Don’t get left out in the cold after suffering a property loss; read the fine-print of your policy and know your rights!
The absolute last thing a family such as yours wants to worry about in the wake of a devastating property loss, is the possibility of having your insurance company deny your claims covering your additional living expenses. Unfortunately, we have found this to be a common issue in our industry, mostly because of the sometimes-confusing and loophole-ridden wording of insurance policies.
Most policies contain language similar to the following:
“If a covered loss renders the residence premises uninhabitable, we will pay the required increase in living expenses you incur to maintain your normal standard of living. Payment will be for the shortest time required to repair or replace the premises; or, if you permanently relocate, for the shortest time required for your household to settle elsewhere. Payment will not exceed the limit of liability shown on the declaration page or 12 months, whichever occurs first. This period of time is not limited by the end of the policy period.”
At first glance, this paragraph above seems rather welcoming. It may seem that your insurance company is willing to do whatever it takes to cover your additional living expenses until your home is ready to move back into. The trouble is, though, that many of these words lead to something insurance companies refer to as “areas of interpretation.”
The content of the Additional Living Expenses (ALE) section of your policy is often littered with potential traps and loopholes that can perplex the policy holder, and give the advantage of interpretation to the insurer.
So, let’s take a look at the steps you can take to ensure that you will receive what you are entitled to after disaster strikes.
1. Does suffering a loss automatically entitle me to ALE payments?
First and foremost, to be entitled to ALE, the loss suffered must be covered under your particular policy. Not every loss that makes your home uninhabitable is covered. The loss must be one that is named directly in your policy, or, is one that is not excluded in your policy.
Take flooding for example. Your home may be considered uninhabitable, but unless damage caused by flooding is included in your policy, you may not be entitled to ALE.
Taking it one step further, even if the loss is covered under your policy, you have to make sure that you are complying with any and all conditions present under the policy. Such as, an Examination Under Oath (EUO) or other compliance with your insurance company’s investigation.
2. What constitutes an “uninhabitable” home?
To be entitled, your home must be in an uninhabitable condition. What is uninhabitable? Can it differ from case to case? Yes, it can…
“Uninhabitable” is usually construed as “not suitable to live in” and “requiring the occupants to leave the residence.” Clearly, if the loss has caused the house to not be in compliance with local building, housing, or habitability codes, it will be considered uninhabitable. Also, if a home does not have heat, plumbing, electric, or running water, it will likely be deemed uninhabitable, therefore entitling you to ALE.
However, it isn’t always this cut and dry.
What if one part of the home is damaged, such as the master bedroom and bathroom, and the insured chooses to still live in a portion of the home which are still considered habitable? In such instances, this would be considered a “partial loss” and you would likely not be entitled to any ALE, as you are still living inside the home.
But what if the dryers brought in to remove moisture are insanely loud, or the plumbing has to be shut off while repairs are being made? Or what if you have an allergy to mold, which turns this “partial loss” into a total loss for you, because you can’t step inside without having an allergic reaction.
This is where those loopholes and traps can come back into play. Usually, insurance companies apply a “reasonable person” standard to these cases, often requiring scientific testing to demonstrate the presence of mold, or other things that are likely to cause an allergic reaction.
What if the kitchen is destroyed, leaving it without power or water, forcing the occupants of the home to go out to eat for all meals. That brings us to the next area of interpretation, the interpretation of “your normal standard of living.”
3. Is there a limit to the total amount of money I can receive from ALE payments?
ALE provisions are not intended to place a homeowner into a better position than they enjoyed prior to the loss. ALE provisions become payable when the “normal” living conditions of the insured change and the carrier is bound to pay only the “increase” in living expenses to maintain a normal standard of living. ALE does not provide payments for a policy holders regular mortgage payments, or normal food bills, it only pays for the costs that are increased from the normal standard of living.
An example would be as follows:
If you live in a two-bedroom home, you are likely entitled to a two-bedroom home under your ALE coverage. You friend down the street that lives in a five-bedroom, 11,000 sq. ft. home, is entitled to replicate that lifestyle under their ALE coverage. Additionally, if you typically eat dinner at home every night, you are entitled to the additional costs that you would incur by being forced to eat-out every night.
4. How long are you entitled to payments under your ALE coverage?
This topic might be the point that causes the most friction between insurance companies and policy holders every time we see it come up. The industry standard, is the “shortest time required to repair or replace your home.”
Naturally, problems can arise when the insurance company determines the “shortest time” is less than the actual time it takes to make repairs. This often happens when a policy holder is given a quote by a contractor in which he or she states that the work will take, for example, six months to complete.
However, it may take upwards of two months of back-and-forth to secure payment for the contractor from the insurance company. Contractors can’t be expected to start work without first securing payment, thus leaving the project delayed. Is the homeowner entitled to recover payments for the extended period of time the repair took?
This is a question of interpretation, and requires resolution on a case by case basis. There is little case law available to help, but in our experience, it seems that a policyholder is typically entitled to ALE for not only construction time, but also for the time it takes to secure the financing for the project.
5. Does an expense have to already be incurred in order for it to be owed by the insurance company?
The main purpose of ALE is to provide policy holders with the means to maintain their normal standard of living when disaster strikes. It is understood that ALE should be the first payment an insurance company provides to a policy holder in order to find a comparable home to occupy.
What if your insurance company states that it will not provide any ALE payments until they are incurred? This could, and has, resulted in many financial hardships, where policy holders are now expected to make double payments, such as mortgage payments AND rent payments for their temporary home.
At first appearance, being required to incur the two payments frustrates the very purpose of ALE coverage in the first place.
In response to this, some insurance companies are reacting by writing policies that require proof of out-of-pocket expenses and receipts before benefits will be provided. Advances are also becoming more difficult to obtain despite hardships faced by policyholders. Determining whether ALE will be paid in advance, or sometimes even at all, can depend entirely on the language of the policy and the state involved.
As you can see, Additional Living Expense, or ALE, claims can often be much more complicated than they first appear. In fact, these claims may seem minuscule in the grand scheme of things. However, an ALE claim is most likely a policy holders largest concern as it directly concerns both shelter and food.
Due to this uncertainty in the interpretation of coverage of such a vital piece in the recovery process, hiring a skilled and experienced public insurance claims adjuster such as Gavnat and Associates can help make this process so much easier.
Don’t get taken advantage of when you find yourself at your most vulnerable. Contact Gavnat and Associates today and get on track to receive the settlement you deserve.