We have a dwelling fire policy AAIS FL-3. If the insured has a total loss fire and they are not rebuilding because they were underinsured, what is the standard on whether they get loss of rent and if so, how many months?
Pennsylvania Subscriber
That's a really interesting question. The policy directly addresses fair rental value as follows:
"We only pay for the period of time reasonably required to make that part of the insured premises rented or held for rental to others fit for use. Fair rental value is the amount you would have received less the charges and expenses that do not continue while the insured premises is unfit for use."
Which does not address not rebuilding the property - that scenario is addressed under ALE, where coverage is provided until the insured resettles elsewhere because the insured needs a place to live. However, the insured having a place to continue renting out is a different thing entirely. We found no court cases that addressed such an issue.
Technically there doesn't seem to be any coverage for continuing fair rental coverage if the insured decides to not rebuild the dwelling for any reason. An insurer could make a decision to provide a few weeks coverage in such situations and make that a company policy but they're under no obligation to - the policy contains no coverage.