Under the powers vested by sections 397 and 401 of the Illinois Insurance Code, the Director of Insurance has promulgated certain regulations which provide for a Standard Fire Policy.1 Under the regulations, all fire insurance policies must “conform to such form of the Standard [Fire] Policy or, if another form is used, shall for the purpose of concurrence of contract be deemed to be the Standard [Fire] Policy.”2 In essence, the Standard Fire Policy guarantees a minimum level of coverage that supersedes any attempt to limit or to restrict coverage to less than the statutory minimum.3 Stated differently, fire insurance policies may not provide coverage less than that set forth in the Standard Fire Policy.4

In Chaney v. Allstate Indemnity Company,5 the insured’s dwelling was damaged by fire. The Allstate policy required the dwelling to be repaired, replaced, or rebuilt within 180 days of receipt of the actual cash value payment to recover replacement cost benefits. The policy also contained an endorsement (AU277–2) incorporating the terms and provisions of the Illinois Standard Fire Policy, including its insuring agreement, which stated, in part, that fire insurance is afforded to “the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss.”

Prior to trial, the circuit court barred the insured from recovering on a replacement cost basis because the insured had failed to make any repairs within 180 days of Allstate’s actual cash value payment.6 This ruling was reversed on appeal. The Illinois appellate court reasoned that Endorsement AU277–2 eliminated the 180-day time limit, and permitted the insured a “reasonable time” following the fire to repair or to replace the dwelling and recover the full replacement cost value of the loss. Because there had been no determination that the insured had failed to make repairs to or replace the property within a reasonable time, or that a reasonable time had already elapsed, the appellate court concluded that the lower court erred in limiting the insured to an actual cash value recovery.

Although it dealt with Allstate’s 180-day replacement requirement, the Chaney decision establishes that, under the Standard Fire Policy’s insuring agreement, an insured is not required to make repairs or to replace fire-damaged damaged property within a certain time-period to recover the full replacement cost value of the loss. Instead, the insured may make repairs or to replace damaged property within a “reasonable time”7 of the fire without forfeiting the right to recover replacement cost benefits. Chaney is yet another example of the Standard Fire Policy trumping policy provisions that limit, restrict, narrow, or reduce the coverage provided by the standard form.
1 215 ILCS 5/397 and 5/401(a); 50 Ill. Adm. Code § 2301 et. seq.
2 50 Ill. Adm. Code § 2301.30.
3 The Illinois Standard Fire Policy 165-line form is identical to the Standard Fire Policy 165-line form prescribed by the New York legislature in 1943. See Corday’s Dep’t Store, Inc. v. New York Fire and Mar. Underwriters, Inc., 442 F. 2d 100, 104 (7th Cir. 1971).
4 See Streit v. Metropolitan Cas. Ins. Co., 863 F.3d 770, 773 (7th Cir. July 17, 2017) (“Though the Illinois Supreme Court has yet to address the question, both the statutory text and Illinois appellate courts make clear that in the event of a conflict between an insurer’s policy and the Standard Fire Policy, the latter controls.”).
5 Chaney v. Allstate Indemnity Co., 2017 IL App (1st) 161498-U (Sept. 5, 2017).
6 In Illinois, actual cash value is defined as replacement cost less depreciation. See Carey v. Am. Fam. Brokerage, Inc., 391 Ill.App.3d 273, 281 (1st Dist. 2009).
7 What constitutes a reasonable time to repair or to replace fire-damaged property depends on the facts and circumstances of each case. See Tamco Corp. v. Federal Ins. Co. of New York, 216 F.Supp. 767 (N.D. Ill. 1963).