We have an insured with a dwelling policy (DP 00 01 12 02) with a coverage A limit of $15,000 and a deductible of $500. The house recently suffered a total loss from a fire. The adjuster has set the amount of the loss at $43,000.

The insurer is offering to pay $14,500 (the policy limit less the deductible). We believe that they owe the entire $15,000.

Who is correct?

Ohio Subscriber

A property deductible applies to the total amount of the loss; not to the amount of insurance available. After the deductible is applied, then other factors are considered such as any special sub-limits or the limit of liability. The policy states that subject to the policy limits, what is paid is only that part of the total of all loss payable that exceeds the deductible. 

In the case you describe, the loss was $43,000. Application of the $500 deductible leaves a total loss of $42,500. However, the insurer's liability is limited to the coverage A amount, $15,000. The policy applies the deductible to the limits of the policy. Therefore, the carrier is correct. 

Editor's Note: 

A subscriber noticed a discrepancy between this answer and answers to similar questions. We have revised this answer to be consistent with the overall FC&S position on this issue.