Insurance companies historically rarely invoked their right to repair a structure. They often did so with jewelry losses because damaged or lost jewelry could much more easily be copied or repaired. Few structural repairs are ever done correctly or to the satisfaction of a property owner. Indeed, the annals of construction history are full of litigation between contractors and upset property owners. So, why are modern insurance carriers invoking the right to repair?

Answer—Leverage to reduce the claim amount.

Two primary ways this is done:

  1. Without invoking the right to repair but offering a shill preferred contractor who has agreed to terms with the insurer in advance.
  2. Pseudo invoking the right and offering the amount for which the shill contractor will allegedly do the work.

What is the insurer trying to avoid? I would suggest the downside of making the insurance policy into a construction contract with all the warranties of performance which come with such an obligation:

[W]here the insurer elected to repair, the insured could recover damages for loss of use proximately caused by the failure to repair it within a reasonable time, even though there was no coverage in the policy for loss of use. when the insurer makes its election to repair, that election is binding upon the insured and creates a new contract under which the insurer is bound to restore the property within a reasonable time. Where the insurer breaches this new contract to repair, it becomes liable for the damages proximately caused by this breach. Thus, this court allowed the insureds to recover damages outside of the scope of the policy in their breach of contract claim, even though the insurer was not alleged to have acted in bad faith. See also State Farm Mut. Auto. Ins. Co. v. Dodd, 276 Ala. 410, 162 So.2d 621, 626 (1964) (‘It is the general rule that where a policy gives the insurer an election to repair or pay, the exercise of the option to repair converts the original contract into a contract to repair, subject of course to various refinements and exceptions.’).1

I will write much more about this topic in the future, but the first question in these cases is to look at the two primary ways above and ask yourself—did the insurance company actually invoke its right to repair or is it just trying to leverage a smaller claims payment without taking the much more onerous route of electing to repair the structure?

Thought For The Day

I sympathize with the victims of Hurricane Sandy and believe that those who purchased flood insurance should have their claims paid.
—Ron DeSantis, when Congressman. Current Governor of Florida
1 Travelers Indemnity Co. v. Parkman, 300 So. 2d 284 (Fla. 4th DCA 1974).