with the terms of the Other Insurance Clause in the form attached to the Plan policy.

J. PRIMARY/EXCESS PROCEDURE If the value of the property exceeds the maximum coverage limits offered by the Association, the Association shall not issue coverage without the insured’s purchase of excess coverage to the full value of the property insured.

For habitational risks the premium percentage “First Loss Table” located in the dwelling manual applies. On commercial properties the “Lloyd’s Table” is used to determine the premium for primary coverage.

All insurance companies licensed to provide property insurance in North Carolina are approved by the Insurance Department to participate. In addition, all non-admitted companies eligible for placement of surplus lines business in North Carolina are also authorized by the Insurance Department to participate in this procedure.

MAXIMUM LIMITS OF LIABILITY The maximum limit for any one risk of all insured interest shall not exceed:

Dwelling: $750,000 per building and personal property up to 40% of the building limit.

FAIR Plan Commercial: $2,500,000 (Aggregate liability per Commercial risk on any freestanding structure or any building unit within multiple firewall divisions shall not exceed $6,000,000 on real and tangible personal property.)

Crime: (a) Residential $10,000 (b) Commercial $15,000

IMMEDIATE AND INTERIM COVERAGE Normally, immediate interim coverage will be extended to eligible occupied habitational risks upon receipt of a properly completed application and the estimated annual premium. If, after interim coverage provisions go into effect, the inspection discloses the property to be ineligible or unacceptable, the policy will be cancelled and the premium will be returned (see D).

A. COMMERCIAL, VACANT, UNOCCUPIED OR FAIR PLAN SEASONAL DWELLING RISKS Notwithstanding any of the other provisions of this Plan, Interim Coverage shall be extended to eligible commercial, vacant, unoccupied or seasonal habitational risks upon receipt of properly completed application and the estimated annual premium, without further action if:

1. Through no fault of the applicant, coverage has not been either offered or denied within

twenty (20) calendar days after the date the request for inspection was received by the Association; and,

2. The applicant, at the time of requesting the inspection or at any time prior to the receipt of an inspection report indicating that the property is uninsurable, pays the estimated annual premium. The estimated annual premium shall be based on the applicable existing specific or class rate in accordance with the rates or adjusted loss costs promulgated by the North Carolina Rate Bureau or such other rating organizations


having applicable rate jurisdiction. If the coverage is presently provided under an expiring policy written through the Association, the deposit premium shall not be less than the premium charges under such policy.

Such insurance shall be effective at a time in accordance with the policy provisions, on the twentieth day after the date the request for inspection was received, or at a time in accordance with the policy provisions on the day following the date the estimated premium is received by the Association, whichever occurs later.

If the property, after inspection within a period of twenty (20) days from the date receipt of the application, is found to be ineligible or unacceptable for coverage under the North Carolina Joint Underwriting Association Plan of Operation, coverage will not become effective and the estimated annual premium will be returned.

EXCEPTION: The Association will waive the twenty (20) day delay for newly purchased vacant or seasonal dwellings if the insurance is needed for a real estate closing. The property must meet all other underwriting requirements and the producer must specifically request the immediate coverage when submitting the application and premium.

B. APPLICANT’S RESPONSIBILITY Interim Coverage can be provided only when, through no fault of the applicant, the Association has not completed an inspection of the property. This provision in no way changes the applicant’s responsibility to cooperate with the Association in arranging for the inspection of the property and providing full access to such property to the inspector. If this is not done, Interim Coverage cannot be provided.

If the applicant desires Interim Coverage, the Producer submitting the application should fully inform the applicant regarding his responsibility.

INSPECTIONS

A. REQUEST FOR INSPECTION Any person having an insurable interest in real or tangible personal property at a fixed location within the State of North Carolina except property located in the “Beach Area” as defined in the North Carolina General Statutes shall be entitled, upon application (which application need not be in writing), in person or by the Applicant’s authorized representative, to an inspection of the property by the Association at no cost to the Applicant.

Upon receipt of a properly completed Application for Basic Property Insurance, an inspection of the property will be made by the Association with no further action required of the Applicant.

B. INSPECTION PROCEDURE The manner and scope of the inspection shall be prescribed by the Association with the approval of the Commissioner. The requirement for inspection may be modified or waived by the Association, if in its judgment; it is in possession of sufficient current inspection information.

Upon receipt of a properly completed application, an inspector representing the Plan may make an inspection of the property during normal working hours. The inspector must be accompanied by the applicant or by another responsible person as designated by the applicant. The Association must be provided full access to the building, but the presence of the owner of a building may not be required for a tenant seeking insurance.


An inspection report shall be made for each property inspected. The report shall cover pertinent structural and occupancy features as well as general condition of the building. A representative photograph of the property may be taken during the inspection.

After inspection, a copy of the completed inspection report indicating the pertinent features of building, construction, maintenance, occupancy and surrounding property shall be sent within five (5) days to the Association. Upon receipt of the report, the Association shall complete a rate make- up statement, to include any condition charges imposed in conformity with the Plan of Operation or under any substandard rating plan approved by the Commissioner.

All reports of inspections performed by or on behalf of the Association shall be made available upon request to the applicant, members of the Association, the applicant’s producer of record and the Commissioner.

The FAIR Plan does not maintain a staff of inspectors. For the purpose of underwriting inspections, the Plan utilizes the services of independent inspection agencies or inspectors. The sole function of the inspector is to make a physical inspection of the property and submit a written report of his findings to the Plan.

The inspector has no authority to make underwriting judgments or decision on behalf of the Plan and for this reason is instructed to refrain from discussing any conditions existing in a property at the time of inspection.

C. REINSPECTIONS The Plan reserves the right to re-inspect, at any time, any location for which a policy of insurance has been issued. An applicant, insured or representative of either, may make a written request for re-inspection specifying the reason(s) for the request.

Following damage occurring to property insured through the Plan and after a reasonable time allowed for repair of the damages, the Association may have the property re-inspected.

Dwelling and commercial properties will be re- inspected periodically by the Association to see if the property continues to meet the Association’s Underwriting standards.

D. INCOMPLETE INSPECTION (LOCKOUTS) If the FAIR Plan has been unable to complete an inspection of a property, notification will be mailed to the applicant and producer.

If there is no coverage in force, notification is by letter, that states that the Association will take no further action on the Application until arrangements have been made with the Association for making the inspection. If no response is received within a reasonable period of time, the file will be closed.

If there is a policy in force and the Association does not have a prior inspection report, a thirty (30) day “Notice of Cancellation” will be mailed. This Notice of Cancellation may be rescinded if proper arrangements for an inspection are made to the satisfaction of the Association.


If there is a policy in force and the Association has a prior inspection report, a notification will be mailed to the applicant and producer. If proper arrangements for an inspection are not made within a reasonable time, the policy will be cancelled.

When a policy has been cancelled as a result of the Plan’s inability to complete an inspection, the cancellation will not be rescinded. A new application must be submitted and coverage will not be available until an inspection has been completed, eligibility and insurability determined by the Plan, and an “Approval Notice” issued.

As the Association must pay for inspections whether successful or not, when the Association pays for an inspection attempt that is unsuccessful through no fault of either the Association or the inspector, no further inspection will be made until the applicant or insured has reimbursed the Association for the cost of the unsuccessful attempt. If the next inspection attempt is also unsuccessful through no fault of either the Association or the inspector, the applicant will be notified, but no further action will be taken by the Association until the applicant personally contacts the Association to arrange for another inspection and pays the cost of the previous unsuccessfully attempt. Insurance coverage will not be provided until the property has been properly inspected.

PROCEDURES AFTER INSPECTION The Association shall, within ten (10) business days after receipt of the inspection report and application, advise the applicant or the applicant’s producer, that:

1. the risk is acceptable, and if any condition charges have been applied, the

improvements necessary to remove condition charges, and will cause to be issued a policy upon receipt by the Association of the premium, or;

2. the risk is not accepted but will be acceptable if improvements noted in the action report

or inspection report are made by the applicant and confirmed by re- inspection; or

3. the risk is not acceptable for the reasons stated in the action report or inspection report.

If the inspection of the property reveals that there is one or more substandard conditions, charges will be imposed in conformity with any substandard rating plan approved by the Commissioner.

In the event a risk is declined because it fails to meet reasonable underwriting standards, the Association shall so notify the applicant and his/her producer.

In the event the risk is conditionally declined because the property does not meet reasonable underwriting standards but can be improved to meet such standards, the Association shall promptly advise the applicant what improvements noted in the action report or inspection report should be made to the property. Upon completion of the improvements by the applicant or property owner, the Association, when so notified, will have the property promptly re-inspected.

If a risk is declined, or if the applicant is notified that coverage will be written if stated improvements are made, the Association shall within ten (10) days, send copies of the inspection or action reports to the proper owner and shall advise the property owner of the right to appeal and the procedure therefore.


After reviewing the inspection report and photographs, the Association will, from time to time, request verification of building and/or personal property values. When building values appear too high, the Association will request an appraisal or cost estimation. When the amount of personal property coverage requested is 50% or more the building coverage, the Association will contact the inspector and producer (or applicant) for additional information. Following this, the Association may request an inventory of the personal property.

Because of the ISO, coinsurance rules for commercial properties, the Association will pay particular attention to values for those properties. To be sure that we have documentation of the value of personal property, as an anti-arson action, we request inventories on all insured properties with personal property exceeding $50,000. Well managed businesses should not have a problem with this request. An audited financial statement showing the amount of the inventory would be an alternative to a physical inventory.

When providing coverage for Condominiums and Townhouse Associations, we are requesting copies of the Articles of Incorporation, Declarations and Bylaws to verify if we are properly naming the insured and to have for review in the event of a loss. This is important information to have after a loss and in writing coverage under Commercial Property forms. Our intent in requesting the information is to smooth the claims process in the event of a loss. Properly naming the insured will clearly state the insurable interest. Final claims settlement requires that these documents are reviewed to clarify Association and Unit Owner interests. We do not request them to set the amount of insurance, as it is the responsibility of the Applicant to do this.

PAYMENT OF PREMIUMS (POLICIES)

A. PREMIUM PAYMENTS Premiums can be paid by check, bank drafts, by credit card via the Associations website (www.ncjua-nciua.org) or by producers using the Dynamic Web’s ACH process. The Association is to be advised if policies are to be policyholder or mortgage billed.

Credit Card payments from the applicant or policyholder should be paid on a gross basis. Commission will be returned to the producer by the Association.

Installment plans of 4 pay and 2 pay are available through the FAIR Plan. There is a $3 charge per installment that applies.

Premiums from received paper applications (not transmitted through the dynamic web) are payable on a net basis (gross premium less producers’ commission) to the Association in cash or money order, certified check, bank check or the check of a licensed lending institution. Payment may be made in person or by mail, but cash should not be sent through the mail. Payment must be received by the Association before coverage can become effective. Premium financing arrangements made between an applicant and a premium finance company will be honored, provided proper documentation of such agreement is promptly sent to the Association. Check certification is not required when the premium is remitted by a North Carolina licensed broker. Checks and/or money orders for FAIR Plan property shall be made payable to “NC FAIR Plan” or “North Carolina Joint Underwriting Association”, which may be abbreviated, “N.C.J.U.A.”

Once the required payment has been received, the Plan will not cancel a policy for non- payment of premium. Producers are cautioned against advancing the premium for an insured.


B. APPROVAL NOTICE The FAIR Plan will issue a policy and bill for additional premiums if short money is received with an approved application. Producers and policyholders are cautioned to recognize that policy cancellation is imminent without prompt payment of additional premiums.

If a producer is unable to collect any additional premium due from the insured within ten (10) days, he must notify the Plan, which will issue proper Notice of Cancellation. If the producer gives prompt notice of his inability to collect the additional premium due, he will be relieved of any responsibility for a premium deficiency resulting from an earned premium greater than the return premium due as a result of the cancellation.

The Approval Notice is void after sixty (60) days and a new application will have to be submitted if there is no coverage in force when the notice becomes void. We will waive the requirement for a new application if the full annual premium is received within the first fifteen (15) days of the lapse. Coverage will not be backdated; it will go in force the day the premium is received, unless there is some coverage restriction such as a hurricane in our restricted zone.

In addition, within the first sixty (60) days of a lapse, if coverage had been approved, in lieu of a completely new application, a copy of the application for continuation can be updated, or marked “NO CHANGES” and resigned and dated by the applicant. Another option is that the applicant can send a statement indicating that there have not been any changes since the Application for Continuation was signed and verifying that the response on the application are still correct. After sixty (60) days, we will continue to require a complete new application, as we will in all likelihood, re-inspect the property.

When an Approval Notice is issued, there will be an effective date shown on it. If the Plan has already received an estimated premium, the effective date will be the date shown on the policy when it is printed following receipt of the full required premium.

When the estimated premium has not been received, the effective date will be the date coverage was approved by the Association. This effective date will be updated prior to policy printing to the date the required premium is received.

The Approval Notice will also have a file number on it. This file number will become the policy number when the policy is printed. This file number should be shown on the remittance for proper identification.

Please do not make changes on the Approval Notice, as this could void the approval. If changes are required, the Approval Notice must be accompanied by an Application for Change (AP-23) or a letter of explanation.

C. RETURN PREMIUMS Should a return premium become due as the result of an amended declaration or policy cancellation, the Plan will remit to the producer or insured, a check for the return premium.

Under no circumstances may any producer withhold from the insured any portion of the unearned commission.

Should any insured make demand upon the Plan for the gross return premium, or should the Plan be called upon to return the gross return premium to a premium finance company,


mortgagee or loss payee on policies written through an insurance producer, such producer shall promptly refund to the Plan, on demand, any unearned commission.

D. WAIVER OF ADDITIONAL OR RETURN PREMIUM No additional premium shall be charged, and no return premium allowed, if the amount of such additional or return premium is less than the amounts shown in the North Carolina dwelling Manual or the ISO Commercial Lines Manual. Any return premium shall be granted if requested by a policyholder.

E. COMMISSIONS The commission to licensed property insurance producers who have completed a NCJUA producer certification course and is authorized to use the dynamic web is: 15% of the gross premium on all lines, except Crime, which is 10% for both Plans. FAIR Plan Producers are requested to withhold commissions when making premium payments to the Plan. Should premium adjustments be made that result in return premiums to the insured, the Plan will issue a check, payable to the producer, for the return premium amount less the commission allowance. The producer is required to return the full gross return premium to the insured, thereby remitting the unearned commission.

From time to time, the Plan receives checks for premiums that are returned to us by the bank for “insufficient funds”. This presents a serious problem for everyone involved. As it costs us money when a check of a producer bounces, we will charge agents who submit such checks what it costs us for the bank to return a check. We are also sending to the Department of Insurance, a monthly list of agencies whose checks were returned to us by our bank.

REQUEST FOR CHANGE

A. POLICY CHANGES The Association will accept policy changes that follow the below criteria:

• Electronic, facsimile, or original signatures are acceptable. • Dynamic Web transmission, ACORD, or the Association’s Application for Change

(AP23) are acceptable. • Changes not affecting policy coverage or limits or changes to correct errors would not

require a signature. • Increases in coverage would require only producer signature. • Requests to decease coverage would require the first named insured’s signature as

outlined in new business procedure.

No change will be made except as it relates to an existing location under the policy in question.

If change is to be an increase in coverage, fill in proper items and give reasons for increase request (such as room added) and if coverage is to be decreased, fill in proper blank and substantiate why decrease is desired and why it is in order.

Should an additional premium be due as the result of a change, the Plan will issue an amended declaration along with additional premium due notice indicating the amount of premium to be remitted and the reason for the additional amount. The change will be effective upon approval by the Association unless a later date has been requested by the insured. For policies written with a policy, writing minimum premium our charges for the additional premium will be in


accordance with rules of the applicable rate making organization. Changes not involving a change in premium will become effective immediately upon action of the Association.

If the change calls for a return premium and the policy is changed (or cancelled), the return premium will be remitted by the Association on a gross basis through the producer. If the policy has been in effect for less than 60 days all return premiums are routed through the producer.

Amended declarations will be issued by the Plan, following a review and approval.

No producer has or will have any authority to issue any amended declaration or to bind the Plan in any way.

B. POLICY ASSIGNMENT Policy assignment to a new owner is not permitted in the FAIR Plan. If coverage for a new owner is desired, a new application must be submitted to the Association. In such an occurrence, it is necessary for the previous owner to make proper request to the Association for cancellation, so that proper return premium can be remitted.

C. CHANGE OF PRODUCER A change of producer can be made when the policy is continued at expiration. A new Application or the proper Application for Continuation of Coverage, signed by the insured, will be sufficient to make this change.

A request for change of producer during the term of the policy will require cancellation of the existing policy and a new Application signed by the insured showing the name and an address of the new producer. The proper annual premium must accompany the application and the existing policy must be returned for cancellation. The return premium for the prior policy will be promptly remitted to the prior producer.

D. CHANGE OF LOCATION The Plan will endorse a policy covering dwelling contents to a new, eligible location upon receipt of a properly completed Application for Change

E. ADDING A LOCATION TO EXISTING DWELLING PROPERTIES Requirements for adding a location to existing policies:

1. A new application must be sent in along with a front angle photograph (showing two

sides) of the dwelling. 2. The dwelling must be occupied, or actively in the process of rehabilitation. (See final

paragraph for more information regarding this situation.) When the application and photograph are received, the Association will underwrite with the information at hand, and, if acceptable, issue an amended declaration. If the request was received without money or less than the full premium, a bill will be mailed with the amended declaration.

If the premium is not paid within thirty (30) days or the carry date, if less, a ten (10) day Notice of Cancellation for non-payment of premium will be issued.

We may choose to inspect a location. When our inspection report is received, and if it reveals


conditions with ground for cancellation, the location will be cancelled.

The Plan will not add a vacant building to an existing schedule of buildings. Information about the unoccupancy or vacancy must be provided to the Association for consideration

Our underwriting standards allow that “Properties actively in the process of rehabilitation shall not be considered vacant”. Therefore, these properties could be added to the schedule of buildings. We still require full details and a photo, if these are to be added to a schedule. In most cases, we will also inspect at some point in time to verify the rehabilitation activities.

F. WILLFUL CONCEALMENT OR MISREPRESENTATION Any willful concealment or any misrepresentation of a material fact or circumstance as stated on the application and supplements may void the policy ab initio (back to inception).

CANCELLATIONS

A. CANCELLATION AT INSURED’S REQUEST Cancellation will be effective the day such request is received by the Plan, on a later date specified by the insured, or on an earlier date with proper supporting documentation. Cancellation will be calculated in accordance with the rules of the rating organization having applicable jurisdiction.

The insured may cancel the policy at any time by returning it to the Association or by notifying the Association in writing of the date, cancellation is to take effect. The first named insured is required to sign and authorize the request for cancellation. Release should be secured from any mortgagee or loss payee. The “Lost Policy Release” provides acceptable wording for such a release. Request for cancellation, by a licensed premium finance company, for non-payment of premium will be honored as an insured’s request, provided a copy of the premium finance agreement is attached, or is on file with the Plan.

B. CANCELLATION INITIATED BY THE FAIR PLAN The Plan is required to give an insured thirty (30) days prior written notice of any cancellation or non-continuation of coverage, except that a shorter notice of not less than five (5) days for commercial property (ten [10] days to mortgagee) and ten [10] days for dwelling property may be used for specified causes authorized by the Insurance Department.

Grounds for cancellation by the FAIR Plan shall normally be limited to:

1. Cause which would have been grounds for non-acceptance of the risk under the

program, had such cause been known at the time of acceptance; or

2. Non-payment of premiums; or

3. Evidence of incendiarism; or

4. Misrepresentation of any material fact either before or after loss; or

5. A finding on the basis of satisfactory evidence that changes in the physical condition of the property or other conditions make the risk uninsurable.


6. Upon such other grounds and upon such notice thereof, as may be approved from time to time by the Commissioner of Insurance. At this time a shorter notice, as defined, has been authorized for the following causes:

a. Owner or occupant incendiarism;

b. At least sixty-five (65) percent of the rental units in the building are unoccupied, and the

insured has not obtained prior approval from FAIR Plan of a rehabilitation plan, which necessitates a high degree of unoccupancy.

c. Fire damage exists and the insured has stated, or such time has elapsed as clearly

indicates, that the damage will not be repaired;

d. Following a fire, permanent repairs following satisfactory adjustment of loss have not commenced within sixty (60) days;

e. Property has been abandoned or there has been removal of undamaged salvageable

items from the building and the insured can give no reasonable explanation for such removal;

f. Utilities such as electric, gas or water services have been discontinued and the insured

has failed to pay his account for such services within one-hundred and twenty (120) days, or real estate taxes have not been paid for a two-year period after the taxes have become delinquent (real estate taxes shall not be deemed to be delinquent for this purpose even if they are due and constitute a lien, so long as a grace period remains under local law during which such taxes may be paid without penalty);

g. Where reliable information exists to indicate that the building will be burned for the

purpose of collecting the insurance;

h. Conviction or unresolved indictment of a named insured or loss payee or any other person having a financial interest in the property of the crime of arson or a crime involving a purpose to defraud an insurance company;

i. Where the building has been subject to more than two (2) fires, each loss amounts to at

least $500 or one percent of the insurance in force, whichever is greater, in any twelve (12) month period; or more than three (3) such fires in any twenty-four (24) month period, provided that the cause of such fires is due to conditions which are the responsibility of the owner-named insured;

j. Material misrepresentation;

k. Non-payment of premium.

The Notice of Cancellation, together with a statement of the reasons therefore shall be sent to the insured, named mortgagees and producer of record. The Association will send a copy of the Notice of Cancellation directly to the named mortgagee(s). Each notice shall be accompanied by a statement explaining that the insured has a right of appeal and that further explains the appeal process.

l. All policy cancellations are on a pro-rata basis.


APPEALS Any person or any insurer affected by any act or decision of the Administrators of the Plan or Underwriting Association may appeal to the Board of Directors within fifteen (15) days after any final ruling, action or decision of the Association (other than a ruling, action or decision relating to the cause or amount of a claimed loss).

The Board, or an Appeals Committee designated by the Board, shall hear and determine such appeal promptly, usually within fifteen (15) days after the same is filed. Such determination may be appealed to the Commissioner within thirty (30) days, as provided by Statute.

Order of the Commissioner shall be subject to judicial review as provided by Statute.

RATES, RATING PLANS AND RATE RULES The rates, rating plans, rating rules and forms applicable to the insurance written by the Association, shall be in accordance with the most recent manual rates or adjusted loss costs and forms that are legally in effect in this State. No special surcharge, other than those approved by the Commissioner of Insurance, may be applied to the property insurance rates of properties located in the State. The FAIR Plan follows the rates, rating plans, rating rules and forms as provided by the North Carolina Rate Bureau for Dwelling risks and by ISO for all Commercial risks.

PUBLIC RELATIONS The Plan does not compete with the voluntary insurance market. Rather, it is an insurance association created to supplement the voluntary market by providing coverage to owners of insurable property who have been unable to obtain coverage in the voluntary market. To assist in telling the FAIR Plan story, the following communication vehicles are available:

A. SPEAKERS • Qualified persons knowledgeable of the Plan’s operation, including its purpose, history

and accomplishments, are available to address community, school and industry groups.

• Persons are also available to address specific issues of public concern which relate to the Plans, such as the Plan’s catastrophe plan and procedures, its efforts to thwart arson for profit, fire safety or any other issue relating to property insurance.

B. OFFICE TOURS • We welcome prearranged office tours for organized groups seeking an inside view of the

operation and an opportunity to meet the people committed to assuring the availability of property insurance. To arrange for a tour, contact the General Manager.

• If you are interested in increasing public awareness of the Plan or providing a program for an organized group on the subject of the Plan, we urge you to contact the General Manager, who will be glad to assist you in any way.

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