Guaranteed Replacement Cost and Repair or Replacement

February 4, 2014

The policyholder has the guaranteed replacement cost endorsement (GRC) on her policy. The loss amounts cannot be agreed upon and as a result, the policyholder invokes the appraisal clause. As fate would have it, the policyholder's appraiser and the carrier's appraiser both agree on the ACV amounts and the RC amounts.

However, the ACV amount awarded/agreed upon in appraisal is more than the ACV limit on the policy. The policyholder wants the additional ACV amounts awarded in appraisal to be paid under the GRC endorsement. The carrier has denied her request and contends that GRC is not paid until actual repair or replacement takes place.

The GRC endorsement states, in part, that the endorsement will apply “provided you elect to repair or replace.”

Is the carrier correct in refusing payment until such time “repair or replacement” has begun or been completed?

Also, what must the policyholder do to show she has “elected” to repair or replace the property? Is a mere declaration or notice of intent to do so sufficient, or are more definitive actions required (i.e. beginning work, signing contracts with vendors, contractors, etc.)?

Ohio Subscriber

The endorsement states in B. 3. that the carrier will pay no more than the actual cash value of the damage until actual repair or replacement is complete. This section applies when a loss has occurred; the section stating that “the provisions of this endorsement apply after a loss, provided you elect to repair or replace…” is a general statement and is not the actual loss settlement provision; B.3. is. The carrier is correct, GRC is not paid until repair or replacement is complete.