Although insurance policies are lengthy contracts filled with dense language that is difficult for a layperson to parse, subtle language distinctions can have a profound impact on coverage. When an insurer files a claim for damage to a home caused by fire, storms, or other covered perils, the policyholder expects the carrier to provide the financial security for which premiums were paid. While the insurance industry carefully crafts policies to mitigate their liability, policyholders benefit from the fact that ambiguity in the language will be construed against the insurance company. When an insurer refuses to pay a homeowner the full value of a claim, an experienced insurance claims attorney can review the policy for ambiguities that may open the door to coverage.
A recent case from another state provides an illustration of the impact of skilled analysis of insurance contract ambiguity in a coverage dispute. In Wilson v. American Family Mutual Insurance Company, the policyholders purchased a “Gold Star” 100% replacement insurance policy. The home burned down after the insured had been making premium payments for eight years. When the homeowners submitted a claim, the insurer eventually offered to pay $419,000 (policy limits) for the house structure plus an amount for a cost of inflation adjustment indicated in the policy.
The insured filed suit after the insurer refused to pay an amount closer to the actual replacement cost of the home. The amount of the policy limit had been based on a calculation conducted by a computer program that the agent was required to run when the homeowners sought to purchase the policy. An expert found that the actual cost to replace the home would be $665,000. The insured testified at trial that he was not worried because he had a “100 percent replacement cost” policy.
The insurer was also paying additional living expenses (ALE) in the amount of $2,500 during the insured’s period of displacement from the home. While the insurance company sent checks for the repairs based on the stated policy limit, the insured returned the checks because of the substantial difference between the amount of the payments and the actual cost to rebuild the home. The dispute culminated in the insurance company sending a letter indicating no further ALE coverage would be paid because the insured failed to rebuild within a year of loss as required by the policy.
While the insurer argued that the amount calculated by the software program as the replacement cost constituted a limit on coverage, the insured contended that the policy was ambiguous. Relying on the contention that ambiguity must be construed in favor of the insured, the homeowner noted several different definitions of the limit on coverage. The insured pointed out that the policy was designated as a “100% replacement cost” policy and that the amount calculated by the computer program was far less than this expense. Despite the insurance company’s reliance on the computer generated value, the insured also pointed out that the policy also provided an exception that permitted the carrier to provide 120 percent of this amount. Because the policy failed to define “limit” or “replacement cost,” the appellate court found that the policy implied multiple meanings of the limit on coverage, so the policy was ambiguous. Given the importance of interpreting conflicting or confusing policy language in insurance claims disputes, homeowners should seek prompt legal advice when their insurance carrier refuses to pay a legitimate claim.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].