We use an unmodified ISO HO 00 03 form. Under Section I – Conditions, losses are settled at replacement cost only for buildings covered under Coverage A and Coverage B. While fences are insured under Coverage B, they are not buildings and so our current practice is to settle fence losses at ACV which is consistent with our reading of the policy language.
We have received feedback from an agent that this is an overly strict interpretation and that some other carriers routinely settle fence losses at replacement cost. The agent believes the ACV limitation was intended primarily for items such as farm fencing rather than typical residential fencing.
Can you confirm settling fence losses at ACV under an unendorsed ISO HO3 is consistent with standard industry interpretation? Can you confirm whether fences are ever considered "buildings" for replacement cost purposes under ISO policy intent? Finally, can you confirm whether carriers that settle fence losses are replacement cost are relying on endorsements, propriety wording or voluntary claims practices rather than ISO form language?
We are looking to confirm whether our approach aligns with standard industry practice and whether there is any recognized interpretative guidance suggesting fencing should be settled at replacement cost without any policy endorsements.
Ohio Subscriber
We need to look at this closely. Coverage B is for "other structures on the "residence premises" set apart from the dwelling by clear space." A structure is different than a building. The terms are not defined in the policy, so we go to the dictionary. Courts regularly turn to the dictionary when questions of wording arise in cases.
Merriam-Webster Online defines building as: ": a usually roofed and walled structure built for permanent use (as for a dwelling)"
And structure as: " a: something (such as a building) that is constructed b: something arranged in a definite pattern of organization"
So, the fence is a structure, but would still fall under the provisions of Coverage B.
However, the policy specifically addresses structures that are not buildings as follows under the loss settlement provisions:
Covered property losses are settled as follows:
1. Property of the following types:
a. Personal property;
b. Awnings, carpeting, household appliances, outdoor antennas and outdoor equipment, whether or not
attached to buildings;
c. Structures that are not buildings; and
d. Grave markers, including mausoleums;
at actual cash value at the time of loss but not more than the amount required to repair or replace.
Note that section c. specifically addresses structures that are not buildings - that would include a fence or other structure, and that those structures are covered at ACV.
Therefore, the fence under an unendorsed HO 00 03 (we looked at the ISO HO 00 03 03 22) would be covered at ACV. As to what other insurers are doing, we do not have access to their forms or claims procedures so we cannot weigh in on that. What other carriers do is not always relevant because their policy may very well be worded differently. You have to follow the policy language.