| Q&A of the Week |
Ordinance or Law and Replacement Cost
A Rhode Island subscriber recently asked the following question:
We have a claim in Rhode Island involving a tree on the insured property that fell and damaged a very small portion of siding on the risk. The siding is over thirty years old and no longer available. Rhode Island regulations require we replace all of the siding on the entire house. The policy limits coverage due to ordinance and law to 10 percent. Would these limits apply in this case?
ANSWER: You have an interesting situation. While Rhode Island statutes state that all the siding should be replaced, and that is an ordinance or law, it does not necessarily mean that only the ordinance or law provision applies. The provision is for the increased costs incurred due to the ordinance. However, if this is a replacement cost policy, our interpretation is that all the siding should be replaced, as otherwise you have not restored the insured to his preloss condition, that of having matching siding. Therefore, the ordinance and law provisions should not be invoked because this is how the claim should be settled to begin with, outside of any regulations. The regulation itself agrees with this logic, as follows:
A. Replacement Cost
When the insurance policy provides for the adjustment and settlement of first party claimant losses based on replacement cost, the following shall apply:
(1) When a loss requires repair or replacement of an item or part, any consequential physical damage incurred in making such repair or replacement not otherwise excluded by the policy, shall be included in the loss. The first party claimant shall not have to pay for betterment nor any other cost except for the applicable deductible.
(2) When a loss requires replacement of items and the replaced items do not match in quality, color or size, the insurer shall replace all such items so as to conform to a reasonably uniform appearance. This applies to interior and exterior losses. The first party claimant shall not bear any cost over the applicable deductible, if any.
(R.I. Admin. Code 11-5-73:9)
Note the last sentence: the state of Rhode Island did not intend for this regulation to allow carriers to invoke ordinance or law restrictions and leave insured's facing potentially extra expenses. The loss should be covered in full.
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| What's New This Week in FC&S |
Electronic Device Insurance
As portable electronic devices have become more and more popular, keeping them safe is a priority for many owners. Cell phones, iPads, e-readers and even laptops are taken most everywhere. Read More |
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| Litigation Watch |
Separation of Insureds Clause Applied to Employer's Liability Exclusion
An umbrella commercial liability brought an action seeking a declaratory judgment that it owed no coverage for a bodily injury claim filed against property owners by an employee of the lessee under the lessee's umbrella policy that named the owners as additional insureds. This case is Mutual Benefit Insurance Company v. Politsopoulos, 115 A.3d 844 (2015).
Leola Restaurant maintained an umbrella commercial liability insurance policy with Mutual Benefit Insurance Company. The restaurant conducted its business on a property leased from Politsopoulos. The lease required the property owners to be named as additional insureds on the liability policy.
An employee of the restaurant fell from an outside set of stairs and suffered injuries. She commenced a negligence action against the property owners, asserting that there was negligence in maintaining the stairs in an unsafe and dangerous condition. The property owners sought defense and indemnification from Mutual Benefit. The insurer declined coverage, citing the employer's liability exclusion.
Read More
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