What does the Bold Type on a CEA Policy Refer to?

Many Insurance Policies contain Bold Typeface. The Bold Type on a CEA policy simply refers to terms that are later defined in the policy. Only some terms on a CEA policy are specifically defined within the policy. Just because a term is NOT defined does not mean that a definition does not exist.

Bold Type, the Basics on a CEA Policy:

Definitions define insurance policies. If you question this, just read case law concerning varsious property and lialbity policies and their ultimate outcome. The situation with Earthquake Insurance policies is not much different. California Earthquake Authority policies contain definitions, lots of them. Words that are defined, within the policy are denoted by BOLD Typeface. Barring a specific definition within the policy we are left to source terms and their meanings from other sources.

How many terms are Defined within a California Earthquake Authority Policy?

The 2019 California “Basic Earthquake Policy”, version “BEQ-3B (01-2019 edition)” contains 24 Definitions. These include some of the most important terms in the policy, including “Seimic Event” and “Tectonic processes” and “Earthquake.” There are numerous other definitions within the Definition section. As discussed in our previous post, within the Definitions section the CEA policy does NOT truly define an Aftershock. Definitions are important to all insurance policies.

Why Do Insurance Policies Contain their Own Definitions?

Simple, Insurance companies choose to put into the actual contract the definition whereby the policy will be based on. If a determintion of a claim is made the claims representative can clearly referance a portion of the agreement for certain clarity. As an example definition 15 of the CEA 2019 policy clearly defines “Limit of Insurance” which “means the most we will pay for covered loss arising from any seismic event.” By including this definition within their policy they avoid any confusion or potential lititagation over what the policy means with the use of this term and the actual payout. It might not eliminate all questions and problems, but probably lessens at least some of them.

Listed Definitions often fall into one of two types. The first type are terms deals with insurance in general. Examples within the CEA policy are “Actual Cash Value” and “Business Property”. These are definitions that likely could or would find in other types of policies as well. A second type of definition with CEA policies are specific to earth movement and earthquake insurance. These include “Earthquake” and “Participating Insurer” among others.

This second category, the ones related to earth movement and earthquake insurance in general is likey more important. Potentially they are more important because the terms appear to so few insurance policy forms.

What are the terms defined on the Definitions Page of the CEA Policy?

1. ““Actual cash value” means replacement cost less depreciation.

2. “Association of owners” means, if the location described in the DECLARATIONS is part of a common interest development, a nonprofit corporation or unincorporated association created for the purpose of governing and managing the common interest development in which the dwelling is located.

3. “Business property” means property pertaining to or intended for use in any (a) full-time or part-time trade, profession, or occupation, or (b) other activity intended for economic gain.

4. “California Earthquake Authority” or “CEA” means the entity that issued this policy. The CEA is a public instrumentality of the State of California created and authorized by law to transact insurance in California as necessary to sell policies of basic residential earthquake insurance. The authorization appears in the California Insurance Code, beginning at section 10089.5.

5. “Chimney” means the flue or vent and the building code-required structure that surrounds the flue or vent, including exterior chimney facings, from the firebox to the outside of that structure. Chimney does not include a hearth, a mantel, the firebox where combustion takes place, or the foundation that supports the chimney.

6. “Collectible” or “collectibles” means an item or group of items of personal property, regardless of whether an individual item or part of a collection, the monetary worth of which is not primarily based on its utility or function, but rather, is primarily based on its value to a collector, including property that is kept for investment, has a real or perceived past or expected future increase in value because it would be desirable to collectors as part of a collection, or that has a monetary worth significantly greater than its intrinsic value because of its rarity or its demand among collectors.

7. “Common interest development” means any of the following:
• A community apartment project, as defined in California Civil Code section 4105;
• A condominium project, as defined in California Civil Code section 4125;
• A planned development, as defined in California Civil Code section 4175; or
• A stock cooperative, as defined in California Civil Code section 4190.

8.“Companion policy” means the fire insurance policy, homeowners policy, or other insurance policy that provides fire coverage for the property that is the subject of this CEA policy, and that is issued by the same participating insurer that services this CEA policy.

9. “DECLARATIONS” or “DECLARATIONS page” means the single-page document that accompanies, and forms a part of, this CEA policy, and which lists certain basic information specific to this policy, including, but not limited to, the policy number, policy period, name and mailing address of the named insured, dwelling address, and the limits of insurance, deductible, and premium applicable to this policy. The following title appears at the top of the DECLARATIONS page:
CALIFORNIA EARTHQUAKE AUTHORITY
BASIC EARTHQUAKE POLICY—HOMEOWNERS
DECLARATIONS

10.“Domestic partner” means a party to a two-person domestic relationship registered by the California Secretary of State through the filing of a Declaration of Domestic Partnership, pursuant to California Family Code section 298.5.

11. “Dwelling” means the residential structure or mobile home at the location described in the DECLARATIONS. Dwelling does not include land, whether or not beneath the residential structure or mobile home, even if required for support. Dwelling does not include any structure other than the residential structure or mobile home unless the structure (1) shares a common wall or a continuous roof line with the residential structure or mobile home or (2) is attached to the residential structure or mobile home by a foundation that is continuous with or contiguous to the foundation of the residential structure.

12. “Earthquake” means a vibration-generating rupture event caused by displacement within the earth’s crust through release of strain associated with tectonic processes and includes effects such as ground shaking, liquefaction, and damaging amplification of ground motion. While land sliding, including seismically-induced land sliding, is not itself an earthquake, we cover, subject to “LOSSES EXCLUDED” Item 5 and subject to all other terms and conditions of this policy, loss to covered property arising out of a seismically-induced landslide if that landslide is induced by, and would not have occurred in the absence of, an earthquake that commences during the policy period as part of a seismic event that commences during the policy period. Earthquake does not mean or include tsunami or volcanic eruption.

13. “Fungi” means all types of fungus, including but not limited to mildew and mold, and all of their resulting spores and by-products, including mycotoxins and allergens, but not including cultivated edible mushrooms or other cultivated fungi intended for human consumption.

14. “Insured” means you and the following persons if they are permanent residents of your household:
    a. your relatives, whether related by blood, marriage or adoption; and
    b. anyone under the age of 21 who is in the care or custody of you or of any of your relatives who are permanent residents of your household.
15. “Limit of insurance” means the most we will pay for covered loss arising from any seismic event.
16. “Loss assessment” means an assessment charged by an association of owners against all property owners in a common interest development that is properly and legally made as a result of a loss to structures or other real property contained within that common interest development, and those structures or other real property are owned by one or any combination of the following three categories: (i) all members of the association of owners collectively, (ii) the association of owners, or (iii) you.

17. “Nuclear hazard” means any nuclear reaction, radiation, or radioactive contamination, or any consequence of any of these.

18. “Participating insurer” means the insurance company that issued the companion policy, meets the legal requirements to offer residential earthquake coverage by participating in the CEA, and provides claims and policyholder services for this policy on behalf of the CEA.

19. “Person” means any human, association, organization, governmental entity, partnership, business trust, limited liability company, or corporation.

20. “Replacement cost” means:
a. With respect to structures, the lesser of the reasonable cost at the time of loss to repair or replace covered damaged or destroyed property, without deduction for depreciation, (i) at the location of the residence premises, (ii) for the same use, and (iii) with materials of like kind and quality.
b. With respect to personal property and wall-to-wall carpeting, the cost, without deduction for depreciation, of (i) new property identical to the damaged property or, (ii) if identical property is not obtainable, of new property of like quality and of comparable usefulness as the damaged property.

21. “Residence premises” means the one, two, three, or four unit dwelling, extensions to dwelling, and grounds at the address shown in the DECLARATIONS owned by you. Residence premises does not include land or extensions to dwelling not owned by you. Residence premises does not include property owned by a corporation, association of owners or other entity, including but not limited to property for the common use of members or shareholders even if you are a member or shareholder, except for any extensions to dwelling subject to a loss assessment covered under Item 4 of “Property Covered – Coverage B” on page ___of this policy.

22. “Seismic event” means one or more earthquakes that occur within a 360-hour period. The seismic event commences upon the initial earthquake, and all earthquakes or aftershocks that occur within the 360 hours immediately following the initial earthquake are considered for purposes of this policy to be part of the same seismic event.

23. “Sublimit” means a dollar limit on a coverage for a specific type of property within a category of property that is subject to a higher total limit of insurance. Payment under a sublimit will reduce the amount available under the total limit of insurance. For example, a chimney is covered under “COVERAGE A: DWELLING” which has a limit of insurance shown on the DECLARATIONS page, but no more than the $10,000 sublimit will be paid for loss to any and all chimney(s). In that example, the overall amount available under the “COVERAGE A: DWELLING” and COVERAGE B: EXTENSIONS TO DWELLING combined single limit of insurance would be reduced by the amount that is paid for loss to any chimney.

24.“Tectonic processes” means natural adjustments of the earth’s crust that are wholly in response to regional stress conditions caused by natural dynamic forces within the earth’s interior, and not initiated, in whole or in any part, by any human activity.”

One will note that these apper to be listed in alphabetical order, which is common with dicitionaries and definitions. Further bolding is used within these definitions on the CEA policy to refer to within these definitions. These were taken off to avoid confusion on this article.

What is exactly is bold typeface? This may sound like a dumb question, but it really is not given the nature of the article. PC Mag defines bold typeface as: “A set of type characters that are darker and heavier than normal.” Basically bold type is darker than the surrounding type. Most computers have bold as one of the options for characters.

Note on Boldface Definitions on CEA policies:

The definitions are still subject to the terms, conditions, exclusions, further limitations of the policy, declarations, and any other policy documents. Simply reading the definitions of any policy will NOT give you the entire story.

Why are the CEA Bold Definitions Important?

The California Earthquake Authority definitions are exceptionally important when questions arise as to what something means. Domestic Partner, is clearly defined by California rules and regulations, not Federal government regulations.

It is also important for their absence of certain definitions on their policy form. Potentially a term could be defined in other parts of the policy. Although, one would think that the simplest place to put the definition is in the Definitions section.

Last Thoughts on Bold Face type of CEA Policies:

The insurance policy that YOU have, might contain a different list of definitions or a different definition. If their definition of an seimic event or techtonic process is different this would be signficant.

From the time of writing this blog post, the definitions on the CEA policy can [and likely will] change. You need to be aware of this.

All policies are limited not just by their definitions but also by their terms, conditions, exclusions and all policy declarations and paperwork. One must read all policy documents to understand them.

You should speak with your insurance agent about your possible CEA or other Earthquake policy before making any decisions to change, add, or ammend coverage.