Matching Protections for Hurricane Irma Claims in Florida

In 1990, the National Association of Insurance Commissioners adopted a new section to its model regulations relating to unfair property claims.1

Section 9 of the model regulation provides:2

A. When the policy provides for the adjustment and settlement of first-party losses based on replacement cost, the following shall apply:


(2) When a loss requires replacement of items and the replaced items do not match in quality, color or size, the insurer shall replace all such items in the area so as to conform to a reasonably uniform appearance. This applies to interior and exterior losses. The insured shall not bear any cost over the applicable deductible, if any. Continue Reading

Claims Handling Requirements by State – Colorado

Up next in the state-by-state claims handling tour is the Centennial State – Colorado. Colorado property owners have been devastated by massive hail storms over the last several years so it is very important that policyholders and their representatives are aware of the claim handling requirements of the state. Colorado’s claim handling is governed by Title 3 of the Code of Colorado Regulations. The regulations define their purpose as being “…to describe the procedure and circumstances under which penalties will be imposed for failure to make timely decisions and/or payment on first party claims.”1 Continue Reading

Nationwide Insurance Adjuster Mistakes Flowers for Pot—Nationwide Insurance Policyholders Wrongfully Arrested

Nationwide Insurance Company claims managers may need to add botany and common-sense training to their claims education program. A Nationwide claims specialist sent photos of hibiscus plants to police indicating that Nationwide policyholders with a fallen tree loss were growing marijuana. The Nationwide policyholders look straight out of central casting as the “perfect aging couple” with grey hair and looking anything other than hippy dippy pot growers. Continue Reading

Punctuation Placement Could Lead to a Policyholder’s Next Victory

The saying goes like this, “Say what you mean, and mean what you say.” We all know the business of contract construction is no easy task. But underwriters should go the extra mile to ensure a property insurance policy reads as the carrier intends or steep consequences may ensue. Something as minor as a misplaced comma or semicolon could be consequential in deciding whether an insured is entitled to coverage under the policy. Continue Reading

(T)exas (W)indstorm (I)nsurance (A)ssociation (TWIA) Important information and Deadlines for Hurricane Harvey Claims

According to TWIA’s website, as of November 15, 2017, TWIA has received 72,902 claims related to Hurricane Harvey. So, what happens next? Many of TWIA’s policies, procedures and deadlines are different from that of a typical homeowner’s policy. Thus, it is imperative you read your policy to ensure no deadlines are missed. Below are important deadlines and basic information to remember as you are filing your claim. Continue Reading

Post-loss Assignment of Claims in California

In a prior blog, I discussed the California Supreme Court’s decision in Fluor Corporation v. Superior Court,1 regarding the post-loss assignment of insurance benefits. In Fluor, the California Supreme Court held that section 520 of California’s Insurance Code prohibits insurance companies from refusing to honor post-loss assignments of benefits, regardless of whether the assigned benefits (a) had accrued at the time of the assignment (i.e., constituted “Noncontingent Benefits”), or (b) had not yet accrued but could accrue if additional events occurred or additional conditions satisfied (i.e., constituted “Contingent Benefits”). Continue Reading

Recent Bulletins from the Virgin Islands Division of Banking, Insurance and Financial Regulation

The Virgin Islands Division of Banking, Insurance and Financial Regulation recently issued two bulletins.1

The first, Bulletin 2017-07, required property and casualty insurers, effective January 15, 2018, to maintain and submit to the Commissioner with its new or renewal application, a copy of its Catastrophe Response Plan for the benefit of its policyholders in the event of a disaster or emergency which describes how it will respond to a catastrophe affecting its policyholders in this Territory. In providing background for the Bulletin, the Division explained:

In light of the recent passage of Hurricane Irma and Hurricane Maria, which devastated many islands throughout the Caribbean and the infrastructure of the Districts of St. Thomas – St. John and St. Croix, this Bulletin is being issued to all insurers for the protection of policyholders in the Territory. . . . [T]he impact the storms had on the Territory was so great that many Virgin Islands residents are now displaced in various parts of the United States. Not only was there severe damage to properties but communication between persons in and outside the Territory was limited and at times nonexistent. As such, the Commissioner of Insurance recognized that the interest of the public demands that certain insurers have a Catastrophe Response Plan in place should a similar emergency arise again. Continue Reading

Overhead and Profit Should be Included with Payments Made on Actual Cash Value Basis

While many carriers continue their attempt to exclude overhead and profit from property damage claim payments made on an actual cash value basis, the majority approach across the United States has been to include general contractor overhead and profit in actual cash value payments for losses where repairs would be reasonably likely to require a general contractor, even if no general contractor is used or no repair or replacement is made.

The Colorado Department of Regulatory Agency expressed a similar standard in its 1998 initial issuance, and 2007 re-issuance, of Bulletin No. B-5.1 – Calculation Of Actual Cash Value: Prohibition Against Deducting Contractors’ Overhead And Profit From Replacement Cost Where Repairs Are Not Made.

Colorado DORA Bulletin No. B-5.1 provides:

II. Applicability and Scope

This bulletin is intended for and applies to all property and casualty companies providing replacement cost coverage of dwellings. . .

III. Division Position

Insurers shall be prohibited from deducting contractors’ overhead and profit in addition to depreciation when policyholders do not repair or replace the structure.

. . . .

The position of the Division of Insurance is that the actual cash value of a structure under a replacement cost policy, when the policyholder does not repair or replace the structure, is the full replacement cost with proper deduction for depreciation. Deduction of contractors’ overhead and profit, in addition to depreciation is not consistent with the definition of actual cash value.

When taken into consideration with much of the case law that has developed around the country, the Colorado Division of Insurance Bulletin provides strong support for policyholders’ entitlement to general contractor overhead and profit in actual cash value payments where it is reasonably likely that a general contractor would be required to complete the repairs to the insured property.

More recently, Judge Pratt of Arapahoe County relied on Bulletin No. B-5.1 and case law from other jurisdictions in determining that the law of Colorado with regards to overhead and profit in the context of actual value payments:

[I]s that overhead and profit is to be included as part of the actual cash value determination where it is reasonably likely that the services of a general contractor will be required to repair or replace the covered damage.1

When considering Judge Pratt’s decision, the Colorado Department of Regulatory Agency Bulletin No. B-5.1, and the extensive amount of case law from other jurisdiction, it becomes clear that overhead and profit should be included with payments made on an actual cash value basis in circumstances where the policyholder would be reasonably likely to need a general contractor in repairing or replacing the damaged property in issue under Colorado law.
1 Woodgate South Homeowners Assoc. v. American Family Mut. Ins. Co., No. 2013cv30784 (Colo. Dist. Ct. Oct. 20, 2014).