Q

Our question concerns replacement cost coverage for awnings. In the ISO commercial property form CP 00 10 04 02 it says under the valuation condition clause b. that “If the Limit of Insurance for Building satisfies the Additional Condition, Coinsurance, and the cost to repair or replace the damaged building property is $2,500 or less, we will pay the cost of building repairs or replacement.” It goes on to say that the provision does not apply to (1) Awnings or floor coverings; (2) Appliances for refrigerating, ventilating, cooking, dishwashing, or laundering; or (3) Outdoor equipment or furniture.

Does this mean that the replacement cost option does not apply to awnings?

South Carolina Subscriber

A

The replacement cost option does apply to awnings.

The valuation clause establishes that the policy will value covered property at actual cash value, with a number of exceptions, one of which is exception “b” you referred to. It says that if a loss is less than $2,500, it will be covered at replacement cost automatically; but the exception to the actual cash value does not apply to awnings, among other items. Thus, in an actual cash value policy, awning losses of under $2,500 are valued at actual cash value, as are awning losses of over $2,500.

When the replacement cost option is selected, the policy says that the words “replacement cost” are substituted for the words “actual cash value” in the valuation clause. That makes exception “b” to the valuation clause irrelevant. If all losses are valued at replacement cost, there is no need to select losses of $2,500 and under and state that they are valued at replacement cost. If exception “b” is irrelevant, it is meaningless to say that the replacement cost coverage it grants does not apply to awnings, which are already covered at replacement cost by selection of the replacement cost option.