If you have replacement cost coverage, they DO have to replace it to current code, at no cost to you. You pay your deductible - the insurance covers the rest. Period.
My brother's old farmhouse burned to the ground. Insurance paid to build a house of the same square footage - all brand new - to the same level of finish. The old house was pretty basic, so the insurance would not pay for travertine floors, marble kitchen counters etc - but he DID get double glazed argon filled windows in place of the drafty wood-sash single pane windows the old house had - and the wiring and plumbing were to current code, not 1938 standards like the old house. And he even got a square foundation and floors that were level.
Ayup, what he doesn't want to hear is likely the case.
I still think it would be interesting to be able to see into the rate-setting/coverage boundary processes internal to the underwriters to see how the coverages have been squeezed over the years ('cuz I've no doubt they have been for various reasons most notably the aforementioned obvious one of the heavy losses sustained after the successive Gulf coast years).
On 3/23/2013 3:19 PM, snipped-for-privacy@snyder.on.ca wrote: ...
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No, not necessarily...there may be some jurisdictions that require such riders (in the US only FL that I know of for sure at the moment) but it's not uncommon for there to be an "ordinance or law" exclusion in a standard replacement policy (in fact, any more it's more common for it to be there rather than not which is why one needs to read the policy in its entirety in the actual policy language and can't rely simply on the general description to know of what is/isn't actually covered).
I have no idea about Canada, specifically...wouldn't surprise if it were a reqm't there.
Here's a case that was litigated in Colorado about this exact issue with Allstate. Allstate tried to claim the exact same thing, that replacement cost coverage only meant they would pay for a replacement house that could not be legally built because current codes required some things beyond what was required when the house was originally built. The first court agreed with Allstate and you guys. The appeals court reversed the whole decision and agreed with the plaintiff and my interpretation, ie that replacement cost coverage means the insurance company has to pay to build it to current code. They said it in a very elegant way. Replacement cost coverage is supposed to put you back in the position you were in before the loss, ie replace what was damaged. The fact that it costs more now due to some code requirements does not put the insured in a better position, they are still only getting a house that they can live in like they originally had. Or in my case a roof.
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"Plaintiff contends that the trial court erred in concluding that the replacement cost limitation for ?equivalent construction for simila r use? is unambiguous and precludes coverage for the cost of upgradin g the fire damaged parts of her house to comply with current building codes. ? We agree.
In its order granting summary judgment to defendant, the trial court noted that ?[o]ne of the traditional concepts of fire insurance is to indemnify or compensate the insured for the actual loss sustained, and not to place the insured in a better position than he or she was in at the time of the fire,? citing Bischel v. Fire Insurance Exchange, 1 Cal.App.4th 1168, 2 Cal.Rptr.2d 575 (1991), and Breshears v. Indiana Lumbermens Mutual Insurance Co., 256 Cal.App.2d 245, 63 Cal.Rptr. 879 (1967). ? The trial court reasoned that replacing plaintiff's noncomplying structure with one that complied with current building codes would compensate plaintiff for expenditures she had never made and would put her in a better position than she had been in prior to the fire.
Taking this reasoning into account when applying the common definition of the terms to the facts, the court concluded that:
?equivalent construction for similar use? does not require the insurer to pay for structural improvements or code upgrades which were not in existence in the building at the time of the fire despite the fact that any new construction must conform to current building codes. ??Equivalent construction for similar use? requires replacement with construction equal or like in value or worth to that which was destroyed or damaged for a use nearly corresponding or resembling in many respects the pre-fire use (i.e., in this case a house which, although it was inhabited, did not conform to current building codes).
Plaintiff contends that interpreting the policy language to include the cost of building code upgrades does not conflict with the principle of not putting an insured in a better position than he or she was in before the fire and that the provision can reasonably be interpreted to include the cost of returning the dwelling to its equivalent or similar use as a habitable structure. ? We agree with both contentions.
?An insured who does not rebuild or repair is generally entitled on ly to the actual value of the loss, and payment of additional amounts representing a higher cost to replace the structure would be an impermissible windfall. ? See State Ins. Co. v. Taylor, 14 Colo. 49
9,
511, 24 P. 333, 337 (1890)(?[t]he rule of damages is the value of t he property lost, and not the cost of replacement,? and the measure fo r destroyed buildings is ?the actual value of the property in the condition it was in at the time of loss, taking into consideration its age and condition, and not necessarily what it would cost to erect a new building?); ?Dombrosky v. Farmers Ins. Co., 84 Wash.App . 245, 259,
928 P.2d 1127, 1136 (1996)(where insured had not incurred the additional cost of replacing the structure, payment of additional amount would be a windfall).
?However, while an actual cost policy is designed to avoid placing the insured in a better position than he or she was in before the fire, a replacement cost policy allows for such a possibility because it is intended to allow the insured to replace the damaged building. ? Se e Hess v. North Pac. Ins. Co., 122 Wash.2d 180, 859 P.2d 586 (1993) (replacement cost coverage is not limited by concept of indemnity and recognizes that obsolescence and deterioration are insurable risks);
12 L. Russ, Couch on Insurance 3d §?176:56 (1998)(?Rep lacement cost coverage was devised to remedy the shortfall in coverage which results under a property insurance policy compensating the insured for actual cash value alone.?).
?Here, the policy defines replacement cost as the ?cost to repair, rebuild or replace the damaged or destroyed part(s) of the building(s) without deduction for depreciation.? ? However, defendant's narrow interpretation of this clause-requiring only the payment of the cost to provide a building constructed to its prefire specifications rather than a functional replacement-conflates the separate concepts of replacement cost and reproduction cost:
Reproduction cost is the estimated cost to construct, at current prices, an exact duplicate or replica of the building being appraised, using the same materials, construction standards, design, layout, and quality of workmanship, and embodying all the deficiencies, superadequacies, and obsolescence of the subject building.
Replacement cost is the estimated cost to construct, at current prices, a building with utility equivalent to the building being appraised, using modern materials and current standards, design, and layout.
American Institute of Real Estate Appraisers, Appraisal of Real Estate ch. 15, at 351-52 (9th ed.1987); ?see also Black's, supra, at 349 (?replacement cost? defined as the ?cost of acquiri ng an asset that is as equally useful or productive as an asset currently held?).
Thus, nothing in the concept of ?replacement cost? coverage limits plaintiff's recovery to the cost of restoring her house to its prefire condition.
Regardless of the actual ?replacement cost,? however, the p olicy contains a limitation on the amount that will be paid. ? It provide s that the amount paid for replacement cost is not to exceed the smallest of the cost for ?equivalent construction for similar use o n the same premises,? the limit of the policy, or the amount actually expended.
Defendant contends that the ?equivalent construction for similar us e? limitation does not include the cost of rendering plaintiff's house habitable by complying with changed building codes, even if that amount is otherwise encompassed in ?replacement cost,? and that, in any event, plaintiff's recovery here is limited to the amount she actually expended on the modular home. ? We disagree with both contentions.
a.
?Defendant contends that the restriction on replacement cost to ?equivalent construction for similar use? clearly limits re placement cost coverage to reproduction cost. ? We disagree.
??[C]overage provisions in an insurance contract are to be liberally construed in favor of the insured to provide the broadest possible coverage.? ?Fire Ins. Exch. v. Bentley, 953 P.2d 1297, 1300 (Colo.App.
1998). ? While an insurer may exclude events from coverage, see O'Connor v. Proprietors Ins. Co., 696 P.2d 282 (Colo.1985), the exclusion must be clear and specific. ? See Bohrer v. Church Mut. I ns. Co., 965 P.2d 1258 (Colo.1998). ? Only if the language of the exclusion is unambiguous will it alter the reasonable expectations of an insured. ? See Principal Mut. Life Ins. Co. v. Progressive Mount ain Ins. Co., 1 P.3d 250 (Colo.App.1999), aff'd, 27 P.3d 343 (Colo.2001).
Here, the limitation provides for the cost of ?equivalent construct ion for similar use.? ? The terms are not defined in the policy , but their meaning can be ascertained from common definitions. ?Equivalent is defined as ?[e]qual in value, force, amount, effect, or significanc e? or as ?[c]orresponding in effect or function; ?nearly ident ical; virtually identical.? ? Black's, supra, at 561. ? ?Use? is defined as ?[t]he application or employment of something; ?esp., a lon g-continued possession and employment of a thing for the purpose for which it is adapted.? ? Black's, supra, at 1540.
As the definitions of both ?equivalent? and ?use include concepts of functionality, the plain meaning of the term ?equivalent constructi on for similar use? includes maintaining the property's prefire functi on.
Prior to the fire, plaintiff's house was a habitable dwelling yielding rental income. ? Merely restoring it to its prefire condition would have rendered it uninhabitable and thus unfit for any similar use. Such a result does not comport with the plain language of the limitation or the reasonable expectations of an insured purchasing a replacement cost policy. ? See Bering Strait Sch. Dist. v. RLI Ins. Co., 873 P.2d 1292 (Alaska 1994); ?Starczewski v. Unigard Ins. Grou p,
61 Wash.App. 267, 810 P.2d 58 (1991).
Although defendant cites cases that have reached the opposite result- some interpreting ?equivalent construction? to preclude the cost of building code upgrades and some finding the exclusion for building codes applicable-most of those cases involved policies that also included language that the insurer would pay replacement cost ?with out allowance for any increased cost of repair or reconstruction by reason of any ordinance or law regulating construction or repair.? See Bischel v. Fire Ins. Exch., supra, 1 Cal.App.4th at 1174, 2 Cal.Rptr.
2d at 578; ?McCorkle v. State Farm Ins. Co., 221 Cal.App.3d 610, 27
0 Cal.Rptr. 492 (1990); ?Breshears v. Ind. Lumbermens Mut. Ins. Co., supra; ?Bradford v. Home Ins. Co., 384 A.2d 52 (Me.1978); ? Weinstein v. Commerce Ins. Co., 196 Va. 106, 82 S.E.2d 477 (1954); ?see also Hewins v. London Assurance Corp., 184 Mass. 177, 182, 68 N.E. 62, 64 (1903)(amount paid ?shall in no event exceed what it would then cos t the insured to repair or replace the same with material of like kind and quality,? and insurer was not liable ?beyond the actual value destroyed by fire?).
Here, however, no other language in the policy would negate the reasonableness of interpreting the ?equivalent construction for similar use? limitation as contemplating similar functional utility and thus to include the cost of complying with regulations necessary to render plaintiff's house habitable.
Just a slim chance? The same adjuster that looks at a wall with
7 windows and two doors and takes out the area for them because they don't have to be painted, then applies a cheap per sq ft painting cost? Any painter knows that cutting in around all those windows, doors ADDS to the cost instead of decreasing it. The same adjuster that says it only takes one coat to paint water damaged walls and ceilings? The same adjuster that says that a power attic roof fan with ripped up top can be fixed by buying a new top for it? You ever see those sold? For a 25 year old fan? That adjuster and insurance company?
They are only required to do what is in the contract. Many policies are written such that they pay only for the current value. If the paint job is ten years old you get that value and not a new paint job. If the building has say 40 year old wiring with a knob and tube wired outlet in each room you get that value not the cost to wire the building to current code.
The irony of all of this is that you are such a staunch defender of big soulless organizations (including things like the bank bailouts etc). So maybe this is your thanks?
In that case, it comes down to how much time are you willing to invest for $150. That applies to both sides. Allstate will have to spend a fair amount of money to keep denying the claim
That's true. But, and it's a big but (no pun intended) it is for replacement of what was present at the time the policy was placed in force. If there was no ice dam at that time, they are not required to pay for an ice dam at a later date. The insured will have to pay the difference. That is why one should update their policy every year. It's called a coverage review and if you fail to do that, you really don't have a leg to stand on if you wind up in court. It always comes down to this. Read the policy BEFORE you pay for it. If you are not sure about a particular provision, or unhappy with one, say so.
Well it would seem to be a case where a house had old wire, a fire and the insurance company paid to bring it up to code. He did say they paid for GFCI's and insulation when the house was not insulated at all. It's not 100% clear what he meant about the GFCI's, but I think his meaning was that it had knob and tube and no GFCIs, yet they paid for a complete rewire.
Totally different case and I seriously doubt the
Oh, I see. It makes sense to spend to put in a new electrical system that is up to code, because it may avoid future costs for the insurance company. But not ice dam material? What's up with that? Ice damming costs little and could avoid BIG claims for water damage.
Which doesn't have anything to do with what's right or the premiums I've been paying.
Yeah, I know they are trying to screw me. That doesn't make it right.
Take a look at my earlier post citing what Allstate found out in Colorado appeallate court. In that case a house burned down and Allstate tried to claim what you say above, that they only have to pay for construction standards of what was already there. The appeallate court said no. The insured had a house before the loss, replacement coverage and to put them back in the position they were in they get a new house. The fact that new building codes mean it will cost some more money is the insurance company's problem.
They looked at it like I do. If your bedroom burns down, the insurance company owes you a new bedroom. The fact that arc fault interrupters, more insulation, ice dammng, etc are required today is their problem. The alternative view requires believing that they aren't replacing a bedroom, they are just replacing drywall, nails, electical cable, carpet etc and it doesn't have to be a livable bedroom when they are done. If you believe it has to be a livable bedroom, how can it be right for the insurance company to not pay for it to be built to min code? If they don't pay, you can't build it, unless you pay the difference yourself.
So, following their method, you could have a house insured for $400K. You could be paying replacement cost premiums for 40 years. One day the house burns down and they tell you they won't pay out the full $400K, because the house could be re-built for $350K, IF it could be rebuilt to codes that were in effect in 1970. But of course, you can't legally do that. So, what then? You go live in a tent?
I'm hoping you're smarter than that. No, you pay the difference. Read your policy and get back to me with exactly what the replacement cost exclusions are. Having said that, each state has different requirements and so one state might allow "added costs" for code required additions and some might not, Texas for instance does not unless they have changed. But it is usually a case of "give it to you with one hand and take it away with the other". So, read the policy, expecially the exclusions. If there is no reference to code required additions, either pro or con, then you have a case. If they exclude it, you don't. You pay the extra costs.
A this old hose had one of the crew had a home fire, the home burnt down.
The rebuilding meant meeting todays code. that included a new septic system. a new system had to be installed and the current code for that location required a sand mound system. insurance was required to pay the costs because it was a code issue up to the limits of the policy...... san mound pumps etc 40 grand extra....
in the case of my friends with knob and tube, the kitchen and baths had no GFCIs, and ALL the K&T had to be removed by law, to meet code.
Well, we're back to what I've said all along--in the end it will come down to the details of what your policy says and, specifically, whether it does or does not have an exclusion or not. It's why I said there was (I figure probably slim) chance it's an overly zealous adjustor but I figured it was likely the adjustor knows what the policy he's adjusting against actually covers as the better odds.
And, then if it doesn't and the adjustor still doesn't want to give and your personal agent won't help then you have the choice as to whether it's worth the legal battle to fight or not.
But the above judgment wins on your side because the particular litigant's policy did not have the exclusion not because it's a general principle in all cases. As always, in law, the particular facts will pertain on the particular case and slight differences in those can change the outcome.
I'm hoping you'll come out whole; just warning that it isn't a foregone conclusion depending on the circumstances.
maybe, in my friends case it was FORCED PLACE insurance. The mortage company required them to have and pay for. It ONLY covered the structure at a cost of 5 times normal homeowners insurance:(
The original homeowners insurance company went bankrupt out of business. no other company wanted to insure the home the roof was bad, over mold fears and the presence of K&T. the owner failed to make repairs lacking the $.
So forced place insurance covered the mortage company.
As soon as the fire damage was fixed the homeowner qualified for regular homeowners insurance so forced place wasnt needed.
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