Victory for the Good Guys: Navigating a Familiar Claims Scenario

Insurance Carrier Misapplies Policy Provision, Victimizing Insured in Claims Settlement

In a recent case involving Farmers Mutual Hail Insurance Company of Iowa, an insured individual was improperly victimized by the misapplication of a policy provision regarding replacement cost coverage. The insurance carrier limited the payment to Actual Cash Value (ACV) because the damage was discovered more than six months after the loss occurred.

The policy provision in question stated that a claim for an additional amount payable under replacement cost terms must be made within six months after the loss. However, the insurance carrier misapplied this provision by adding a requirement that repairs must be made within six months of the loss to qualify for replacement cost.

The insured individual had repaired or was in the process of repairing the damaged property, meeting the requirement for replacement cost. The carrier’s decision to pay only ACV was based on their own misinterpretation of the policy provision, which did not grant them the authority to make such a decision.

This case highlights the issue of insurance carriers misusing policy language to limit claims payments unfairly. The insured individual in this case was entitled to replacement cost coverage based on the specific qualifiers within the policy provision.

It is crucial for insurance carriers to adhere to the terms of the policy and not impose additional requirements that are not supported by the language. In this case, the carrier should do the right thing and pay the insured individual the replacement cost they are owed.

Overall, the industry needs to address and prevent the misuse of policy language in claims settlements to ensure that insured individuals are treated fairly and receive the coverage they are entitled to.