Insurance coverage firms that wrongly deny or underpay property insurance coverage claims are discovering a golden monetary alternative that gives an incentive for them to wrongfully underpay and deny claims—they escape the fee of the substitute value valuation they promised to their policyholders. Whereas this consequence might be stopped by frequent regulation permitting for dangerous religion actions and extra statutory legal guidelines defending premium-paying policyholders, an instance of how this authorized problem performs out in lots of states is from the Georgia case of TPN Properties v. Dwelling-Homeowners Insurance coverage Firm. 1
The courtroom discovered that the decrease Precise Money Worth (ACV) fairly than greater Substitute Value Worth (RCV) was the suitable measure for the price of repairs on this case regardless of the policyholder buying RCV protection. A number of key information and causes led the courtroom to this conclusion.
The coverage’s “Loss Cost” provision acknowledged that Dwelling-Homeowners would decide the worth of misplaced/broken property per the “Valuation Situation,” which specified utilizing ACV. Nonetheless, the coverage additionally had an elective protection provision stating RCV replaces ACV. The policyholder bought greater priced RCV protection. The RCV provision, which is frequent within the overwhelming majority of all property insurance coverage insurance policies, stated Dwelling-Homeowners wouldn’t pay on an RCV foundation till the property was really repaired/changed, and until repairs had been made as quickly as moderately doable after the loss.
The information of the case indicated that the property nonetheless had not been repaired by TPN. Due to this fact, Dwelling-Homeowners obligation to reimburse based mostly on RCV had not been triggered for the reason that well timed restore requirement was a situation precedent to restoration of the upper RCV quantity. Primarily based on Georgia case regulation, the courtroom discovered that the insured (TPN) fairly than the insurer has the burden of satisfying the situation precedent of constructing well timed repairs earlier than receiving RCV.
In abstract, the courtroom dominated ACV was the right valuation as a result of TPN had not but repaired the property, which was a situation precedent to obtain RCV underneath the coverage phrases and Georgia regulation putting that requirement on the insured. Nonetheless, the courtroom nonetheless denied abstract judgment on this depend as a result of factual disputes remained relating to the scope of repairs wanted, which might impression the ACV quantity owed.
The courtroom particularly famous how this boilerplate language offers a gamesmanship unfair benefit to the underpaying or wrongfully denying insurer:
The Court docket notes that TPN would have been entitled to a reimbursement from Dwelling-Homeowners based mostly on RCV if TPN had carried out the repairs by itself inside an affordable time. After all, as a sensible matter, that will have required TPN to imagine the danger that the price of performing these repairs can be totally reimbursable, and that any dispute about the price of the repairs can be resolved in its personal favor. Though this studying definitely doesn’t inure to the good thing about the insured, the Court docket finds that it’s nonetheless probably the most logical studying for functions of reconciling the varied competing provisions within the Coverage, although this development is one the place the insurer successfully designed the least favorable choice for the insured….
Our legislators and insurance coverage commissioners must cease this incentive to underpay and wrongfully deny claims if the courts is not going to accomplish that underneath frequent regulation. United Policyholders (UP) has been a staunch supporter of pro-policyholder legal guidelines and rules to stop these unconscionable outcomes. Merlin Regulation Group is a supporter of UP and is a sponsor of its upcoming UP to Good 2024 occasion, which might be held on Friday, September 20, in Santa Rosa, California.
Readers of this weblog ought to admire that the definition of precise money worth might differ considerably from state to state. I might counsel studying Precise Money Worth Damages and The Broad Proof Rule in Florida, and Precise Money Worth and Indemnity.
Lastly, I’ll talk about this case and plenty of extra essential matters for public insurance coverage adjusters on the upcoming Georgia Affiliation of Public Insurance coverage Adjusters convention on Tuesday, September 17, in Atlanta. Matt Brown and I’ll current What Does Your Consumer Consider You? How Solely an Ethically and Worth Oriented Public Adjusting Agency Succeeds. Right here is the hyperlink for registration.
Thought For The Day
All through historical past, it has been the inaction of those that may have acted; the indifference of those that ought to have identified higher; the silence of the voice of justice when it mattered most; that has made it doable for evil to triumph.
—Haile Selassie
1 TPN Properties v. Dwelling-Homeowners Ins. Co., 631 F.Supp.3d 1301 (N.D. Ga. 2022).