Fire Insurance Claim: Inadequate Coverage
The client purchased his home and Homeowners policy in 1993. The insurance company’s agent placed $180,000 in dwelling coverage on the home without inspecting it. The Homeowner questioned his agent because he had paid much more for the home. The agent assured him that $180,000 was sufficient to rebuild the home and said the homeowner also had nothing to worry about because he had “guaranteed replacement cost” coverage.
After a fire destroyed his home the homeowner discovered that rebuilding it would cost $385,000. Making matters worse, his insurance company claimed he no longer had “guaranteed replacement cost” coverage, saying it was taken away by a policy amendment buried in a renewal notice sent to the homeowner eight months before the fire. Of course, the homeowner had no documentation because all possessions were destroyed in the fire.
When the client retained us, we tried to persuade the insurance company to pay his full home rebuilding costs on two grounds. First, the agent had assured our client that $180,000 was enough to rebuild the home. Second, our client was still entitled to “guaranteed replacement cost” because the insurance company had not complied with the law requiring it to give the client, the homeowner, “conspicuous notice” if it reduce his insurance coverage. The insurance company still refused to pay the full cost of rebuilding. We filed a lawsuit, and obtained a court award under which the insurance company not only had to pay the full cost to rebuild the home, but also additional amounts for loss of contents, landscaping, demolition, etc. The award totaled more than $700,000 – money our client then used to rebuild his home.