The insured owns a house in Louisville, KY, near Churchill Downs. Every year, prior to the first Saturday in May, he rents his house out for two weeks. He secured a renter for $3,000. However, a week before the Derby, his home was destroyed in a fire.
Notable Timestamps
[ 00:15 ] - The adjuster is giving him the Coverage A limits to rebuild the house. But he is also making a claim for Fair Rental Value (Coverage D). ISO HO 00 03 05 11. Is there coverage?
[ 01:36 ] - Trivia Time! The Kentucky Derby was first run in what year? 1898, 1920, 1842, or 1875?
[ 03:30 ] - Fair Rental Value is covered if a covered loss makes that part of the residence premises rented to others or "held for rental" not fit to live in.
[ 05:20 ] - "Held for rental" could apply to someone advertising a rental, or someone with a contract for rental (even if breached due to the loss).
[ 06:16 ] - Fair Rental Value can mean a much higher price than most equivalent units, if it's the week before the Kentucky Derby.
[ 07:29 ] - Fair Rental Value can be informed by prior history of unit rental price for that specific unit or similar nearby units, and it can be affected by the time of year or even the significance of sporting events.
[ 08:50 ] - The sporting event's impact on pricing would not be affected by the renter's intent to attend or not.
[ 09:25 ] - Claiming ALE is likely inconsistent with claiming FRV. Did the insured intend to live in the house, and therefore they need ALE to make them whole for the living space they lost? Or did the insured intend to rent the house, and therefore they need FRV to make them whole for the rental they lost?
[ 11:32 ] - A partial use, partial rental situation might justify claiming both ALE and FRV.
[ 12:35 ] - The paucity of caselaw on Fair Rental Value means that uncertainty is high but variation among the states is low.
[ 13:15 ] - The 2022 ISO HO form made significant changes relating to homesharing apps, and excluded coverage for FRV specifically when homesharing activities are involved.
[ 14:45 ] - Tim's "policies in his pocket" are color-coded!
[ 15:55 ] - If the home was repaired prior to the Derby, but the tenant had cancelled, FRV would likely not apply. The relevant ISO policy specifically excludes coverage for cancellations of agreements. The end of the Period of Restoration closes the window on FRV.
[ 17:25 ] - Tim provides a recap of the scenario and the points above.
Your PLRB Resources
Fair Rental Value For Home Up For Rent At Time of Loss – PCQ.2013.06.11a (Cov Question) - https://www.plrb.org/documents/fair-rental-value-for-home-up-for-rent-at-time-of-loss-pcq-2013-06-11a/
ALE: Travel Costs to Rental Property – PCQ.2014.05.09a (Cov Question) - https://www.plrb.org/documents/ale-travel-costs-to-rental-property-pcq-2014-05-09a/
Fair Rental Value (HO38) (Annotation) - https://www.plrb.org/documents/fair-rental-value-ho38/
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/ask-plrb/) at no additional charge to you or your company.
Subscribe to this Podcast
Your Podcast App - Please subscribe and rate us on your favorite podcast app
YouTube - Please like and subscribe at @plrb
LinkedIN - Please follow at "Property and Liability Resource Bureau"
Send us your Scenario!
Please reach out to us at 630-509-8704 with your scenario! This could be your "adjuster story" sharing a situation from your claims experience, or a burning question you would like the team to answer. In any case, please omit any personal information as we will anonymize your story before we share. Just reach out to scenario@plrb.org.
Legal Information
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.
Music: "Piece of Future" by Keyframe_Audio. Pixabay. Pixabay License.
Font: Metropolis by Chris Simpson. SIL OFL 1.1.
Icons: FontAwesome (SIL OFL 1.1) and Noun Project (royalty-free licenses purchased via subscription).
Sound Effects: Pixabay (Pixabay License) and Freesound.org (CC0).
