July 02, 2015 Articles

Making an Insured Whole Entails More Than a Patch Job

Discover how "replacement cost" coverage is often complicated by whether a repair can truly match damaged material that is in need of replacement

by Grace V. Hebbel and David G. Jordan

New England weather can be brutal at times, as evidenced by substantial storms over the past several years, including Tropical Storm Irene, Winter Storm Alfred, and Super Storm Sandy. Just this past winter, Connecticut endured 20 snowstorms, receiving more than 60 inches of snow in some parts of the state, and suffered its coldest February on record, with an average daily temperature in greater Hartford of 16.1 degrees Fahrenheit. See Kevin Arnone, Winter 2014-2015 Recap, WTNH News 8 (April 1, 2015); Connecticut Magazine Staff, “February Was Coldest Month Ever in Connecticut; Snowfall Total No Record,” Connecticut Magazine (Feb. 27, 2015).  Extreme weather conditions such as these often lead to property damage (especially in older structures), including roof collapses from heavy weight of snow, exterior damage from high wind gusts, flooding, and water damage from burst pipes. To protect against these weather-related risks, prudent business owners and homeowners alike usually acquire property insurance that includes “replacement cost” coverage. Ideally, when a loss occurs, this type of coverage should place an insured back to its pre-loss position, meaning that the insured is no better or worse off than before the damage occurred. The realities of insurance coverage, however, do not always match the expectations. Limitations upon available resources (e.g., scarcity/unavailability of matching building materials) and policy restrictions can affect the insured’s recovery. Given these realities, it is not uncommon for policyholders and insurers to disagree over the scope and quality of repair the policyholder is entitled to receive when a loss occurs.

Most policies affording “replacement cost” coverage indicate that damaged property shall be repaired or replaced with materials of “comparable” quality or “like kind and quality.” Exactly what this means can be a source of dispute, especially when an exact match of the damaged material(s) is not possible. For example, disagreements can arise as to whether the insured must be satisfied with a replacement of damaged property with materials that are somewhat close, but not the same as the damaged property (which can lead to a non-uniform, patchy repair) or instead should receive a more robust replacement that arguably results in a betterment. Fortunately for policyholders, recent statutes and case law support the position that personal and commercial risk insurance policies are to be broadly construed, thereby requiring a repair of damaged property that is aesthetically consistent with existing property.

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