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Can you get paid more on your insurance claim when prices rise after loss? | Real estate insurance coverage law blog

Timber prices and other construction costs have soared! Some of these prices have fallen recently. When do you measure the loss that the insurance company must pay?

We have been inundated with these "what do you do when prices get out of control?" questions. It happens after almost every major natural disaster we get involved. When hundreds of buildings and homes are destroyed or market forces create a rapid price change, what is the correct measure of loss to be paid? What date do you measure the loss?

We were recently sent a FC&S Bulletin which provides an insurance industry with answers to these questions, which I suggest policyholders, public adjusters and contractors copy and paste when dealing with an insurance company: 1

[19659004] Hi, my question is when it comes to demanding payments. We had hail claims in May and June 2020 and have paid ACV for the damage. We have restraint for compensation cost recovery HO-3 policy form HO 00 03 05 11. With the dramatic increase in building materials and labor, are we owed the extra costs or the cost of the loss? Some receivables have more than double the cost. Thanks!
—South Dakota Subscriber

The policy states that once the repair is complete, it will not pay more than at least the limits of the policy, the cost of repairing or replacing with similar kind and quality, or the amount actually spent on repairing or replacing damaged property. (emphasis added). This indicates that regardless of the cost of the actual repair time is not the date of the loss, is what is paid out. Nothing in the policy links payment to costs incurred in the loss; payment is made when it is made, to the running costs then.

Who are the FC&S Bulletins ? I first started reading the National Underwriter FC&S Bulletins as a lawyer in 1981. My mentor, Paul Butler, was emphatic about doing full research and that included looking for insurance industry discussions about what industry experts thought their policy meant rather than just reading case law written by judges. who were not experts in insurance law. Here is an agent's discussion of the National Underwriter FC&S bulletins: 2

The Fire, Casualty & Surety Bulletins (FC&S) service was started in 1929 by Edward J. Wolgemuth, founder of The National Underwriter Company. FC&S still exists today as the leading information service on properties and damages.

For more than 85 years, FC&S has provided objective information – in particular regarding the interpretation of insurance – to all types of insurance staff.

The entire printing service consists of eight volumes: Fire & Marine, Personal Lines, Casualty & Bail, Umbrella, Director & Officers Liability, Guide to Policies I and II, and Companies & Coverages.

Current FC&S Online allows subscribers to download over 5,000 documents through a state-of-the-art content management system and graphical user interface. Today's FC&S Online provides information and analysis to the desks of thousands of insurance staff worldwide.

Public adjusters, insurance agents and everyone in the insurance claims industry should subscribe to the FC&S Bulletins if they want to keep up and be the best at what they do.

We will have more on this topic in the future. The question of which date to measure a loss is much more complicated than this quick answer. But this can help in the meantime.

Thought for the day

It's hard to imagine a more stupid or dangerous way to make decisions than by putting those decisions in the hands of people who pay nothing price for being wrong.
—Thomas Sowell
1 Christine Barlow, CPCU. This week's questions and answers about insurance: loss settlement and increased costs . August 9, 2021. Available at https://www.nuco.com/fcs/2021/08/09/insurance-qa-of-the-week-loss-settlement-and-increased-costs/ (subscription). (Thanks to public adjuster Larry Berman for forwarding this bulletin).
2 https://www.piaindiana.com/fcs.html

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