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JWill
USA
28 Posts |
 Posted - 01/16/2003 : 10:52:41
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This question has come up many times. Under the HO 00 03 4/91 policy this question is derived;
The property is located in Missouri. Specifically, the insured suffered a loss to siding on the house on July 7. The company paid the loss on November 21, but held back depreciation until replacement is completed. The insured plans to replace but, being winter now, is unable to do so for several months. Now the company refuses to pay for depreciation because the insured did not replace within 180 days. Is that correct? |
J. Williams |
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Manmut
USA
26 Posts |
Posted - 01/16/2003 : 11:59:09
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| It probably depends on the company. When I worked for Allstate, they were pretty generous with granting extensions provided you had a reasonable excuse. I would consider winter weather a fairly reasonable excuse, especially if the contractor has a target date to begin repairs in the spring. |
Patrick W. Laws |
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Newt
USA
657 Posts |
Posted - 01/16/2003 : 12:19:15
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Section I Conditions Par C 2. e , refers to option for ACV instead of RC, if notification is given to the carrier within 180 days after the date of loss.
If the claim is over $2500.00 according to Par C 2 a, b and d the claim will be paid ACV until the actual repair is made. No mention of 180 day time limit to accomplish the repairs.
Claims under $2500.00 will be settled whether or not the repair or replacement is complete.(d.(2)
This is HO3 ISO , the carrier may have that time limit included in their policy.
If that is the case, the next option would be to check with the State Ins.Commision or the next level with the carrier. If the claim was made in Nov. something is missing, others may have a comment on this. |
Edited by - Newt on 01/16/2003 12:32:31 |
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JimF
USA
1014 Posts |
Posted - 01/16/2003 : 21:25:21
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Several comments:
(1) Newt, PLEASE. READ the policy again. The 180 day time limit for recapture of RCV is standard in the ISO HO-3.
(Newt, since you are not yet an 'adjuster', on some of these 'gray area' and highly complex claim case studies, you might want to listen and learn, rather than voice an unfounded and uninformed opinion, and thus be considered a 'handful of sand in the KY Jelly of Life').
(2) Out of curiosity, what was the amount (%) of depreciation taken? 'Siding' does not depreciate rapidly, so depreciation taken should be 'reasonable'.....if depreciation taken was not 'reasonable' by the adjuster and/or carrier, the Insured likely has an 'E&O' or 'Bad Faith' claim against the adjuster and/or carrier.
(3) While the HO-3 does stipulate the 180 day period, most carriers will extend this period upon written request of the Insured.
(4) Policy language notwithstanding, a complaint to the Commissioner of Insurance in the State where the loss is located, is likely to motivate the carrier to reverse their stance on this claim.
(5) Check with an attorney to review case law in
your location regarding this question. There may be State cases which establish precedence over policy language.
(6) When all else fails, have your Insured contact Bill Cook, P.A. or Bill Kelley, Attorney At Law. |
Edited by - JimF on 01/16/2003 21:51:43 |
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JimF
USA
1014 Posts |
Posted - 01/16/2003 : 22:59:49
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Memo to 'JWill':
There are some obvious problems with the 180 day recapture of depreciation policy language as outlined in the examples below, and the courts have taken cognitive notice in decisions handed down.
(1) Insured suffers a covered loss on January 1 but the carrier does not make an indemnity payment (ACV) until 180 days after the DOL (Date of Loss), and then argues that RCV cannot be paid because Insured did not effectuate repairs/replacement within the 180 day policy limit period. (Insured argues with merit, that without indemnity payment, repairs and/or replacement could not commence).
(2) In the second scenario, Jack and Jill Homeowner leave the country for a 7 month vacation on April 1. On April 2, a hailstorm totally damages the 15 year old roof on their home. Upon arrival back at home on December 1, their next door neighbor tells them about the hail storm and they call their agent to report damage. Adjuster inspects loss, and adjuster and carrier advise Insured that RCV is not available on claim since loss was not reported and damages repaired/replaced within 180 days of the DOL.
These are just two examples of why the 180 day RCV recapture limit policy provision may be ruled unfair and inequitable by the courts! |
Edited by - JimF on 01/16/2003 23:06:09 |
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JWill
USA
28 Posts |
Posted - 01/17/2003 : 03:47:06
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"Memo to JimF":
To answer your question,...
(2) Out of curiosity, what was the amount (%) of depreciation taken? 'Siding' does not depreciate rapidly, so depreciation taken should be 'reasonable'.....if depreciation taken was not 'reasonable' by the adjuster and/or carrier, the Insured likely has an 'E&O' or 'Bad Faith' claim against the adjuster and/or carrier.
The siding was over twenty (20) years old and treated as obsolete/betterment and depreciated 50%. |
J. Williams |
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JWill
USA
28 Posts |
Posted - 01/17/2003 : 04:19:18
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In the 1991 ISO form, there is nothing that says the insured must physically replace the property within 180 days, just "make claim" for replacement cost. My intent here was to see if someone could show me where this requirement is stated and not the assumption that seems to be the industry standard.
Yes, I'm familar with the limited case law concerning the subject and in my limited research capabilities (access to actual transcripts), I find no reference to this wording to mean repairs/replacement must take place in 180 days.
With the exception of fire, tornado and other losses that would require repair/replacement to begin as soon as possible, I do not see how carriers or adjusters can deny the claim for payment if the policyholder does as the policy states; "makes claim for the holdback within the 180 days whether repairs/replacement has been completed."
I see this as a "notice of intent", which assures the carrier/adjuster that repair/replacement is intended. Go along with me and let's examine this again?
Here are the policy excerpts again:
(4) We will pay no more than the actual cash value of the damage until actual repair or replacement is complete. Once actual repair or replacement is complete, we will settle the loss according to the provisions of b.(1) and b.(2) above. (co-insurance requirement)
(5) You may disregard the replacement cost loss settlement provisions and make claim under this policy for loss or damage to buildings on an actual cash value basis. You may then make claim within 180 days after loss for any additional liability according to the provisions of this Condition 3. Loss Settlement.
As you can see, the policy says it will only pay ACV unless the repairs are actually made...then it'll pay replacement cost. Nothing in this clause puts a time limit on completion. The carrier/adjuster does not have to pay replacement cost until after the property has been physically repaired or replaced, but paragraph (5) doesn't say that repair/replacement must be COMPLETED within 180 days...it just says the insured essentially has to make up his/her mind and "make claim" within 180 days. I don't know how it could be much clearer...if completion of all work is to be done within 180 days, then it could have just said that.
This clause is entirely at the insured's discretion. The purpose is to allow the insured to be paid ACV up front, then get the difference between that and replacement cost later. The insured might elect to collect ACV in lieu of replacement cost if he/she doesn't intend to make repairs.
ISO's new HO2000 program makes it even clearer that replacement doesn't have to be completed in 180 days.
Specifically, Form HO 00 03 10 00 says:
e. You may disregard the replacement cost loss settlement provisions and make claim under this policy for loss to buildings on an actual cash value basis. You may then make claim for any additional liability according to the provisions of this Condition C. Loss Settlement, provided you notify us of your intent to do so within 180 days after the date of loss.
Note that you can get replacement cost coverage if you "notify us of your intent to do so" in 180 days. According to ISO's filing memorandum, this was a "no change" in coverage, meaning that the intent was the same in the 1991 edition.
Remember, the insurance policy is a legal contract and coverage issues are normally resolved based on what the form says, not what someone thinks it was meant to imply.(normally)
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J. Williams |
Edited by - JWill on 01/17/2003 04:36:27 |
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Newt
USA
657 Posts |
Posted - 01/17/2003 : 07:49:18
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JWill, Sorry if I missed the point, thats what I got out of the policy. I think it was the same as your conclusion.
Jim, Sand in the KY jelly of life here. I did not find the 180 days statement in my policy for RC.
I went back over it to make sure.
I participate in these discussions to profit by my mistakes. If I offend anyone or make some remarks that are wrong, I stand corrected and learn. If being new means not to be heard, so be it.
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JimF
USA
1014 Posts |
Posted - 01/17/2003 : 07:52:26
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J.Will: I follow your reading and interpretation of the policy as well. You will note that in my earlier post, I did not suggest that repairs must be made in order to 'recapture' depreciation, but that there is a 180 day period outlined within the H0-3(91)in which the Insured must make known their intent to recapture depreciation ('additional liability').
In most instances, most carriers will pay or accept as 'intent to recapture' when an Insured provides the adjuster with a signed contract for the repairs with a contractor. While outside repairs/replacement cannot be made in some climates during winter months, an Insured could show intent and protect themselves from an adverse reading of the RCV policy loss settlement provisions simply by hiring a contractor for the future work, and then sending a copy of that contract to the carrier along with a demand for RCV benefits.
Can you imagine what would have happened after Hurricane Andrew or the Northridge Earthquake had carriers tried to force repair/replacement completition within 180 days? |
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JimF
USA
1014 Posts |
Posted - 01/17/2003 : 08:20:40
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'Cousin' Newt, I wasn't sure that you had been properly inducted into Ghostbuster's 'Burnt Tail Feathers Club' here on CADO. I apologize for not letting the BTFC Pledge Master Der GhostMeister have the honors of hazing you first and whacking you with that big fat fraternity paddle he carries around with him everywhere ('never know when you might need it'). Besides, I was dying to use that K-Y cliche somewhere and well, you can guess the rest.
Thanks for having a thick skin (it helps in cat adjusting) and by all means, speak out, ask questions, and sling it back at us too. I'm sure you can give as good as you get.
Newt, I think you have sent me that nasty head cold you had a week or so ago, and between the snow on the ground here today as well as sanding floors in a house I am renovating, it has taken me out of clarity of mind. (Of course, there are those who would say that is not all that unusual).
We welcome everyone's input here in 'The Clubhouse' so please stick around and help to make it all more interesting, informative and inspiring! |
Edited by - JimF on 01/17/2003 08:27:11 |
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Newt
USA
657 Posts |
Posted - 01/17/2003 : 11:49:46
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I always take about a half gallon of grapefruit juice and drink it down for a cold. But fair warning, don't drink it with any type time release medication, it will cause it to release at once and you may OD.
I don't mind the hazing, take your best whack. Ghostbuster is pretty good at it too. Sometimes I wonder if is serious, then again I don't care if it is.
I really thought at first I had goofed, and went back over my policy and I was right. Seems that there was a problem with the 91 version and they have taken out the 180 day limit. I really need a 91 version so I can get on the same page with everyone else and give two answers. There are a few changes and danged if we ain't covered about all of them. I'll bet we don't forget these differences.
I need to review the Inland Marine manual after I get through with the NFIP manual and policies.
If I don't go over this material periodicly, I forget and have to refreash. That comes from not working with it day in and day out. |
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JWill
USA
28 Posts |
Posted - 01/17/2003 : 20:03:27
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Newt; your desire for knowledge is well shown, a little ribbing is healthy. Frankly, I'd be disappointed to see you disappear.
JimF; I'm in agreement with you. However, it seems to be the norm for a "requirement" to be stated. Frankly, a signed contract isn't required either. Just simply state, "I intend to make claim for the holdback as specified in the policy". Requiring a contractor in not within the form.
Your knowledge and grasp of the process is quite admirable and well stated in your post. My attempt here is to possibly catch some of the "falsehoods" that I've ran into performing desk cleanup and branch assists. Some of the things I've ran into would raise hairs. Another story there.
As for Andrew/Northridge, I would dare to speculate that many policyholders were never made aware of the simplicity of just how the "180 Day Rule" works and therefore missed out on the holdback for lack of writing a simple letter. |
J. Williams |
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jcc1138
12 Posts |
Posted - 01/18/2003 : 19:34:49
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| In Maryland for example, you must notify within 180 days if you do not get the work done, but if you make notification in that time period, you would have up to 3 years to ge the work done. (of course subject to RCV price at time of loss). Look to state statute for filing suit, for it seems to be the time line that the court looked at for replacement. |
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CCarr
Canada
1200 Posts |
Posted - 01/20/2003 : 16:19:50
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JWill, dealing with your opening question, most carriers 'set their clocks' for the 180 day period for the insured to make his intent known, from the date of the ACV payment. That is only common sense and good practice, but I recognize it is not cast in stone. Whoever made that other determination that you mention that would put any date after Jan 7th beyond the scope of giving intent, is a misinformed junior or with a carrier with a very poor 'best practices' guidelines for handling claims.
If I followed the thread correctly JWill, in your 1/17 post - the policy excerpt you note as (#5), I think there is one element of that part of the wording that you are not recognizing the significance of; ".... then make claim within 180 days .... according to the provisions of Condition 3 Loss Settlement".
In my view, RC is an elective option of an insured. The immediate indemnity a carrier owes for a covered loss is ACV. That being done, then if the insured wants RC he must comply with the requirements for that in the Loss Settlement Clause - among those requirements is, ".... we will pay no more than the ACV of the damage UNTIL actual repair or replacement is complete. Once actual repair or replacement is complete, we will settle the loss according to ....". That is in the wording, and is interpreted according to the carrier's 'best practices' guidelines.
In the real world, I agree fully with Jim's 1/17 07.52 post regarding the insured giving notice / intent which would be satisfactory to the carrier to allow the insured's ".... may then make claim .... for any additional liability (i.e. RC) under the Loss Settlement Clause. |
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Newt
USA
657 Posts |
Posted - 01/22/2003 : 09:20:06
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One thing for sure folks, I think it would be wise to inform the client of what you find in the varied policies. Since I don't have the knowlege of most of you fellows do, It will be imperitive that I do my home work on this subject if and when I do a claim. It would take very little time to tell the client he has 180 days, and if he needs more time, log it and tell them to notify their Agent.
State Farm has a two year deadline and with in thirty days after the work is completed to notify them. Thats a sample of what I am looking at. The ISOs are different, the carriers, and some states have their requirements, no wonder the ISO changed in 2000.
I really can't see the carrier denying the claim, the staff adjuster might because of the policy language. However if the claims manager does it, he may regret it if a suit is filed.
I have learned a lot from this subject, the most important being, research this subject in every policy. Being fair to the client and inform them of their responsibility so they don't get blind sided with a denial.
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CCarr
Canada
1200 Posts |
Posted - 01/23/2003 : 08:45:19
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JWill, I was reading your opening post again last night and having a look at the comments that followed, and it sure seems like an issue that there is little consensus on within the industry. With the lingering feeling there shouldn't be, with what looks like a fairly straightforward paragraph of policy wording, I did some digging this morning to see if I could find anything that may help to clear the water.
I did come across some items of relevance, all judicial rulings and legal opinions that may help, at least to understand why there is such an industry lack of consistency on the important paragraph of coverage.
Reviewing this information that is presented in summary form, allows me now to suggest that the Allstate position as suggested by Pat Laws, is a good 'best practice' regarding this issue.
Unfortunately, the only case law and legal review I have on this issue is Canadian. However, our Homeowner policies carry a very similar "180 day" wording for the RC provision that is relative to your opening question.
It is important to note that the focus of these summaries is on the issue of whether an insured can make a subsequent claim on an RC basis LATER than 180 days after the date of loss, AFTER having initially ELECTED to receive payment on an ACV basis.
Take a quick re-read of the "180 day clause", i.e. #5 in the Loss Settlement Clause, summarized as follows, "you may disregard RC .... and make claim .... on an ACV basis. You may then make claim within 180 days after loss for any additional liability ....".
In that regard, I summarize a legal opinion as follows, 'a close reading of the provision allowing only 180 days to submit an RC claim, reveals that the provisions only require insureds who elected initially to receive ACV money, to submit an RC claim within 180 days of the loss. Presumably then, insureds who do not expressly elect to receive ACV money initially, need not submit their RC claims within 180 days. It is our opinion that such an election must be made expressly, it can not be deemed to have been made by an insurer'.
I can see that in the 180 day wording, can you? Note that phrase, ".... make claim on an ACV basis ....", that is distinct from a carrier automatically advancing as their practice may be, the ACV money.
The legal opinion two paragraphs above goes on, 'consequently, we believe that before checks for ACV money are delivered to insureds, it would be wise for adjusters to write to the insured and to explain that ACV money will only be given to an insured if the insured elects to receive them, and in the event that the insured elects to receive them, the consequence is that a subsequent RC claim must be submitted within 180 days of the loss. A copy of the RC provision in the policy should, in our view, be attached to such a letter'.
Based on reported cases, "Peters v Commonwealth Insurance" and "Omega Inn v Continental Insurance", the issue of when the '180 day clock' starts arose, when the Justice's specifically stated in their ruling that, ".... when the insurer's obligation to pay is acknowledged, as against when the loss occurred, then the obligation to rebuild or replace, on the part of the insured arises ....".
A legal opinion followed those reported cases suggesting, 'on the basis of this reported reasoning, a further argument could always be advanced by an insured that any stipulation or condition in the policy stating that an RC claim must be made within 180 days from the date of loss, will be of no effect until the insurer acknowledges its reciprocal obligations under the policy to pay'.
Don't these reported cases and the legal opinion following the reasons, suggest that if the insured actually elected to receive ACV under the policy, the insured could be considered as having 180 days from the date the insurer paid the ACV money, to submit a claim for RC money?
After all, as I think Jim also pointed out in one of his examples, if the carrier does not acknowledge its obligation to pay any money until 160 or 170 days after a loss, how would a court ever consider it fair or equitable for the carrier to rely on the wording of the 180 day clause; leaving the insured only 10 or 20 days or less in which to replace items for the purposes of advancing an RC claim?
"319107 Alberta Ltd v New Hampshire Insurance", is a good reported example of the court insisting upon what it considers equitable, between the carrier and the insured.
The legal summary of this case included, 'the court ruled that an insurer can not rely on an insured's lack of due diligence in replacing items if the insurer fails to co-operate with an insured to determine say, whether a proposed replacement would qualify under the RC provision. This case serves as a prime example of the courts unwillingness to allow insurers to rely upon the strict wording of the RC provisions, where it simply considers it inequitable to allow the insurers to do so.
However, an opposite ruling case was found, where the insurer did immediately acknowledge its obligation under the policy. "Foxcraft v Economical Insurance", an Appeal Court reported decision dealt with a fact situation where the insurer had made a prompt ACV payment for damaged contents of $10,000. The insured placed the money in an interest bearing bank account, and only replaced one item, a table. The insured then proceeded to bring action against the insurer for RC - presumably after some form of request was made for RC and denied. The Appeal Court held that the failure of the insured to make an effort to replace his goods constituted a failure which prevented him from now electing to receive RC money.
In "Dimitry v Royal Insurance", this reported case illustrated that the intentions of the insured must be examined in order to determine whether the RC money should be awarded. The plaintiff claim failed, as noted in the legal summary, 'where there is no evidence that an insured actually intended or desired to replace items damaged, the courts will not award RC money. It is as well our considered opinion, that the courts will be disposed to consider the insured's reasonable expectations favorably, when confronted with cases in which insurers have denied coverage on the basis that replacement was not effected within 180 days from the loss'.
So JWill, what does all this say to your specific question in your opening post? I think it says - No, the carrier is not correct - the scenario you presented as the company refusing to now pay additional liability a short time after the expiry of the policy 180 day clause is wrong.
What I reviewed is only a small bit of the available case law on this issue. What does that say? Perhaps carriers best do some due diligence on their 'best practices' claims guidelines concerning their application of this provision; and right from the start with regards to under what conditions they disburse the ACV money.
What does this all mean to the rank and file adjuster? To me clearly, there is little continuity among carriers on the issue, and each adjuster when confronted with having to say anything on the topic to an insured, best be real sure to make sure they are singing the very same song as the carrier on the other end of that insured's contract. |
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Does Property Have To Be Replaced In 180 Days?
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