Try to watch an hour of television without seeing an insurance company trying to sell you on their marvelous company. The insurance giants are on every channel and all with the same message—we will cover you if the bad event happens. Sadly, on the next channel there is news of some terrible event happening. The insurance companies have amazing marketing teams and some very clever tactics to get your attention and your dollar. But when you have a claim, the response can leave you feeling betrayed and numb. The language of the insurance policy controls the coverage for a loss, but the policy was written by the insurance company, and while the company should search to apply coverage to your loss, this doesn’t happen in many cases.
In the case of Jason Neisler’s Atlanta rental home, a Georgia appellate court has ruled that while the policy had a theft and burglary exclusion, the company was still required to pay for the cost of repairing the damage to the home caused during the burglary.1
While Neisler’s rental property was not rented, a theft occurred and the water heater, outside condensing unit, inside air handler and furnace, and the electrical wiring were taken.
Auto-Owners responded to the claim and advised that the policy did not cover the lost items because the policy had a provision that excluded the stolen property, but Neisler made a claim with Auto-Owners for the cost of the labor to replace and re-install these items. Neisler also made a claim for lost rent. The lost rent claim was presented because without all the essential parts of the home, the property could not be rented and the policy had a loss of rents provision.
The provision on loss of rent read:
If a covered loss makes the described premises unfit to live in, we will pay for your loss of normal rents resulting from such covered loss while the described premises is unfit to live in. We will not pay charges and expenses which do not continue during that time. We will pay this loss of normal rents only for the shortest time needed to make the rented part fit to live in.
The trial court ruled that the policy provisions for coverage and exclusions related to the burglary and for "normal rent" were ambiguous. Ambiguity in your own insurance policy is a bad thing for carriers and a very good thing for the insureds. Since the insurance company wrote the insurance contract on their form with their lawyers and insurance experts, the coverage should be clear. However, when there is a provision in one section that squarely contradicts another provision, coverage should be afforded because of this ambiguity. Ambiguity is always a good argument for a policyholder to bring when an insurance company appears to have talked out of both sides of its mouth.
While the trial court agreed there was ambiguity and thus coverage should be given for the labor and repairs to replace the items and the lost rent, the insurance company did not pay and appealed the decision to the next court. This is the insurance company taking another measure to delay payment and hope the insureds tire of pressing forward.
The appeallate court agreed with Mr. Neisler on coverage for the damages related to the burglary but reversed the trial court on the issue of the lost rents.
Here is how the court reasoned:
The policy had a provision that excluded vandalism and malicious mischief and losses from theft or burglary. (watch out for this provision in your own insurance policies). However, the policy separately covered "damage by burglars to the dwelling or other structures". Auto-Owners argued this coverage was to pay for the damage caused when the burglar was breaking in or busting out of the house during the crime. The appellate court disagreed and stated that the two policy provisions were in conflict and deemed Auto-Owners liable for the cost of repairing the damage to the dwelling caused during the commission of the burglary, including the cost of labor and materials to repair and replace what was stolen (but not the items themselves).
However, for the normal rent issue, the court sided with Auto-Owners that this coverage required that the tenant be in place at the time of the loss.
The morale of the story is that if you feel your insurance claim is not being properly handled, you need to press the issue. While an insurance company may sell you a standard policy, the facts of your claim are unique and the endorsements and the changes in coverage to your policy can make all the difference. The best thing you can do is at least seek a legal consultation.