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Storm Season is Here. Is Your Policy up to Date?

DJP May Storm Prep

Storm Season Prep Q&A with Property Insurance Attorney Dave Pettinato. See below on how to keep yourself and your policies prepared.

Question 1: Replacement Cost Value vs. Actual Cash Value – Do you have proper coverage and is it too late?

By Florida statute, and by many insurance policies, when an insurer issues a Replacement Cost Value (RCV) policy, the insurer is required initially to pay to its insured at least the Actual Cash Value (ACV) of the covered loss, less the deductible. After the insurer meets this statutory obligation, the insurer is then required to pay its insured for repairs as the insured incurs repair costs, also known as the RCV. An RCV policy is designed to cover the difference between what property is actually worth and what it would cost to rebuild or repair that property. RCV is measured by what it would cost to replace the damaged structure on the same premises.

In contrast to an RCV policy, ACV is generally defined as “fair market value” or replacement cost minus normal depreciation, where depreciation is defined as a decline in an asset’s value because of use, wear, obsolescence, or age. In other words, RCV policies provide greater coverage than ACV policies because depreciation is not excluded from replacement cost coverage, whereas it generally is excluded from ACV.

Question 2: Understanding your policy – Call Attorney Dave Pettinato for more information

Under Florida law, an insurance policy is treated like a contract, and therefore ordinary contract principles govern the interpretation of such a policy. As such, insurance contracts are construed according to their plain meaning. The terms of an insurance policy should be taken and understood in their ordinary sense and the policy should receive a reasonable, practical and sensible interpretation consistent with the intent of the parties—not a strained, forced or unrealistic construction. Where a provision of an insurance contract is ambiguous, courts construe such provisions liberally in favor of the insured and strictly against the insurer who prepared the policy. A Policy of insurance consists of multiple parts, e.g., Declarations page, Perils Insured Against, Exclusions, Conditions, Loss Payment, etc. And, provides, if requested, different Coverages in case of damage, e.g., Dwelling (Coverage A), Other Structures (Coverage B), Personal Property (Coverage C), Loss of Use (Coverage D), Law & Ordinance, and potentially many more. A policyholder must be knowledgeable to know which coverages he/she needs to request for full comprehensive coverage.

Question 3: Preparing your property, prior to the storm, for “The Claim” that may, more likely than not, be submitted.

With the start of hurricane season, every policyholder must ensure he/she is ready for a potential wind event that could cause damage to your home. TV channels will provide you with basic information on preparing an insured for a storm, e.g., batteries, water, radio, etc. However, one of the most important assets a person owns is your home and/or business. Preparing these structures are just as important. Some suggestions are video taping the roof, exterior and interior of the structure, retaining a contractor prior to storm, safe guard all documents related to repairs/renovations/closing documents/appraisal, etc.

Question 4: Additional Living Expense (ALE). What happens when your home is damaged to a point where it is “not fit to live in.”

An insurance policy normally provides for ALE, under Coverage D (Loss of Use), to a policyholder in case his/her residence premises is “not fit to live in” as a result of a covered peril. Normally, the policy will cover the ALE, meaning any necessary increase in living expenses incurred by the policyholder so that the policyholder’s household can maintain its normal standard of living. Payment will be for the shortest time required to repair or replace the damage or, if the policyholder permanently relocates, the shortest time required for the policyholder’s household to settle elsewhere. If the structure is a rental, then the policy provides for Fair Rental Value reimbursement, less any expenses that do not continue while the rental structure is not fit to live in.

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