Additional Living Expenses

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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?

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A common theme I have noticed lately is the tendency of homeowners, having just weathered a major natural disaster, to compare their ability to recover insurance proceeds to that of their neighbors. Wondering if you can recover alternative living expenses? Curious to know if you can recover for your sewage back-up claim? Rather than looking to your neighbor’s recovery for answers, make sure to check your homeowners insurance policy.…
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The buzz amongst policyholders about what insurance owe for additional living expenses due to the Northern California Wildfires is still going strong as Southern California braces this week for Santa Ana winds. With predicted gusts up to 70 mph, Southern Californians are in real danger of the potential for wildfires. Recently, I’ve received quite a few calls from victims of the Northern California wildfires asking what their rights are under their additional living expenses portion of their insurance policies. Most policies limit policyholders to one year of additional living expenses (ALE) or the reasonable time to rebuild. In the recent Northern California wildfires, California Governor Jerry Brown declared a State of Emergency which means that every policyholder with proper additional living expense coverage under their policy has an extension of an additional year for ALE.…
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We recently had a request for a blog topic discussing additional living expenses (“ALE”) options following the loss of a home and subsequent evacuation. Under many insurance policies, not only is your real and personal property covered, but you may be entitled to additional living expenses, meaning food and housing costs, relocation, storage, meals when there’s no access to a kitchen, furniture rentals, and additional transportation expenses.…
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In this unreported New York decision,1 Steven Hirth filed suit for breach of contract on a homeowner’s insurance policy after American Insurance Company (AIC) denied coverage for additional living expenses (ALE). On August 12, 2012 Hirth’s apartment sustained water damage when another apartment in his building had a water issue that damaged Mr. Hirth’s apartment so severely, he and his family were forced to evacuate and arrange for lodging elsewhere. AIC paid him $208,108.63 for damage to the apartment and for contents. AIC also paid an additional $10,725.38 in ALE for the Hirth’s hotel stay from August 26 through September 1, 2012. AIC also offered to pay for a comparable hotel in New York City for an additional four months (the period of restoration). Hirth disagreed with AIC’s estimate of the cost of the hotel and instead entered into a short-term sublease at $22,500 per month (AIC originally offered $40,000 per month). The repairs to his apartment took almost two years, and the apartment could not be occupied until July 1, 2014. Hirth declined to provide certain documents to AIC without a confidentiality agreement and AIC declined any further payment for ALE. Hirth filed suit on February 24, 2015.

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Most people understand that insurance policies are drafted by insurance companies. There is little to no negotiation of terms between a potential policyholder and the insurance company, so if language is ambiguous it is construed against the drafter—the insurance company. Below you will find details about a recent case out of the Western District of Missouri written by an esteemed panel of Judges. It is also a good refresher from elementary school –when a teacher asks you to define a word, you should not then use that word in the definition. American Family forgot this and it is an expensive lesson to learn.

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As we near the end of this Additional Living Expenses (ALE) blog series, we can reflect back at past case law and point out there are not only negative exceptions that impact an insured. Sometimes exceptions reflect positively that aid the insured on recovery where ALE is owed to the insured due to an uninhabitable residence after a loss.

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Over the past few weeks I’ve blogged on Additional Living Expenses (ALE) and how case law has influenced the recovery of ALE in many states. There are exceptions to every rule, and over the next few weeks I will continue the ALE blog series and discuss the times where case law has indicated that ALE is not recoverable. Some of these cases are exceptions, but when adjusting a case, knowing where the exceptions are can be the difference between coverage for an insured or leaving the insured with out-of-pocket expenses.

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In this series of ALE blogs, I’ve come to realize that the incurring of Additional Living Expenses (ALE) is probably the most disputed part of ALE and the definitive factor of whether ALE is paid by the insurance company. It’s probably the most controversial part, as the whole concept of ALE “incurred” is based upon the definition and interpretation of “incurred” and this interpretation differs by state. Overall, there is little case law on ALE as compared to other areas of property insurance law. Generally, most states interpret “incurred” to be some sort of liability to pay, such as entering into a lease above and beyond normal rent or mortgage may trigger the payment of ALE. Remember, we must still look at the whole picture of when an ALE payment may be due from the insurance company. Before ALE payments are triggered, there must be:

  1. a covered loss;
  2. uninhabitable home; and
  3. incurred ALE expense.

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