A client's commercial property suffered wind damage. Repair estimates were approved, but weather delayed the repair and the costs increased. The adjustor is denying the additional repair costs.
A client with a CP 10 30 09 17 policy experienced wind damage to a completed structure. Repair estimates were approved by the adjuster and a contractor was hired to repair the damage. However, due to weather, the project suffered delays and the cost of the repairs increased. The adjustor is denying coverage for the additional repair costs, citing exclusion B.2.b: “Delay, loss of use or loss of market."
The agent believes that this exclusion does not apply as the increased costs relate to services being delivered, not construction on a damaged building.
Q: Does the delay, loss of use or loss of market exclusion apply to increased costs caused by repair delays?
Response 1: The additional costs is not from loss or damage to the insured property, it is the additional cost charged by a service company for repair for the loss or damage that has already been sustained by the insured. Since the risk of loss has already been contractually transferred to the insurance company, it is the insurance company, and not the insured, that must absorb the higher costs for the weather-caused delay in completing repairs.
Response 2: I agree with you. Repair estimates are estimates—they evolve up or down as repairs are performed. It is common that supplemental adjustments are made. Traditionally, that included weather delays and changes in cost of labor or materials beyond the control of the general contractor and the policyholder. For example, roofers typically do not build a new roof during a torrential rainstorm.
The exclusion the adjustor cited is typically applied to revenue stream delays or builders risk consequential loss scenarios. Under builders risk policies, a delay in completion that delays a building being put to its intended use in a timely manner typically requires a special coverage endorsement for the consequential loss of delayed opening, delayed start-up or increased soft costs. But, as you are now encountering, some insurers attempt to apply it to increased costs for delays in reconstruction of a damaged building, even when beyond the control of the contractor and insured.
Consider the insured's business income and extra expense coverages, and if the coverage there might conflict with the adjuster's denial.
Response 3: You need to take this issue to a higher authority at the insurance company. This exclusion rules out loss caused by delay. In this case, the loss was caused by wind and the policy requires payment for reasonable costs of repair. If the insured acted in a timely manner to make repairs and the delay was the fault of the weather or the repair contractor, the increase is covered.
On the other hand, if the insured dithered about making repairs and the cost increased because of their delay—for instance, if there was further damage because the insured didn't act promptly—then the exclusion applies.
Response 4: The adjuster is off-base on this one. The causes of loss form is used to determine whether loss or damage to property is covered. That has already been established—the insured has a wind loss. There is no additional claim for new damage. The insured is simply trying to repair the damage caused by the wind. Therefore, the insurer should be looking only at the loss payment conditions in the property form. There is nothing stating that the insurer is not responsible for increased repair costs beyond the insured's control. Cost overruns for various reasons are common in property claims.
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