Blog Archives

Fifth Circuit: Total Loss Amount Caps Insured’s Recovery Even Under Multiple Policies Covering Different Risks

We don’t usually cover cases dealing with Standard Flood Insurance Policies (SFIPs) issued pursuant to the National Flood Insurance Program, but a Texas case decided by the federal Court of Appeals earlier this month addresses a broader issue – where the policyholder has multiple policies covering the same property against mutually exclusive risks, such as an SFIP covering flood and a homeowner’s policy covering wind, can his or her recovery ever exceed the total loss amount.  In Lowery v. Fidelity Nat’l. Prop. & Cas. Ins. Co., 2015 WL 6848323, 2015 U.S. App. LEXIS 19443 (5th Cir., Nov. 6, 2015), a unanimous panel of the Fifth Circuit answered no, in reliance on the insurance principle that bars a double recovery. The

Tagged with: ,
Posted in Actual Cash Value, Depreciation, Flood, Homeowners Coverage, Hurricane, Hurricane Ike, Replacement Cost, Valuation, Water, Windstorm

Kansas Court Sanctions Depreciation of Labor to Determine Actual Cash Value

Two of our previous posts reported that Arkansas and Kentucky courts have now barred insurers from depreciating labor—as opposed to materials—when arriving at actual cash value (ACV).  Last Wednesday in Graves v. American Family Mut. Ins. Co., 2015 WL 4478468, 2015 U.S. Dist. LEXIS 95127 (D.Kan., Jul. 22, 2015), a federal court in Kansas reached the opposite result in a case of first impression in that state, holding that ACV entails depreciating both materials and labor. A storm damaged the insured’s roof in December 2013, and she made claim under her homeowners policy.  The contract of insurance called for payment on an ACV basis unless the damage had been completely repaired or replaced, and it defined ACV as “[t]he amount

Tagged with: ,
Posted in Actual Cash Value, Depreciation, Homeowners Coverage, Loss Adjustment, Replacement Cost

Missouri Court: “Equivalent” Requires that Replacement Siding be Both Equal in Value and Virtually Identical

In December, we published a post about a Minnesota Supreme Court case that held that under a replacement cost policy, the phrase “comparable material and quality” meant that all of the siding on 20 buildings had to be replaced to avoid a color mismatch, even though less than 2% had actually been damaged by hail.  According to the court, that was necessary to ensure a “reasonable” color match.  Last week, a unanimous panel of Missouri’s intermediate level appellate court reached a similar conclusion under a replacement cost contract of insurance that required replacement “for equivalent construction and use.”  In Alessi v. Mid-Century Ins. Co., 2015 WL 3874799, 2015 Mo.App. LEXIS 679 (Mo.App., Jun. 23, 2015), the judges held that the

Tagged with: , ,
Posted in Direct Physical Loss or Damage, Hailstorm, Replacement Cost, Valuation

A New Twist in the California Debate Over Allegedly Inadequate Replacement Cost Limits in Homeowners’ Policies

The April 8, 2015 decision of the California Court of Appeals in Ass’n. of Cal. Insurance Companies v. Jones, 2015 WL 1569669, 2015 Cal. App. LEXIS 298 (Cal.Ct.App., Apr. 8, 2015) held that the state’s Insurance Commissioner overstepped his authority in attempting to regulate the content and format of replacement cost estimates under homeowners’ insurance policies.  Although the legislature may choose to provide such a definition, it has not done so.  While the sufficiency of policy limits remains a concern in the insurance industry and there are other valid statutes in effect that address replacement cost, pending a potential appeal of the decision the Regulation at issue, Title 10, Cal. Code of Regulations, §2695.183, is therefore no longer effective. Fire

Tagged with: , ,
Posted in Loss Adjustment, Replacement Cost, Unfair Insurance Practices

Kentucky Court: Depreciating Labor to Get Actual Cash Value Is Like Making the Insured Use a Very Old Roofer With Debilitating Arthritis to Repair the Roof

Surprisingly few states have addressed the question of whether an insurer can depreciate labor – as opposed to materials – to arrive at actual cash value (ACV).  Two weeks ago in Bailey v. State Farm Fire & Cas. Co., 2015 WL 1401640, 2015 U.S. Dist. LEXIS 37568 (E.D.Ky., Mar. 25, 2015), a federal court in Kentucky held that it was impermissible to do so, quoting an Oklahoma opinion that analogized such a step to requiring the policyholder to use “a very old roofer with debilitating arthritis who can barely climb a ladder or hammer a nail” to effect repairs to a roof. The case was a proposed class action by a West Liberty, Kentucky dentist whose office was damaged by

Tagged with: ,
Posted in Actual Cash Value, Depreciation, Fire, Replacement Cost, Tornado

Minnesota Holds “Comparable Material and Quality” Requires Wholesale Replacement Where Undamaged Siding Is Faded

Matching issues are frequently problematic when storms damage only portions of an insured structure’s exterior and it proves impossible to replace the damaged sections with material that is an exact match for the rest of the building’s roof or siding.  Earlier this month, the Minnesota Supreme Court held that the phrase “comparable material and quality” means material that is suitable for matching; with respect to color, a reasonable match – not an identical match – is all that is required.  In Cedar Bluff Townhome Condominium Ass’n. v. American Family Mut. Ins. Co., – N.W.2d – , 2014 WL 7156914, 2014 Minn. LEXIS 661 (Minn., Dec. 17, 2014), however, the court held that that meant that all of the siding on

Tagged with: , ,
Posted in Direct Physical Loss or Damage, Hailstorm, Replacement Cost, Valuation

New York’s Highest Court Holds a Two-Year Suit Limitation Provision Can Be Unenforceable

In answer to a question certified by the Second Circuit, New York Court of Appeals has held that a two-year suit limitation provision in a property insurance policy – which the court acknowledged was not an “inherently unreasonable” provision – was unenforceable under the factual circumstances of the case before it.  Executive Plaza, LLC v. Peerless Ins. Co., — N.Y.3d –, 2014 WL 551251, 2014 N.Y. LEXIS 165 (N.Y. Feb. 13, 2014).  In doing so, the court held for the first time that such a limitation period may be rendered unreasonable by what it called an inappropriate accrual date. Peerless Insurance Company issued a $1 million fire insurance policy to Executive Plaza.  This gave Executive the choice to select payment

Tagged with:
Posted in Replacement Cost, Suit Limitation

Saving Green by Going Green

As Kermit the Frog famously said: “It’s not easy being green.”  When it comes to property insurance, Kermit is only partially correct.  Although green buildings and commercial construction projects pose unique risks that are likely not covered by traditional commercial property policies, the insurance industry has become increasingly responsive to this issue by creating and offering products specifically tailored for green risks. Just What is Green Construction, Anyway? Green construction (also known as a “green building” or a “sustainable building”) is an environmentally responsible and resource efficient structure and process.  In other words, it’s not just the building itself that’s “green” – it’s the entire construction and using process. The objective of green construction is to reduce the overall impact

Posted in Business Interuption, Green Insurance, Replacement Cost
About The Property Insurance Law Observer
For more than four decades, Cozen O’Connor has represented all types of property insurers in jurisdictions throughout the United States, and it is dedicated to keeping its clients abreast of developments that impact the insurance industry. The Property Insurance Law Observer will survey court decisions, enacted or proposed legislation, and regulatory activities from all 50 states. We will also include commentary on current issues and developing trends of interest to first-party insurers.
Stay Connected

Email:

Topics
Cozen O’Connor Blogs