Can you imagine Allstate Insurance Company running an advertisement explaining that it tries to deduct labor costs as depreciable items when you make a homeowners claim? Allstate runs television ads trying to warn against “cheap” insurance but fails to disclose that it instructs its claims adjusters to cheapen its insurance product when it comes to paying its customers’ insurance claims.
Continue Reading Can My Insurance Company Deduct Labor Costs When I Have A Replacement Cost Policy? What Allstate Does Not Say In Its Ads

Insurers often try to limit damages once they are found liable for breach of the insurance contract by claiming that the insurance policy limits the insured’s recovery to the actual cash value because the insured did not comply with the policy’s condition on recovering replacement cost.1
Continue Reading Can My Recovery be Limited to Actual Cash Value When the Insurer’s Failure to Pay Prevented Compliance with My Policy Condition on Recovering Replacement Cost?

In my experience, one of the most misinterpreted property insurance policy provisions is the 180-day notice requirement to receive replacement cost benefits. Many in the property insurance industry interpret the provision to require actual repair/replacement within 180 days of the loss. Others interpret the provision to simply require notice within 180 days of the loss of the intent to repair/replace. And, there are those who interpret the requisite 180-day notice to be given only if the insured initially makes claim on an actual cash value basis.
Continue Reading Replacement Cost Coverage and the 180-Day Notice Requirement

Last month, California passed legislation that requires residential property insurers to take specific measures to review the estimated cost of rebuilding or repairing structures insured under residential property insurance policies. Assembly Bill 1797 added section 10103.4 to California’s Insurance Code. With certain, limited exceptions, under the new statute, residential property insurers must, at least biennially, at the time of renewal of a policy, offer to provide the insured an updated estimate of the cost to rebuild or replace the insured structures, or offer updated coverage limits based on an inflation factor that reflects the cost of construction in the policyholder’s geographic area.
Continue Reading California Passes Law Requiring Insurance Companies Take Specific Measures To Periodically Review The Estimated Replacement Cost Of Structures Insured Under Residential Property Insurance Policies

Replacement cost insurance generally allows recovery for the actual value of property at the time of loss, without deduction for deterioration, obsolescence, and similar depreciation of the property’s value. Depending on the circumstances, the difference between the actual cash value and the replacement cost value of a loss can be significant.
Continue Reading Replacement is Not Always a Prerequisite for an Insured to Claim Replacement Cost Benefits

Under the “Loss Settlement” provision in the typical homeowners property insurance policy, the insurer is not obligated to pay replacement cost benefits unless and until “actual repair or replacement is complete.” The “Loss Settlement” provision also limits the insurer’s replacement cost payment to the lesser of:

  • the limit of liability that applies to the building,
  • the replacement cost of that part of the building damaged for like construction and use on the same premises, or
  • the necessary amount actually spent to repair or replace the damaged building.1


Continue Reading Does Entering Into a Land Contract for Replacement Property Satisfy the “Actual And Complete Replacement” and “Amount Actually Spent” Requirements for Replacement Cost Benefits?

The California Department of Insurance recently issued a press release announcing that the California Supreme Court affirmed the homeowner reimbursement protections recently decided in California Fair Plan Association v. Garnes.1 Back in June, my colleague Kevin Pollack wrote about the recent decision and whether actual cash value means fair market value or replacement

The short answer is yes. In Conway v. Farmers Home Mutual Insurance Company, the California Court of Appeal followed several out-of-state authorities in considering the issue and ruling in favor for the insured.1 Chip Merlin raised this issue with respect to Texas back in 2009 – finding that the courts there apply the law a bit differently. You can revisit the blog here: Obtaining Full Replacement Cost Benefits Through Replacement at a Different Location – Texas Style.
Continue Reading In California, Can an Insured Homeowner Recover Full Replacement Cost by Purchasing a Home at Another Location?