“Overhead and profit” is a phrase often used in property insurance claims that if included is used to estimate the amount it will cost a contractor to complete a job or repair a damaged structure, and the amount of profits they will obtain from the replacement/reconstruction project. Florida has a unique set of rules regarding overhead and profit inclusion. Florida Statute § 627.7011 provides this form of coverage through an ordinance that describes the extent of replacement cost coverage found in homeowner policies.
In Juvonen v. United Prop. and Cas. Ins. Co., the Florida appellate court held that the insurer was required to include overhead and profit in pre-repair payment if homeowners were reasonably likely to need a contractor to fix their property damage. The court came to this decision by citing the requirements set forth in § 627.7011. It is a protection for the insured because these are costs that must be incurred if it is the only manner that the property could be restored to its proper condition. It would be unfair to not include overhead and profit costs merely because your policy is silent regarding its inclusion in your coverage. Ambiguous language can also lead to insurer’s attempting to by-pass statutory protections, but they are still subject to governing state law. This is why it is important that you are aware of your policy to make sure your insurance company adheres to state regulations.
Another similar Florida case that can assist in clarifying what overhead and profit costs are is Trinidad v. Florida Peninsula Ins. Co.. The holding in this case also concluded that overhead and profit are included in the replacement cost of a covered loss when the insured will likely have to hire a general contractor. Statutory prohibitions requiring the payment of replacement costs created by § 627.7011 were also cited. The court also further defined “Replacement cost” as “the difference between what property is actually worth and what it would cost to rebuild or repair that.” Naturally, one could assume that necessary overhead and profit costs would fall under this classification making it a mandatory expense. This is preferable to actual cash value policies which excludes depreciation unlike a replacement cost policy. In this case the general contractor’s overhead included fixed costs related to the contractor’s work such as salaries, utilities, licenses, and other costs incurred during the replacement process.
Figuring out the content of your policy is no simple task that requires navigation through wordy legal terminology and ambiguous language with multiple reasonable interpretations. An experienced insurance claims attorney can help you decipher your policy and determine the extent of coverage you are entitled to recover in the unfortunate situation that your property is damaged.
- § 627.7011
-Juvonen v. United Prop. and Cas. Ins. Co., 124 So.3d 976 (4th DCA 2013)
-Trinidad v. Florida Peninsula Ins. Co., 121 So.3d 433 (S.C. 2013)