You answered a similar query from me several months back. Specifically, that question asked whether the ACV of building repairs needed to be exceeded prior to making claim for depreciation holdback funds. You opined "there is nothing in the policy that states that the property must be replaced before the ordinance and law additional coverage is to be provided; all the policy says is that the ordinance and law amount must be incurred (emphasis added), not that the repairs must be completed".
My question now involves the highlighted words, "must be incurred". The insured's general contractor made several of the code related repairs (primarily electrical) and has invoiced the insured for this portion of the code work. The insurance company has taken the position that they will not release those funds until the insured provides a cancelled check for this expense. However, the insured does not have the funds necessary to pay the general contractor until the carrier releases those funds (a classic "catch-22").
I thought that this issue had been resolved many years ago. I believed that to qualify for the release of code and/or building depreciation holdback funds, it was sufficient that the work had been performed and the monies owed. That standard certainly comports with the term "incurred" and has been the "standard operating procedure" with virtually every other carrier in the past. This insurer previously accepted that procedure but now is requiring a cancelled check to release these funds.
What are your thoughts on this topic?
Massachusetts Subscriber
When words aren't defined in the policy, courts turn to a standard desk reference, since that's what an insured has access to. Merriam-Webster Online defines incur as: to become liable or subject to : bring down upon oneself. To further work through this, liable is defined as: obligated according to law or equity (see equity sense 3) : responsible Both owners are liable for the debts incurred by the business.
So to incur an amount is to owe an amount - it is not to have already made payment, because then you no longer owe anything. When you incur something, you owe something to a vendor, provider, business, etc. The insured owes funds to the provider for the work done - the insurer should pay those funds from the bill provided. They could make the check to the insured and the provider if there is concern that the insured for whatever reason wouldn't pay the contractor. The work has been done, the expense has been incurred, the money should be paid.