An insured must accept actual cash value for its loss rather than replacement cost value where it failed to comply with a notice provision in its insurance policy, a federal district court in Oklahoma has ruled.
The Case
RLI Insurance Company provided an insurance policy to cover property now owned by A-Line T.D.S. While the coverage was in place, the property was damaged by hail on September 21, 2014 and again on May 21, 2015.
On December 10, 2015, RLI Insurance received notice that coverage was being sought under the policy for the hail damage.
The parties could not agree on the cost to correct the damage and the matter was referred to an umpire under the terms of the policy. The umpire determined both an actual cash value (as measured by the replacement cost less depreciation) as well as the permissible replacement cost.
After that determination, RLI Insurance tendered payment to A-Line in the amount of the actual cash value.
After repairing the roof, A-Line sought to recover the additional amount of replacement value.
RLI Insurance denied the replacement claim, arguing that it had paid all amounts required under the policy.
RLI Insurance filed an action against A-Line, and the parties moved for summary judgment.
The RLI Insurance Policy
The RLI Insurance policy's "180-day clause" provided:
"You" may make a claim for actual cash value before repair or replacement takes place, and later for the replacement cost if "you" notify "us" of "your" intent within 180 days after the loss.The District Court's Decision
The district court granted RLI Insurance's motion.
In its decision, the district court explained that, under the 180-day clause, A-Line ("you") could make a request for actual cash value ("ACV") and then later recover any additional costs of repair or replacement only if A-Line ("you") notified RLI Insurance ("us") of A-Line's ("your") intent to do so within 180 days of the loss. If A-Line did not comply with this provision, its options either were to accept ACV as full payment for the loss, or bear the full expense of repair or replacement and seek reimbursement from RLI Insurance after the repairs were complete.
Here, the district court found, A-Line's first notice to RLI Insurance had occurred more than 200 days after the loss. Further, the district court continued, A-Line requested that RLI Insurance pay the ACV for the roof and RLI Insurance did so before repairs were complete.
Thus, the district court concluded, under the "clear and unambiguous" terms of the 180-day clause, RLI Insurance's obligation under the policy was limited to ACV.
Because RLI Insurance had tendered that amount, the district court concluded, it had no further obligation under the insurance contract.