Railroad Avenue Properties, LLC ("Railroad Avenue") sued Acadia Insurance Company ("Acadia") for breach of contract. The dispute concerned the amount of insurance coverage available under a commercial property insurance policy for damages caused by a fire at 11 Railroad Avenue. I Railroad Avenue Properties, LLC v. Acadia Insurance Company, CA no. 19-40155-TSH, United States District Court, D. Massachusetts (September 29, 2021), the court ruled Acadia & # 39 ;s Motion for Summary Judg.
Acadia insured the property and adjusted and paid for damages resulting from the fire loss. Acadia argued that it had no obligation to pay Railroad Avenue for the difference between the exchange and the actual cash value of any property loss or damage because the property was not repaired or replaced within two years of the loss, as stated in the policy  RELEVANT POLICY PROVISIONS4  The policy states "We will not pay on a compensation cost basis for any loss or damage: (1) until the lost or damaged property has actually been repaired or replaced: (a) in the premises described; or (b) elsewhere in the Commonwealth of Massachusetts; and (2) Unless repairs or replacements are made within a reasonable time, but not more than 2 years after the loss or damage. " including loss due to fire.On November 18, 2017, the property suffered serious damage from a fire.In view of the damage extent, the building was deemed to be a total loss and would require a rebuild.
Acadia was notified immediately. The fire loss was caused by an unidentified arsonist. Railroad's public adjuster agreed with Acadia's estimate to replace the structure but reserved the right to seek an additional $ 25,000 in ordinance or legal coverage arising from the expected need to install sprinklers when the building was rebuilt.
Following the fire, Railroad hired a contractor, RGN Construction Management, LLC, ("RGN") to design and build a replacement building.
On February 22, 2018, Acadia received a certificate of loss from Railroad Avenue. The loss proof showed that: (a) the replacement cost value of the repair (excluding the potential code requirement of $ 25,000) was $ 808,468.13; (b) the actual cash value was $ 610,928.46; and (c) after deduction of the deductible amount ($ 10,000) and the advance payment ($ 25,000), the actual net worth was $ 575,539.67.
Christopher Redmond inspected the property on September 27, 2018. Redmond observed that the building in question had been demolished had all debris been removed from the premises, but there was no indication that any reconstruction had begun. Railroad Avenue requested a six-month extension on November 5, 2019, approximately two weeks before the two-year anniversary of the fire, stating that construction would be completed in four months. Acadia did not grant an extension of the two-year redevelopment requirements under the policy. the benefit of that party. When the moving party shows the absence of any disputed essential fact, the burden shifts to the non-mobile party to put at least one essential fact into dispute.
Under Massachusetts law, the interpretation of an insurance contract is a matter of law.
Railroad Avenue claims that it was entitled to the cost of repairing and / or replacing the property and seeks to recover the difference between the cost of replacement and the ACV. Railroad Avenue also claims that it is entitled to payment under the regulation or statutory provision in the policy which gives it the right to reimburse increased costs incurred in connection with the repair and replacement of damaged property to get the repaired / replaced property in minimum conformity with the building, zoning or land use ordinance or law (here, a sprinkler system).
Acadia claims that the clear and unambiguous language of the policy stipulates that Railroad Avenue is not entitled to compensation costs or ordinance costs unless the damaged property is repaired or replaced within two years from the date of the loss. As it is common ground that Railroad Avenue did not repair or replace the property within two years from the date of the loss, Acadia claims that Railroad Avenue was not entitled to recover compensation costs or ammunition costs.
The clear language of the policy states that Railroad Avenue is not entitled to recover compensation or prescription costs under the insurance until the damaged property has actually been repaired or replaced. In addition, such repairs or exchanges would be made as soon as reasonably possible and must have been completed within two years from the date of loss.
The requirement that the damaged property be repaired or replaced is a condition for the insured to be entitled to replacement cost and appointment cost reimbursement. That is, the insurer is not obliged to pay either compensation or regulation unless and until the insured has met all the necessary conditions, i.e. repaired or replaced the damaged property. If the time when the condition must be met ceases to be unfulfilled, the debtor's obligation is fulfilled unless the debtor apologizes that the condition is met.
only available if Railroad Avenue performs such repairs or replacements "within a reasonable time, but not more than 2 years after the loss or damage."
Railroad Avenue claims that the condition was met because it intended to build if, was in the process of rebuilding, others caused delays, and since it had performed construction contract within two years after the loss,
the execution of the precedent was not excused. Therefore, Railroad Avenue is left to claim that Acadia has breached its obligations under the policy and prevented the precedent from being met. In addition, the burden of proof lies on Railroad Avenue to establish that Acadia prevented it from fulfilling the condition that the damaged property be repaired and replaced within two years of the loss . The indisputable evidence shows that Acadia acted immediately when investigating the loss, provided its estimate and paid the claim. The defendant's request for a summary judgment was upheld.
The district court applied the clear and unambiguous language of the policy. The insured could not repair. In fact, all they did in the two years after the loss was tear down the fire-damaged structure. They requested an extension of the time limit only two weeks before it expired, which request was rejected and the precedent condition applied. Insurance is a contract and if its terms and conditions are clear and unambiguous, they must be applied if they are not excused.
© 2021 – Barry Zalma
Barry Zalma, Esq. , handling of insurance claims, bad faith and insurance fraud almost equally for insurers and policyholders.
He also acts as an arbitrator or mediator for insurance-related disputes. He has practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry.
He is available at http://www.zalma.com and email@example.com. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award. For the past 53 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claims staff to become professionals in insurance claims.
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