The answer from most readers to the question asked is “Of course Chip! Just because a property is damaged does not mean that the policyholder cannot sell the damaged property. “Well, not so fast my nerdy insurance coverage and claiming friends.
I was listening to a presentation by attorneys Frank Winston and Jonathan Lerner as they described how they represented a policyholder whose plumber threw out a piece of plumbing after a loss. The insurer refused to pay because the policyholder did not protect the insurer's subrogation rights. The part that the plumber threw in the trash would potentially have proven a subrogation case.
I will discuss that case and its consequences in a later post, but it led me to examine this clause that is often found in real estate insurance: [1
While researching this clause, I came across 914 2nd Pub, Inc. v. QBE Insurance Company . 1 This case in New York 2017 considered that a property insurer was not liable to pay a claim arising from structural damage caused by excavation work. While there was coverage for the excavation work and the insurance company made "advance payments", the insured sold the property to the owner of the adjacent property. In doing so, the court ruled that the sale of the property violated the terms of the insurance policy, which required them to "do whatever was necessary to insure" and "do nothing after loss to impair" the insurer's subrogation rights. The court also found that the sale of the building violated the insured's obligation to cooperate with the insurer in the investigation of the claim. The court ruled that the adjacent property owner, who now owns the building, demolished it and left nothing for the insurer to investigate.
There are lessons from the two cases that public adjusters, insurance agents and restoration contractors can learn from these cases. First get permission – and preferably direction – from the insurer to throw rubbish after a loss. Second, if the property is to change ownership or if it will be substantially altered, notify this in writing, offer to make the property available for inspection and attempt to agree that the property can be sold or altered from the carrier.
Finally, stop using the term "advance payments". When an insurer pays part of the loss before making its final payment, it pays what it owes and makes "installments". The insurer should always, after an investigation confirming the coverage, pay immediately for the benefits owed by the police, even if it is for the "partial" amounts owed. The insurer does not do a service by paying these amounts – nothing is "advanced". Insurance managers and their managers who work for the insurer should try to get the money out of the insurance company's cash register and into their hands so that the policyholder customer can use it as soon as possible. This is what the policyholder paid for before a loss ever occurred.
Thought For The Day
Everyone makes a living by selling something.
– Robert Louis Stevenson  ___________________________________
1 914 2nd Pub, Inc. v. QBE Ins. Co. 146 AD 3d 415 (N.Y. App. Div. 2017).