In this series of ALE blogs, I’ve come to realize that the incurring of Additional Living Expenses (ALE) is probably the most disputed part of ALE and the definitive factor of whether ALE is paid by the insurance company. It’s probably the most controversial part, as the whole concept of ALE “incurred” is based upon the definition and interpretation of “incurred” and this interpretation differs by state. Overall, there is little case law on ALE as compared to other areas of property insurance law. Generally, most states interpret “incurred” to be some sort of liability to pay, such as entering into a lease above and beyond normal rent or mortgage may trigger the payment of ALE. Remember, we must still look at the whole picture of when an ALE payment may be due from the insurance company. Before ALE payments are triggered, there must be:
- a covered loss;
- uninhabitable home; and
- incurred ALE expense.
In the case of Ceballo v. Citizens Property Insurance Corporation,1 the Florida Supreme Court noted, “to incur’ means to become liable for the expense, but not necessarily to have actually expended it.” This interpretation of incurred allows for the possibility of a rental agreement to be executed after a covered loss which triggers ALE, even without payment upfront of that rental agreement. Here the court indicated that the legal liability of payment of the upcoming rents is necessarily enough to trigger ALE from the insurer. However, in other states such as California, unpublished case law hints that for ALE payments to be triggered that the financial payments for extra rents or food must be “actually incurred”. This interpretation has allowed insurance companies to take their investigations of “incurred” ALE to an extreme. Insurers with California insureds are sending Special Investigation Units (SIU) to sit outside of the rental homes of insureds to make sure that the insured’s ALE is legitimate and being incurred. They verify the insureds are staying overnight at the rentals versus the home of a family member who may allow the insured to stay rent free. Such insurer behavior can be interpreted as extreme and a waste of resources but insurers feel that the expense is well worth catching those who haven’t “actually incurred” their ALE, as they use this method of investigation as a tool to deny the entire insurance claim when they interpret not “actually incurring” the ALE as a fraudulent claim.
Luckily, most case law such as United Services Automobile Association v. Gordon,2 the Texas appellate court held that ALE must be incurred by a policyholder and defined “incurred” as “becoming liable or subject to” or “become liable to pay”. Such case law seems to be the predominant consensus—that the mere entering into legal liability of the expense gives rise to the ALE payment.
Next week we’ll go over how an insured may prove up an ALE claim and what courts deem as proper evidence for an insured to present an ALE claim to the insurer