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dpb

On 3/26/2013 8:26 AM, wrote:
On Mar 26, 12:40 am, bob wrote:
....

I still believe they MUST meet and pay for code requirement upgrdes,,

Bob, I agree with you in concept. The way you and I see
it, if you're paying for replacement cost coverage and
your bedroom burns down, the insurance company should
be responsible for paying for a new bedroom that is the
same size, same functionality as the old one. That code
now requires arc fault, more insulation, ice damming on the
lower roof, etc, is their problem. You paid for replacement
of a bedroom, they have to replace it.

But DPB is right that the clever insurance companies have
exclusions in most policies that say they don't have to pay
for it. Or at least they think it means they don't have to pay
for it. Did you see that Colorado case I posted the link to?
The policy in that case had exactly that, an exclusion.
The house burned down and Allstate said they were not
required to pay for things now required by code.
The lower court agreed with the insurance company.
On appeal, it was reversed, because the appellate court
cited case law where if the overwhelming verbage of
the policy would lead a reasonable person to believe that
it was covered, tricky exclusions can be ignored. They said
the overall policy was clearly to put the homeowner back
in the position they were in pre-fire. That means they
had a bedroom then, they are entitled to a bedroom now.
The fact that some code changes mean it costs more
does not mean the homeowner winds up in any better
position than they were pre-fire. They still only have
a min code bedroom. That was the essence of the finding.

And following that, they probably crafted the policies better
so as to still be able to deny it. In short, at best it's a grey
area and could vary from state to state depending on the
laws there, the court rulings, etc. And in my case it's a
couple hundred buck, if the insurance company won't
cover it, it's not worth a big fight. BUT, I think it is worthy
of discussion for two reasons:

1 - I don't think it's right

2 - Anyone that has replacement cost coverage should be
aware of this. Worst case, let's say you have a house that
you've been paying for replacement cost on for 25 years.
It covers the house to $300K. The house burns down.
The insurance company could total up what they say it
takes to build a new one, that isn't up to code. Suppose
that can be done for $250K. So, even though the policy
says they will pay to replace the house, they give you a
check for $250K and refuse to pay the other $50k,
because that is for code required items that were not
required when the original house was built.

I had missed the end result in the CO case before indeed...that's
interesting that the court did strike the exclusion down owing to the
preponderance of implied coverage to make whole. If undoubtedly help
the insured in that case to have been in what is now a very
liberal-leaning State in making the appeal.

As noted, I'm sure the underwriters' lawyers have studied that (and any
similar) decisions _very_ carefully and have wordsmithed the language to
try to ensure it will be enforceable in the future.

As you, I think it's a despicable ploy; nothing I've written previously
should be interpreted as being supportive of the idea; only that it's
definitely not a given that coverage will be automatically given to
cover additional Code or other occupancy reg's in place since the time
the original structure was built.

As noted earlier, I think there was a big problem in the casualty models
used in setting rates for catastrophic losses in that they forgot
about/essentially ignored common-cause and the magnitude of the possible
damage area affected by these events as the population and particularly
evaluations in these coastal areas grew exponentially over the years w/o
any major events. After that, they were left with such massive losses
they've resorted to whatever could to try to limit liability.

Also as I noted before, I believe one upshot of Sandy will be that
FL-like legislation will follow in the NE and along all the Atlantic
coastal areas w/ time that will mandate that policies include the rider
by default and homeowners will have to explicitly decline it if choose
to not pay the additional premiums that it will entail. And, of course,
while it will provide coverage, "there is no free lunch" and rates will
rise to cover it. Of course, they're rising anyway to cover the
problems the last few years have uncovered in the actuarial rates were
using, anyway...

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