Connecticut is among a number of states that have recently codified legislation, in response to model regulations issued by the National Association of Insurance Commissioners, which requires a matching of replacement materials to existing, undamaged property. Other states that have adopted “matching” legislation include: Iowa, Nebraska, Kentucky, California, Florida, Utah, Ohio, and Rhode Island. When a reasonable match is not possible, a more expansive repair may be required. Connecticut’s “matching” statute, General Statutes § 38a-316e, enacted in 2013, provides as follows:
When a covered loss for real property requires the replacement of an item or items and the replacement item or items do not match adjacent items in quality, color or size, the insurer shall replace all such items with material of like kind and quality so as to conform to a reasonably uniform appearance. This provision shall apply to interior and exterior covered losses.
While Connecticut’s new statute has not yet been examined by the courts, cases outside of Connecticut may offer guidance as to what the statute might entail. In Minnesota for example, the State Supreme Court recently held that an insured suffering damage to its siding from a hail storm was entitled to replacement of both the damaged and undamaged siding in order to ensure continuity of color. Cedar Bluff Townhome Condo. Ass’n v. Am. Family Mut. Ins. Co., 857 N.W. 2d 290 (Minn. 2014). In such case, the insured, Cedar Bluff, filed a claim with its insurer, American Family, for damage sustained to 20 of its townhomes. At least one panel of siding was damaged on each of the 20 buildings and 11 of the buildings had three or fewer damaged panels. Cedar Bluff and American Family were unable to agree on the amount of loss. Both parties acknowledged the fact that an exact color match of the siding would not be possible due to the fading of the existing, weathered siding that was 11 years old. However, American Family was only willing to replace the individual panels damaged by the storm, while Cedar Bluff believed it was entitled to replacement of all the siding in order to avoid a mismatched appearance. Pertinently, Cedar Bluff’s policy obligated American Family to pay for “direct physical loss of or damage to Covered Property at the premises . . . caused by or resulting from any Covered Cause of Loss.” The policy further required payment of “replacement cost,” defined as the cost to replace “the lost or damaged property with other property . . . [o]f comparable material and quantity.” Id. at 292.
The Minnesota Supreme Court concluded that “‘comparable material and quality’ requires something less than an identical color match, but a reasonable color match nonetheless.” Here, although the property could be “matched” in that replacement siding of the same make, model name, texture, and size of was commercially available in the marketplace, it could not be matched in terms of color.
The Cedar Bluff court also focused on the issue of whether the insurer could be required to replace the undamaged siding panels, which the insurer argued did not sustain “direct physical loss or damage” from the hail storm. It concluded that color mismatch was in and of itself a direct “physical loss” which the policy defined as “distinct, demonstrable, and physical alteration.”
“Because of the color mismatch resulting from the inability to replace the hail-damaged siding panels with siding of ‘comparable material and quality,’ the covered property—Cedar Bluff’s ‘buildings’—has sustained a ‘distinct, demonstrable, and physical alteration.’ Thus, we conclude that the covered property sustained a covered loss.”
Similar reasoning has been applied by other courts across the country in both interior and exterior contexts, including roof repair and floor replacement. For example, in Republic Underwriters Ins. Co. v. Mex Tex, Inc., 150 S.W.3d 423, 425 (Tex. 2004), a new roof which was installed in a more expensive manner than the previous roof was determined to still be “comparable” and thus, was held by the Texas Supreme Court to be covered under the policy.. In another case, where repair to plumbing damage required cutting a hole through vinyl flooring, an Ohio court found that the insurer was obligated to pay to replace the entire vinyl floor, not merely patch it up. Mastin v. Sandy & Beaver Ins. Co., 10 Ohio Misc. 2d 22, 23, 461 N.E.2d 332 (Ohio County Ct. 1983). Similarly, the Louisiana Appellate Court, in Holloway v. Liberty Mutual Fire Ins. Co., awarded replacement value of all of the carpeting in the bedroom wing of the insured’s house when the facts showed that a portion of bedroom and hallway carpet sustained water damage and the carpeting had been discontinued. 290 So. 2d 791, 795 (La. App. 1st Cir. 1974). Here again, the Cedar Bluff court disallowed a narrower scope of repair that would have resulted in an unsightly appearance.
Connecticut’s newly enacted statute in conjunction with nationwide case law, including the recently decided Cedar Bluff decision, provide strong support for the argument that in instances where exact replacement of covered property is not possible, such that rectifying the loss requires a finished product that is either inferior to, or better than, what previously existed, the insured should receive the more favorable of the two outcomes.
Keywords: insurance; coverage; litigation; property insurance; property insurance policy; replacement cost; weather
Grace V. Hebbel and David G. Jordan are with Saxe Doernberger & Vita, Hamden, CT.