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Question: I have a claim in Illinois and the insured has an HO-0005. The public adjuster is stating since we can't match the siding we owe for the whole re-siding of the home regardless of damage. They are referring to page 14 of 22 where it states:
D. Loss To A Pair Or Set
In case of loss to a pair or set we may elect to:
1. Repair or replace any part to restore the pair or set to its value before the loss; or
2. Pay the difference between actual cash value of the property before and after the loss.
Our interpretation in the past is this has to do with personal property and not siding, roofing, gutters, etc. I was wondering if you have a previous opinion on this or could give one for our future reference? Thank you for your help on this matter.
— Illinois Subscriber
Answer: Matching is one of the most discussed parts of homeowners coverage. Our opinion has always been that if the policy is replacement cost, the carrier owes to restore the insured to what he had pre-loss, and that is matching siding. Otherwise, the insured has not been property indemnified, which is the point of coverage. You are correct in that the pair or set clause refers to personal property and not parts of the dwelling itself. The siding is siding, and not a set that can be broken up and moved around.
Coverage for non-damaged hotel rooms?
Question: Our insured is a hotel that suffered water damage to some of its rooms. The insured is a franchisee and has an agreement with the hotel chain that requires replacement of damaged decor with current decor; all of the rooms on the same floor must be updated to the current decor. The hotel has a replacement cost policy, but the other furniture was not damaged. The carrier's position is that it is not responsible for the non-damaged rooms. What should the carrier pay?
— California Subscriber
Answer: This scenario differs from the matching issue, about which we often receive questions. The carrier is correct in not paying to bring all of the rooms up to the current decor. There is no loss or damage to the other rooms, and while the rooms would not match each other, this is not something that would be apparent to guests. Nothing in the self-contained rooms themselves would be mismatched.
If the chain requires franchisees to maintain a uniform look to all rooms on a floor, that falls more under the cost of doing business. If the rooms themselves are not damaged, it is not an insurance matter to bring them up to speed with the other rooms.
If items in the rooms themselves are not matched, that would be a different matter. For instance, if a headboard needed to be replaced on one bed but a matching one could not be found, then both headboards should be replaced.
Matching historic details
Question: On a HO Deluxe replacement cost policy, if there exists an inability to match the existing item on the structure is the insurance company then obligated to replace all items (including the undamaged ones) so that all items match in appearance as they did prior to the loss?
For example: On this claim one-third of the windows are damaged. However, because of the age of the house and style of construction, matching windows are no longer available. If that one-third is replaced with a newer style, the windows will be different and cause an aesthetic problem as to the appearance of the house.
Please advise as to what the insurance company is responsible for in this instance.
— Indiana Subscriber
Answer: This is one of the big points of disagreement within the industry and courts. In Holloway v. Liberty Mutual Fire Ins. Co. 290 So. 2d 791 (La. Ct. App 1974), the court ruled that where replacement of undamaged property was necessary to achieve an aesthetically pleasing repair and prevent devaluation of the property, then an entire replacement is in order.
On the other hand, Weiler v. Union Ins. Co. 2006 WL 2403935 (not designated for permanent publication) stated that when hail damaged one side of the insured's house and the replacement siding could not be matched to the siding on the other sides, the court ruled that only the damaged side should be replaced, and that the policy was clear on that language.
Many states now have fair claim settlement practice regulations in place, so you may want to check state statutes. FC&S has long maintained that the insured is not restored unless everything matches, but with court cases falling on both sides of this, we advise that you check with the state in question.
Ordinance or law and replacement cost
Question: We have a claim in Rhode Island involving a tree on the insured property that fell and damaged a very small portion of siding on the risk. The siding is over 30 years old and no longer available. Rhode Island regulations require we replace all of the siding on the entire house. The policy limits coverage due to ordinance and law to 10 percent. Would these limits apply in this case?
— Rhode Island Subscriber
Answer: You have an interesting situation. While Rhode Island statutes state that all the siding should be replaced, and that is an ordinance or law, it does not necessarily mean that only the ordinance or law provision applies. The provision is for the increased costs incurred due to the ordinance. However, if this is a replacement cost policy, our interpretation is that all the siding should be replaced, as otherwise you have not restored the insured to his preloss condition, that of having matching siding. Therefore, the ordinance and law provisions should not be invoked because this is how the claim should be settled to begin with, outside of any regulations. The regulation itself agrees with this logic, as follows:
A. Replacement Cost
When the insurance policy provides for the adjustment and settlement of first party claimant losses based on replacement cost, the following shall apply:
(1) When a loss requires repair or replacement of an item or part, any consequential physical damage incurred in making such repair or replacement not otherwise excluded by the policy, shall be included in the loss. The first party claimant shall not have to pay for betterment nor any other cost except for the applicable deductible.
(2) When a loss requires replacement of items and the replaced items do not match in quality, color or size, the insurer shall replace all such items so as to conform to a reasonably uniform appearance. This applies to interior and exterior losses. The first party claimant shall not bear any cost over the applicable deductible, if any.
(R.I. Admin. Code 11-5-73:9)
Note the last sentence: The state of Rhode Island did not intend for this regulation to allow carriers to invoke ordinance or law restrictions and leave insured's facing potentially extra expenses. The loss should be covered in full.
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