Slow, delayed and late replacement and repair is the usual normal state of affairs after major catastrophes. In New Jersey and New York, slow and bogged down restoration and repair is the worst I have ever seen. Most insurance companies pay and work with their customers during post loss construction. A few insurance companies deny coverage citing limitations in policies that seem to require construction to take place with a certain amount of days or years.

Insurance companies seeking to deny payment literally apply boilerplate contract provisions and the policyholder forfeits the replacement cost coverage or law and ordinance benefits they paid an extra premium to have in the event of a loss.

Axis Surplus Insurance Company v. Caribbean Beach Club Association, Inc.,1  is a recent case that will help policyholders if their insurance company tries to deny replacement costs benefits merely because the repair or replacement took too long. The case will certainly be cited in Superstorm Sandy litigation because delay is so prevalent. 

The relevant time limitation in the AXIS policy is fairly standard regarding law and ordinance benefits:

b. With respect to the Increased Cost of Construction:

(1) We will not pay for the increased cost of construction:

(a) Until the property is actually repaired or replaced, at the same or another premises; and

(b) Unless the repairs or replacement are made as soon as reasonably possible after the loss or
damage, not to exceed two years. We may extend this period in writing during the two years.

AXIS never extended the period. The construction took many years to complete. AXIS denied law and ordinance benefits and continued to deny benefits even after the construction was completed.

There is an excellent legal analysis about forfeiture which should be read. But, the final holding and result is what is important:

To avoid liability through forfeiture, Axis must demonstrate that it was substantially prejudiced by Caribbean’s noncompliance with the two-year clause…Only that failure which constitutes a material breach and substantially prejudices the rights of the insurer in defense of the cause will release the insurer of its obligation to pay… As noted earlier, our record is devoid of any prejudice suffered by Axis.

The trial court correctly found as a matter of law that the two-year clause was a forfeiture
provision waived by Axis. When an insurer acquiesces to an insured’s failure to strictly adhere to a timetable of payment or performance, courts are inhospitable to the insurer’s sudden invocation of strict enforcement of forfeiture provisions. See Restatement (Second) of Contracts: Excuse of a Condition to Avoid Forfeiture § 229 note on cmt. c (1981).

As a result, Caribbean is entitled to receive the increased cost of
construction in the stipulated amount of $1,800,000.

As Jackie Gleason would say,

How Sweet it is!

Have a fantastic Monday and plan a fun Fourth of July!

1 Axis Surplus Insurance Company v. Caribbean Beach Club Association, Inc., No. 2D13-1057 (Fla. 2d DCA June 27, 2014).