In addition to physical damage caused by an insured hazard, there may be significant costs for an insured person to remove debris after a loss. Most property insurances include debris removal payments as an "additional coverage." If the sum of the costs of garbage removal plus the amount of direct physical loss exceeds the policy limit, the policy provides an additional amount for garbage removal.
In a recent decision 1 a New York federal court held that the dismantling of a building after suffering a covered loss constitutes "debris removal" under an insurance policy. In that case, a fire caused damage to the insured's multi-storey apartment. The insurer paid the insured the entire insurance limit for damage to the building. The insurer also paid the insured approximately $ 340,000 for garbage removal, which consisted of the cost of removing and disposing of materials that had been removed and / or dismantled from the building, as well as the cost of inspection work.
According to policy, there was an additional limit of up to $ 500,000 for "debris removal" that was triggered if the sum of the damage to the building and the debris removal cost exceeded the insurance limit. The insured claimed that it was entitled to the remaining balance of the "debris removal" limit because it was necessary to tear down and remove debris still attached to the fire-damaged building. However, the insurer maintained the cost of physically unloading material from a damaged building that consisted of "demolition costs" rather than garbage removal and therefore could not be included or paid for the separate additional garbage removal limit.
The Court found that a reasonable interpretation of the terms of the policy clearly leads to the conclusion that the dismantling of the destroyed building constituted "Removal of debris". The Court noted that it logically follows that the "necessary and reasonable clause" in the "Debris Removal" provision deals with the fact that debris often cannot be removed without the cost of first extracting it from the building. The court refused to comply with a previous New Jersey federal court ruling that "garbage removal costs" did not include the costs of demolishing the damaged property, but were limited to the costs of removing debris from the property and transporting it away from the damaged properties.