Insuring a Duplex

October 4, 2012

We are experiencing situations involving duplex homes where coverage is being requested under a HO 2 or HO 3 form. When the applicant owns both sides of the duplex–one owner occupied and the other side tenant occupied—we develop replacement cost based upon the whole structure. The problem we are experiencing is when an applicant owns one side of the duplex and expects the replacement cost to be based on the square footage and features of their particular unit only. Keeping in mind in our area there is no fire wall between the two units. We currently take the stance the replacement cost must be based on the entire structure. My question is what is the proper way to rate a duplex given these circumstances?

Michigan Subscriber

If an insured owns only half of the structure and another entity owns the other half, base the cost on the owned half only. The insured has no insurable interest in the other half of the dwelling. Yes, it makes claim settlement very complicated, but premium cannot be based on property an insured does not own, even though it is attached.