How about, “Where’s the Advil?” My wife commented Friday night that all my “edgy” friends must also enjoy this genre of rock because the concert was sold out. Just as she made that remark, a thunderstorm struck. Being the nerdy insurance coverage lawyer that I am, and even though my thoughts were straying just a little at the time with the rather bizarre visuals that accompany a Def Leppard concert, I thought, “if the power cut off and the concert cancelled, would there somehow be coverage afforded under an insurance policy?”

A special product of insurance coverage exists called “event” or “private event coverage.”  From weddings, to outdoor events, corporate outings, and concerts, those who host these events should consider calling an agent for quotes. Coverage available depends on the event, and can help with extra expenses, lost income, and liabilities to others in the event something goes wrong and the event does not take place. Call your insurance agent to get this valuable coverage.

In researching the issue, I found a case where the coverage discussion is applicable to general insurance disputes, not just canceled Def Leppard concerts. In Celebrate Windsor, Inc., d/b/a Summerwind Performing Arts Center, vs Harleysville Worcester Ins. Co., No. 3:05cv282, 2006 WL 1169816 (D.Conn. May 2, 2006), damage to a canopy lead to a protracted dispute with an insurer and difficulty dealing with the expenses of holding events during a period when the auditorium was not ready for performance. Much of the decision is irrelevant, but the following remark will strike remarkable relevance to many of our current clients and policyholders with delayed insurance claims:

“Harleysville argues that it is not required to pay SummerWind anything because SummerWind never filed a proof of loss. But Harleysville never asked for a proof of loss and continued to process the claim in the absence of one. Therefore, Harleysville waived that requirement. Harleysville also contends that it is not required to pay for any loss until the structure is actually repaired or replaced, and obviously that has not happened yet. But courts have found a duty on the insurer to reimburse the insured before rebuilding takes place when, as here, the insured does not have the means to rebuild the facility without the insurance proceeds. See, e.g., Zaitchick v. American Motorists Ins. Co., 554 F.Supp. 209, 217 (S.D.N.Y.1982); Pollock v. Fire Ins. Exch., 423 N.W.2d 234, 237 (Mich.Ct.App.1988). The Court believes that Connecticut courts would adopt those decisions as the law of Connecticut and, therefore, the Court rejects Harleysville’s claim. Finally, Harleysville argues that its policy obligations are conditioned upon the insured replacing the property within a reasonable time after incurring the loss and that SummerWind has not done so. However, if Harleysville’s failure to pay Soper’s estimate was the reason why the facility has not been repaired sooner, then surely Harleysville could not defend its conduct on this basis. Therefore, this argument by Harleysville does not add anything to its main argument, which is that it is not required to pay the full cost of Soper’s 2004 estimate.”

This issue is very important to policyholders. Replacement cost policies contemplate that policy proceeds of at least actual cash value are paid promptly as possible so that replacement can take place. When that does not happen, the entire purpose of insurance is defeated. Insurers that refuse to pay replacement cost benefits when the policyholder seeks judgment should not be allowed to take advantage of the policy terms requiring actual repair or replacement unless they have fully paid all actual cash value amounts owed. This seems common sense, as the Court found above, but not all courts are so inclined.

In Pollock v. Fire Ins. Exch., 423 N.W.2d 234 (Mich.Ct.App.1988), the Michigan case cited by the Celebrate Windsor court had an excellent discussion of the issue:

“…case law and equitable considerations render replacement cost the appropriate method of valuing plaintiffs’ damages. The defendant does not challenge the plaintiffs’ contention that a bank would be chary to lend money on the basis of an unlitigated law suit in which the defendant and its vast resources intend to present several defenses to payment. Nonetheless, defendant asserts, case law precludes plaintiffs’ recovery of replacement value, citing American Universal [Ins Co v Falzone, 644 F2d 65 (CA 1, 1981); Kolls v Aetna Casualty & Surety Co, 503 F2d 569 (CA 8, 1974); Lerer Realty Corp v MFB Mutual Ins Co, 474 F2d 410 (CA 5, 1973); Bourazak v. North River Ins Co, 379 F2d 530 (CA 7, 1967); Higgins v. Ins Co of North America, 256 Or 151; 469 P2d 766 (1970) ]. These cited cases, however, are distinguishable from the instant case. In all the relevant cases cited by defendant save Lerer Realty, the defendant paid actual cash value, and was only litigating the issue of whether additional monies would be due under the relevant replacement cost contract provisos. Thus plaintiffs in the cited cases had at least some money with which to begin rebuilding their property.

The language of the Zaitchicks’ insurance contract also supports my emphasis on whether cash value has been paid or not. The contract states that “[t]he Named Insured may elect to disregard this [replacement cost] condition in making claim hereunder, but such election shall not prejudice the Named Insured’s right to make further claim within 180 days after loss for any additional liability [for replacement cost].” Defendant’s Exhibit M, “Additional Conditions,” ¶ 1(f). In other words, insureds can obtain the necessary funds to begin rebuilding their home, and subsequently upon completion of the construction, obtain additional amounts up to the replacement value. In the instant case, plaintiffs were refused any monies under the insurance contract. Not surprisingly, they were unable to replace their home. This conduct by defendant made it impossible for plaintiffs to fulfill the condition precedent, and therefore, excuses plaintiffs from performance of the replacement condition…

While Zaitchick is foreign law, the concept of not permitting an insurance company to benefit from its own misdeeds is not foreign to the jurisprudence of this state. In Wendt v. Auto-Owners Ins. Co., 156 Mich.App. 19, 27-28, 401 N.W.2d 375 (1986), which considered a somewhat different question than that presented in the case at bar, this Court held that an insurance company is liable for its conduct and may suffer a pecuniary loss as a result of that conduct even where a loss would not ordinarily be imposed by statute:

We see no reason to hold an insurer less accountable for its actions than another contracting party. Consequently, we hold that the breach of an insurer’s obligation to process a claim in good faith renders an insurer liable for pecuniary losses which are not otherwise compensated for by statute.

In the instant case, defendant impeded any progress in this matter by refusing to deal with plaintiff prior to her contacting an attorney, by failing to appoint an appraiser after plaintiff’s attorney requested they do so and by forcing plaintiff to bring this lawsuit. Defendant failed to make any substantial payment to plaintiff until twenty-five months after the fire. Defendant does not even argue any good faith defenses to its actions of delay. At most, in its answer to plaintiff’s complaint, defendant asserted as an affirmative defense that plaintiff failed to provide proper documentation of her loss. Defendant does not argue this defense on appeal. We conclude that, in the face of such lack of good faith processing of plaintiff’s claim, the trial court correctly chose to award the replacement cost value to plaintiff based upon equitable considerations.

In short, defendant’s failure to pay on the claim hindered, and quite possibly even prevented, plaintiff from complying with her obligation to repair or replace the building. Had defendant immediately paid in good faith the actual cash value of the loss, holding the additional amount due under the replacement cost provision in reserve until the replacement was made or contracted for, or had otherwise worked with plaintiff to insure her financial ability to immediately proceed with the replacement or repair, a different result might be called for. However, defendant did not work with plaintiff to promptly pay the claim and enable her to repair or replace the building; rather, it did as much as possible to hinder plaintiff and delay or prevent the payment of the claim. We will not now allow defendant to raise as a defense plaintiff’s failure to perform an act which defendant itself greatly hindered plaintiff from performing…

For the above-stated reasons, we conclude that the trial court properly determined that plaintiff was excused from performing her obligation under the policy to repair or replace the building due to defendant’s dilatory tactics.”

Sometimes, I start researching one area of insurance law just to find other gems more relevant to my current cases. I find it amazing how rock and roll can impact my “edgy” interests and then lead to more meaningful understandings in other areas of life. I guess I have to give credit to Def Leppard, a band that will “Rock for the Ages,” for their moving music. Their music made me a better lawyer and lead me to law that supports my clients’ cases.