Options for Settling Fire Loss

November 11, 2013

I am handling a fire loss at a restaurant, which appears to be underinsured. The policy form is a CP 00 10, and the loss is subject to replacement cost coverage. I thought that the insured could elect to settle the loss at actual cash value rather than bearing the coinsurance penalty. I have looked through the policy form and cannot find where it indicates that. Am I thinking of another policy form or does the CP 00 10 provide that option and I am just not locating it in the policy form?

Florida Subscriber

Yes, section G.3.c of the CP 00 10, in the optional coverages section, gives the insured the option of making a claim for loss or damage on an actual cash value (ACV) basis. This does not eliminate the application of the coinsurance clause, but the penalty, if any, is calculated on the ACV instead of the replacement cost. So, it sometimes works out to the insured's advantage to take the ACV amount over replacement cost.