| Q&A of the Week |
Depreciation and ACV
A Kentucky subscriber recently asked the following question:
A homeowner has a replacement cost policy for the dwelling but has an ACV endorsement for the roof. The roofing material that is currently installed is not allowed per local building code to be installed. A synthetic material is available and allowed and meets like kind and quality specifications. How do you calculate the depreciation but then properly account for the increased cost of construction costs?
ANSWER: We specialize in policy interpretation, and the policy does not give depreciation calculations. However, actual cash value of the existing roof includes the depreciation; that is why the ACV is automatically less than replacement cost, so the ACV is what is owed. Read More |
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| What's New This Week in FC&S |
Personal Liability Supplement
This article analyzes the Personal Liability Supplement, DL 24 01, to the ISO Dwelling Property forms. This form may also be used on a monoline basis if combined with conditions and declarations pages. Read More |
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| Litigation Watch |
FAIR Plan Coverage Limited by Statute
In 1968, the legislature enacted the California FAIR Plan to provide property insurance to the otherwise uninsurable. Appellants, who lived in high fire risk areas, were insured under the FAIR Plan. Following wildfires, appellants were paid the full amount of their policy limits because their loss was equal to or exceeded the policy limits. Appellants contended, however, that they were entitled to additional payments and should have coverage provided to them under a standard homeowners policy rather than the fire policies issued by the FAIR Plan. The trial court disagreed, determining that the FAIR Plan had met its contractual and statutory obligations to them. The California Court of Appeal, in Gaeton St. Cyr v. California Fair Plan Association, 223 Cal.App.4th 786, 167 Cal.Rptr.3d 507 (2014) resolved whether the policy issued by the FAIR Plan to the plaintiffs should have provided broader coverage.
Beginning in September 2009, appellants filed several complaints against FAIR Plan. In their first amended complaints, appellants admitted that FAIR Plan paid them the actual cash value (ACV) of their respective policies within weeks of their losses. Specifically, they contended that FAIR Plan was required to issue a policy in accordance with the standard form fire insurance policy set forth in section 2071 and the Basic Property Insurance written in the normal market. One appellant asserted that the "Basic Property Insurance written in the normal market is the standard form policy known as the 'HO-3,'" a homeowners policy that provides property, liability, and workers compensation coverages.
The Court of Appeal noted that it is not clear how the FAIR Plan could issue an HO-3 form since it was not submitted as part of its rate plan nor is the FAIR Plan authorized by the statutory scheme to issue some of the coverages offered under that form, like third-party liability and workers compensation.
The FAIR Plan filed a demurrer to the complaints. The demurrer asserted that appellants had failed to state a cause of action for bad faith breach of contract, for breach of contract, or for unfair business practice, because (1) the commissioner had approved all of the challenged features of the FAIR Plan, (2) the FAIR Plan satisfied the statutory requirements for basic property insurance, and (3) under the statutory scheme, the commissioner, not the court, must determine whether the FAIR Plan should have expanded coverage beyond that presently provided in the plan.
The trial court sustained FAIR Plan's demurrer without leave to amend. The trial court found that FAIR Plan "performed the contract as written and that the insurance contract form did in fact comply with the applicable requirements of the Insurance Code."
Read More
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| FC&S Ask the Experts |
Did you realize that the Q&A section of FC&S is made up of questions submitted by subscribers like you?
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Who knows? Your question may be featured (anonymously) in the online Q&A of the Week or as an FC&S update.
Submit your coverage interpretation question right to the editors of FC&S for quick and reliable information. Ask our expert staff a question by clicking here. |
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