The insured's house in Rhode Island was destroyed in hurricane winds. The insured is a natural handyman (although his day job is an accountant), and he decided to rebuild the house himself from scratch, working diligently nights and weekends. Since he has a talent for this, materials & labor only ended up costing him less than the replacement cost estimate but more than ACV. Is he owed ACV, RC, actual cost, or policy limits?
Notable Timestamps
[ 00:15 ] - The insured's home undergoes a total loss covered under the standard ISO HO3 with standard replacement cost and Coverage A limits of $450K. ACV was determined to be $200K, and the replacement cost estimate was $400K.
[ 01:00 ] - The insured, a handyman, rebuilt the house from scratch for $300K, including materials and his own labor.
[ 02:15 ] - Tim and Alissha prefer to hire help, but Mike shares a story about how he once attempted a sump pump repair with limited success…
[ 05:43 ] - Twenty states are "valued policy states" where the insurer must pay the policy limits on a total loss to discourage policy limits consistently higher than replacement cost and the resulting higher premiums. This doesn't apply here.
[ 07:03 ] - Mike suggests paying $200K until the work is confirmed, then the remaining $100K for the balance of the actual work done, even though the replacement cost estimate was higher.
[ 09:10 ] - Tim confirms that according to the policy, the insured is to receive the lowest of: the replacement cost estimate, actual cash value, or actual cost incurred. The philosophy to make the insured whole.
[ 10:26 ] - The insured's own labor could be paid. It's hard to figure out what "overhead & profit" would be in this scenario.
[ 12:00 ] - If the insured didn't keep good records to substantiate the self-repair, some courts would rule against them.
[ 14:00 ] - If the actual cost to repair falls under ACV, however, the insured can always simply make the ACV claim.
[ 15:30 ] - If the insured rebuilds somewhere else, he is still only entitled to the replacement cost estimate for the original location.
[ 17:30 ] - Tim provides a recap of the scenario and the points above.
Your PLRB Resources
Coverage Question - Are DIYers entitled to the cost of their labor? - https://search.plrb.org/?dn=54422&src=gsa
Q&A: "The Do-It-Yourselfer: ACV (Defined as Replacement Cost Less Depreciation) and RC" - https://search.plrb.org/?DN=39042
PLRB Homeowners Policy Annotations - Replacement Cost Loss Settlement - 80% Insured (HO96) - https://search.plrb.org/?DN=26
Employees of member companies also have access to a searchable legal database, hundreds of hours of video trainings, building code materials, weather data, and even the ability to have your coverage questions answered by our team of attorneys (https://www.plrb.org/container.cfm?conlink=sec/cq/default.cfm) at no additional charge to you or your company.
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The views and opinions expressed in this resource are those of the individual speaker and not necessarily those of the Property & Liability Resource Bureau (PLRB), its membership, or any organization with which the presenter is employed or affiliated. The information, ideas, and opinions are presented as information only and not as legal advice or offers of representation. Individual policy language and state laws vary, and listeners should rely on guidance from their companies and counsel as appropriate.
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