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Claim Submission

Persons who wish to submit an RWP arising from the alleged failure of a Member Builder to perform under its limited warranty, who believe that they have a covered claim for a Major Structural Defect, or who wish to assert any other claim, must send their claim information to the following address:

HOW Insurance Company, A Risk Retention Group
In Receivership
P.O. Box 901021
Fort Worth, Texas 76101-2021

 The Companies maintain a toll free number which is answered between 7:30 a.m.- 5:30 p.m . Central Time, Monday through Friday. For urgent matters only, you may call toll free at 1-800-834-0577.

 Defense of Third Party Actions

  The Companies are not providing a legal defense to Member Builders against claims brought by Home Owners under the Major Structural Defect ("MSD") coverage provisions of the HOWIC Warranty. A Member Builder may, however, present a claim to the Companies for costs it has incurred in connection with the defense of such a claim. To the extent approved, the claim will be treated as a Class 5 general creditor claim (as described in the "Prioritization of Claims" section in this Part 3) against the Companies. A Member Builder's claim for legal defense is a general creditor claim because the claim arises under the Member Builder's Agreement with HOW rather than the HOWIC Warranty. Generally, in order to be approved, a Member Builder's claim for defense costs must meet certain criteria. Namely, the costs must be reasonable and necessary, incurred after the filing of a lawsuit against the Member Builder to recover under the insurance documents for an MSD, and not covered by other insurance protecting the Member Builder or its subcontractors. To be considered reasonable and necessary, the costs must relate directly to the Member Builder's defense of a claim by a Home Owner under the Major Structural Defect coverage provisions of the HOWIC policy. Other insurance in this context may include a commercial general liability insurance policy which covers the work of the Member Builder or its subcontractors, a liability policy issued to a subcontractor, or other forms of insurance.

 Other Insurance

  The HOWIC Warranty provides only excess insurance coverage. This means that if a loss occurs that is covered under the HOWIC Warranty as well as by other insurance applicable to the home or its construction, HOWIC will not be liable for the loss, except for that portion of the loss which is not covered by, or which is in excess of, the amount due from such other insurance (whether or not collected). Therefore, claimants should first seek recovery of the amount of their loss from other insurance policies, such as their homeowners insurance policy, their builder's commercial general liability insurance policy and any other insurance policies which may be applicable to the loss. To the extent it is applicable, all such other insurance must be exhausted before the Companies can be required to pay any portion of the loss.

 Claim Determinations

  Once the Companies receive a claim, a claims representative will review the documentation and make a determination as to whether coverage is available based on the information received or whether additional information is necessary. The representative may contact the claimant over the telephone or by written correspondence and inform him or her of any additional information which is required. After a thorough investigation of the facts and circumstances concerning the claim, the claimant generally will receive a Notice of Claim Determination ("NCD") which informs him or her of the Deputy Receiver's disposition of the claim.

 Advisory Opinions Regarding Claims

  From time-to-time, Home Owners, Member Builders, creditors, and other interested persons may contact the Companies seeking advice about whether a hypothetical situation constitutes a valid claim against the Companies, and, if so, the level of payment priority that the claim would receive. These scenarios typically present situations where assumptions must be made regarding the facts and circumstances of the claim. It is the Deputy Receiver's policy that no advisory opinions or statements will be offered in these situations regarding whether claims coverage exists. It is important that all relevant claim information be submitted in writing to the address referenced in the "Claim Submission" section of this Part 3 so that the claim can be properly evaluated without constituting an advisory opinion.

 Right to Appeal

  Under the terms of the Receivership Order, a procedure has been implemented by which appeal may be taken from any decision of the Deputy Receiver involving a specific claim. The appeal must be received within 30 days after the NCD is issued. The Receivership Appeal Procedure is the exclusive method for appealing such decisions. A copy of the Receivership Appeal Procedure is attached to this Report as Exhibit B. Except to the extent provided in this procedure, all decisions of the Deputy Receiver are final and nonappealable. No procedure exists for alternative dispute resolution or arbitration of claims.

  There are two levels of appeal following the issuance of an NCD. First, the decision reflected in the NCD may be appealed to the Deputy Receiver. Generally, such claims are then reviewed by the Deputy Receiver's appeals department, which may or may not request additional information than that considered by the claims department. The result of this process is typically the issuance of a Determination of Appeal letter by the Deputy Receiver. Claimants dissatisfied with the decision in the Determination of Appeal may appeal to the Commission in the manner

REPORT TO HOME OWNERS - Page 8

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