Policyholders To Be Paid Replacement Cost Upon Incurring Debt for Reconstruction

Policyholders To Be Paid Replacement Cost Upon Incurring Debt for Reconstruction

Description Insurer would not pay homeowner full replacement cost until the reconstruction on their fire-damaged home was completed. Court ordered insureds to be paid the replacement cost up front, once they incurred a valid debt to have their home repaired.

Topic Insurance

Key Words Homeowners' Insurance, Replacement Costs, Withheld Depreciation

C A S E S U M M A R Y

Facts A fire damaged the Northrops' home. Insurer Allstate accepted the loss statement that the replacement cost was $74,724 and the cash value of the loss was $64,408. The difference between the figures, withheld depreciation, was not paid to the Northrops. Allstate claimed it did not have to pay that sum until the Northrops completed the repair or replacement. Northrops sued for the sum to be paid; trial court held in their favor; Allstate appealed.

Decision Affirmed. The insureds are entitled to payment for replacement under the policy. The policy did not require the insureds to actually pay out money for replacement before seeking replacement cost coverage. The insureds "spent" money by incurring a valid debt for repair of their house and so were entitled to payment.

Citation Northrop v. Allstate Insurance Co., 720 A.2d 879 (Sup. Ct., Conn., 1998)

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Policyholders To Be Paid Replacement Cost Upon Incurring Debt for Reconstruction
Description	Insurer would not pay homeowner full replacement cost until the reconstruction on their fire-damaged home was completed. Court ordered insureds to be paid the replacement cost up front, once they incurred a valid debt to have their home repaired.
Topic	Insurance
Key Words	Homeowners' Insurance, Replacement Costs, Withheld Depreciation
C A S E S U M M A R Y
Facts	A fire damaged the Northrops' home. Insurer Allstate accepted the loss statement that the replacement cost was $74,724 and the cash value of the loss was $64,408. The difference between the figures, withheld depreciation, was not paid to the Northrops. Allstate claimed it did not have to pay that sum until the Northrops completed the repair or replacement. Northrops sued for the sum to be paid; trial court held in their favor; Allstate appealed.
Decision	Affirmed. The insureds are entitled to payment for replacement under the policy. The policy did not require the insureds to actually pay out money for replacement before seeking replacement cost coverage. The insureds "spent" money by incurring a valid debt for repair of their house and so were entitled to payment.
Citation	Northrop v. Allstate Insurance Co., 720 A.2d 879 (Sup. Ct., Conn., 1998)