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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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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Last Thursday, October 26, 2017, I had the privilege to be on KSRO 1350 AM/103.5 FM, Sonoma County’s News Talk Radio Morning News, to discuss the wildfire aftermath as communities are looking to begin rebuilding their lives with their insurance proceeds.
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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.
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.
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.
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:
In Part 2 of this series I talked about what constitutes "Uninhabitable conditions" that trigger the possibility of ALE payments to the insured. This week, before we hit the ever controversial prong of ALE "incurred expense," I wanted to revisit a sub-issue of ALE that insurers are a stickler on: "normal living conditions."
During the 15 to 30 seconds that my home rolled and shook on Sunday from the 3.5 earthquake centered in Baldwin Hills, California, I was prompted to think about the habitability or rather “uninhabitable conditions” I may encounter if the shaking got any worse or continued. Earthquakes are rather commonplace in California and thankfully this earthquake, which was centered within 10 miles of my home, ceased and I was able to continue on without damage or loss.
Ordinance or law (“L&O”) coverage is “[c]overage for loss caused by enforcement of ordinances or laws regulating construction and repair of damaged buildings.”1 Additional living expense (“ALE”) coverage “reimburses the insured for the cost of maintaining a comparable standard of living following a covered loss that exceeds the insured’s normal expenses prior to the loss.”2
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