That section starts on page 26 of 31 of the policy and is page 80 of 158 of the attached PDF. It states that the valuation is determined based on replacement cost at the time of the loss. It further states "The replacement cost is limited to the cost of repair or replacement with similar materials on the same site and used for the same purpose. The payment will not exceed the amount "you" spend to repair or replace the damaged or destroyed property.

In our opinion this is interpreted as the valuation for this deductible is based on the cost of the repair/replacement of the damaged property at 1% of those costs. Since we are dealing with a loss in excess of 1.9 million dollars, it is a significant deductible by comparison to the others stated in the policy.

The carrier is trying to interpret the deductible as 1% of the building value prior to the loss. They have calculated a deductible in excess of $400,000.00. The difference is significant, and we feel the language is ambiguous and misleading. If the deductible was as straight forward as they are implying, why not just have it as a stated amount as in other areas for other causes of loss? Why do they have a separate form/endorsement that changes policy language and interpretation. Why direct the insured to the valuation portion of the policy where it speaks to "the cost of repair or replacement with similar materials? Given that it is ambiguous at best, should not the interpretation favor the insured?

Ohio Subscriber

It would appear from the information you provided that the damaged property is subject to the windstorm or hail deductible, and not the all other perils deductible. If that is not the case, and windstorm or hail was not the cause of the damage, then we would revise our answer accordingly.

The windstorm or hail deductible endorsement is introduced by stating that all other "terms" of the policy apply, which is a defined term. "Terms" are all provisions, limitations, exclusions, conditions and definitions that apply.

Next, the windstorm or hail deductible replaces How Much We Pay with the windstorm or hail deductible shown in the schedule. Since it replaces that section, then anything otherwise shown in the policy under How Much We Pay is replaced with and is subject to the Windstorm or Hail Deductible that applies to the loss. Under 4. Percentage Deductible of that endorsement, it is stated that the deductible amount is determined by applying the percentage indicated on the schedule to the value of the covered property that is involved in the loss. This makes it clear that the windstorm or hail deductible percentage is to be applied to the value of the covered property that sustained the "loss". So for example, if there are five buildings that sustained "loss" from windstorm or hail damage, then the value of those covered buildings would be summed and the deductible percentage applied to that summed value, regardless of the amount of damage each of those buildings sustained.

Then, we look at paragraph 4.b. of the windstorm or hail deductible endorsement, which states that the value of covered property at time of loss or damage is determined in accordance with the provisions under the Valuation section of the policy. Since the Valuation provisions were not replaced by the windstorm or hail deductible endorsement, those provisions will apply and are part of the "terms" of the policy. The valuation section does not reference the deductible and as such it does not interfere with the deductible, nor does it change the application of the deductible. The valuation provisions only apply to the policy with respect to which valuation methods are to be used for certain types of property covered under the policy, i.e., replacement cost, actual cash value, market value, etc.

We do not see these separate policy provisions as being ambiguous, since the valuation provisions do not alter the application of the deductible as stated in the windstorm or hail deductible endorsement.