Additional living expenses can create a number of questions about what items of expanse can be claimed following a loss. FC&S is a publication I encourage those in the claims business to subscribe. While reading the Question and Answer section of the FC&S Coverage Insider, the following additional living expense coverage question was posed:
Our insured has an ISO HO 3 policy, 1991 edition, and recently suffered a fire loss. Coverage for her home and contents is not at issue; however, she has had to relocate to a motel until restoration of her home is complete. Prior to the loss, she stored some of her personal property in half of her two-car garage. Because of the fire, she can no longer use this space until repairs have been completed.
The insurance company is questioning two items under additional living expense—the cost to rent a storage space, and the cost to dry clean the clothing she took with her.
We think this is additional living expense, and should be covered. What is your opinion?
To me, the answer seemed quite easy, and they would be covered. What would other entities say about these items being covered?
United Policyholders lists the following examples of what can be claimed as additional living expenses:
1. Rent for temporary housing
2. Insurance policy taken out on contents in temporary rental house
3. Credit check fee charged by management company when renting temporary house
4. Cellular phone overtime charges incurred due to the loss of landline telephone
5. Mileage to/from a temporary rental house to/from all locations visited for rebuild-related business, including:
Flooring, granite, fixtures, and all other construction materials you need to research and choose
6. Mileage for increased distance traveled from temporary rental home to:
Place of employment
Adult and children’s activities (school/sports/clubs/lessons)
Your house of worship
7. Meals eaten when out on rebuild-related business, (e.g., visiting construction site, shopping for replacement personal property items, researching/purchasing rebuild items such as appliances, flooring, fixtures)
8. IT fee charged to set-up new computer system at temporary rental home
9. Sewer fee at temporary rental property if you did not have sewer fee at damaged/destroyed home, (e.g., damaged/destroyed home used a septic system)
10. New account or “setup” fees for utilities at temporary rental home
11. Photocopies and mailing expenses related to claim
12. Moving costs incurred to move from the temporary rental home back into the repaired/rebuilt home (moving company; moving van; moving boxes; packing paper and tape)
13. Reconnection fees for setting up services (cable/telephone/utility) at the rebuilt home
14. Carpet cleaning when moving out of rental home (if temporary lease agreement requires this upon move out).
15. Pet boarding cost
The answer from FC&S indicated the same:
Quoting from the HO 3, ‘additional living expense (means) any necessary increase in living expenses incurred by you so that your household can maintain its normal standard of living.’ Further, the policy does not state exactly what ‘living expense’ is; it does, however, clearly state it is the insured’s normal standard of living that is to be maintained. Therefore, within that framework, many expenses are allowable and justifiable.
The insured’s ‘normal standard of living’ included a large storage space, so the extra expense of providing this is covered. If many of the insured’s clothes were damaged by a covered peril, and the few clothes remaining must be cleaned more than usual to make them wearable, then this expense is indeed additional living expense, assuming her normal standard of living is to wear clean clothes.
IRMI (International Risk Management Institute) is another publication which we suggest those who are professionals trying to help policyholders should subscribe to. In one of its commentaries, it noted some examples of additional living expense and that the coverage is quite broad:
As mentioned, the policy promises that it will cover expenses that the insureds incur so that they will be able to ‘maintain [their] normal standard of living.’ That is a very broad promise and brings with it considerable responsibility on the part of the insurer. The following examples will help to illustrate the point.
• Bill and Amy have a dog. After their home is damaged in a fire, they cannot find a rental home that will allow them to bring their dog and they are forced to board the dog in a kennel. The kennel expense is payable as ALE. Having a dog was part of their “normal standard of living” prior to the fire. They cannot be expected to euthanize the dog; thus, the kennel expense becomes part of the cost so they may maintain their “normal standard of living.”
• Tom drives 5 miles each way to work. After he is forced out of his condo by a fire, the only place the insurer can find for him is 50 miles from his job. The expense to drive the extra 90 miles per day is compensable as ALE.
• Jim and Karen’s home and furnishings were entirely destroyed in a fire. While they are living in a furnished townhome, they begin to purchase new furniture, clothing, and appliances. They place the new items into storage until they are ready to return to their home. The cost of the storage, as well as the cost to move the new furniture into the home, are both covered under ALE.
• Dan and Nancy and their son are forced out of their home by tornado damage. Since it appears they will not be gone very long, they agree to move into a two-bedroom townhouse. While living in the townhouse, Nancy must have emergency surgery. Her sister, Pat, comes to town to help out. If Dan and Nancy were still in their home, Pat could have stayed there. Because they are not and there is no room for Pat in the townhouse, they have to get a room for Pat at a local hotel. Pat’s hotel expenses are also covered as ALE under Dan and Nancy’s homeowners policy.
As mentioned, the promise made by ALE that it will pay for the insureds to maintain their ‘normal standard of living’ is very broad….
The reason why these publications are important is that some claims professionals do not seem to be trained, do not understand the policy, and often seem to be raising objections to keep the claims payments down. You have to show them insurance industry publications to back up your claim—even if the answer seems very simple.
Similarly, some insurance company attorneys have little training about property insurance. They simply want to “win,” which means to pay nothing else. This type of attorney “creates” novel reasons to keep their clients from paying even though their clients normally will pay for the items claimed. They make arguments and hope judges buy into whatever they are saying so they can win their case. Insurance industry reference materials can be used against this type of “studied ignorance.”
Professionals and the best policyholder law firms subscribe to and maintain a large insurance reference library to help their policyholder clients. These are the tools of knowledge and weapons needed to defeat ignorance.
Thought For The Day
I’m not comfortable being preachy, but more people need to start spending as much time in the library as they do on the basketball court.