How to claim the cost of 'contents manipulation'

Analysis brought to you by the experts at FC&S Online, the recognized authority on insurance coverage interpretation and analysis for the P&C industry. To find out more — or to have YOUR coverage question answered — visit the National Underwriter website, or contact the editors via Twitter: @FCSbulletins.

Question: My client is a co-op in Manhattan that had a water damage affecting numerous floors of the building. In the process of doing repair, the HOA’s contractor had to perform content manipulation to make repair in the units. There was no damage to the personal property of the unit owners.

The HOA is insured under the form CP 00 10 06-07 edition. The carrier asserts the cost for content manipulation is not covered because the property being manipulated is not insured by the policy. Several layers of supervisors maintain this opinion.

For years, we have successfully contended the cost is a direct cost of repair, which is usually understood. In this case, to attempt to show potential coverage, I even pointed to the PP of Others in CCC language, even though I still believe it is a direct cost of repair and not excluded by the policy.

Since the HOA’s contractor was performing work they were hired by the HOA to perform, were they not an agent of the HOA and therefore the HOA would be responsible and in control? The carrier still maintains no coverage. Am I missing something in the form that supports their position? Your opinion is appreciated.

— New Jersey Subscriber

Answer: In general, content manipulation charge is an estimate of the costs related to moving contents out or around to do a construction job, and the cost to move the contents back to their original place after the repairs are complete. The movement of property to repair covered damage to covered real property is an expense of labor. It is not damage to “personal property.”

Indeed, the property could have been borrowed or otherwise not covered under the policy; however, the labor expense to move it is still covered. It is a cost of the repair regardless if the property is covered.

Related: 5 tips to creating a home inventory for an insurance claim

New landlord’s oversight spurs claim issues

Question: We have a claim where the client has an HO-3 policy, but had turned it into a rental property two years ago. The insured used to live in the home, which is why they were insured under an HO-3. However, they bought a larger home, moved into it, and they never changed the policy over to a DP3.

The insured recently filed a claim for a small fire in the kitchen. The fire damage is not big at all, but there is some smell of smoke throughout the home.

The claims adjuster for the insurer realized fairly quickly that this was a rental property and stated that they had the wrong policy. The adjuster stated that technically they could deny the claim, but that they were going to go ahead and pay to repair the damage from the fire and wipe down the home for the smoke. However, the adjuster did state that they would not be willing to clean the renter’s belongings of the smoke odor or even to pay to move them around (contents manipulation) while the work was being done to the structure.

We have several questions:

1. Could the insurer deny the entire claim since it was insured under a homeowners’ policy rather than a dwelling policy?
2. When insured under a DP3, we routinely see insurers making payment to move around the belongings of the renters so that repairs can be made to the structure. Why would this not be covered on this claim?
3. If an insurer owes to move the contents around to make way for the repairs to the structure, it would seem that they should also pay to remove the smoke odor from the contents as they would only re-pollute the interior with smoke odor, or cause the smoke odor from the structure to never be successful in being removed?

— Hawaii Subscriber

Related: 6 tips for protecting vacation rental homes

Answer: The homeowners policy clearly states that coverage is for the named insured and the spouse, if a resident of the same household. An insured is “you” and residents of the household. “Residence premises” is defined as the one family dwelling where you reside. As the named insured does not live in the house, it is not his residence premises, and therefore coverage does not apply, even though he is the named insured.

The carrier is fully within its right to deny the claim outright. The exception is when there is a Residence Premises Definition endorsement, HO 06 48 10 15, which provides coverage after the insured moves out of the home is on the policy. Otherwise, there is no coverage.

Covering the cost of storage

Question: We have a flood claim on a property that has suffered water damage to both the dwelling and contents. The policy has coverage for the dwelling and also has coverage for the contents.

The contents are being restored to pre-loss condition and will be put in storage until repairs to the dwelling is complete. Is the cost of the storage covered under the policy?

— Texas Subscriber

Answer: The flood policy pays to relocate property to protect it from flood or the imminent danger of flood. The limit is $1,000 and the coverage applies for forty-five days, but the property must be moved before the flood occurs. The exclusions section states that the policy only pays for direct physical loss from flood; additional living expenses, loss of access to the property, and loss of use of the property are not included. Therefore, the cost to store property until the dwelling is restored is not covered. The property is not relocated to prevent damage from flood, it is simply being stored until the property has been repaired.

How to claim property relocation

Question: Would pack-out and storage of contents for a covered water loss to a dwelling be accounted for under the Coverage A limit or the Coverage C limit? This is a HO-3 policy.

— Virginia Subscriber

Answer: Since the contents are being removed as part of damage to the structure itself, then the removal of contents would be part of Coverage A. If the contents were damaged, then it can be seen as part of Coverage C; but if the sofa needs to be moved to get it out of a soggy room so the room can be cleaned and aired out, it is Coverage A.

Adjuster negotiations

Question: I have a public adjuster challenging me on a DP3 policy (no contents coverage; the insured’s reside at the risk). This is a fire loss.

The first issue is because there is no Coverage C available and in order to complete the repairs, the contents need to be moved. I was thinking we owe content manipulation to remove the personal property to access repairs. Do we owe for storage and return? Or just to return the contents? Unfortunately, there is no space to store the contents at the house — the garage burned to the ground.

The second issue is the public adjuster hired his contractor to place a temporary fence around the property. Apparently, there was an attempted break-in and now the insured wants all the locked windows and doors boarded up. I advised him that damage caused by forced entry is covered if he wanted to pursue a second claim. I don’t feel we owe to board up closed/locked windows and doors; if they were broken or open, then I could see it. The public adjuster is claiming we are not doing our job to protect the property from further damage.

— California Subscriber

Answer: Removal of the contents is required to repair the building so removal is covered; the property can’t simply be left on the street and since the carrier owes to move it to make repairs, the carrier should pay for storage as well. The storage is the result of the loss to the dwelling, Coverage A, and is not related to any loss to the property that would be covered under Coverage C.

As far as boarding up the windows and doors, the policy pays for reasonable necessary measures to prevent further damage. There was no damage caused by theft; there was only an attempted theft. The loss was caused by fire. Boarding the doors and windows is not a reasonable measure to protect the property from further loss; this is not covered. In the duties after a loss section the insured is required to protect the property with reasonable and necessary repairs and keep receipts; however there is no promise of coverage for all the insured’s actions, especially if they are unreasonably cautious.

Mincing policy language

Question: The insured’s dwelling sustained substantial water damage. There was no insurance on the contents but the house was occupied and fully furnished. The contractor has included the cost of some contents manipulation in order to replace the floors and floor coverings. The insurance company is refusing to pay, claiming that is a contents expense. I disagree. The only way to repair the dwelling is to move the contents out of the way. Is the removal of contents covered in the cost of repair?

— Kentucky Subscriber

Answer: The cost to remove the contents should be covered; you are correct in that they have to be moved to fix the floors. The contents aren’t being replaced or repaired, they’re being relocated in order to make repairs to the dwelling. That’s a repair expense for the dwelling, and not a contents expense.

See also:

Insurance questions arise when vehicles get towed

Insurance questions grow alongside mold, fungi and algae

Understanding debris removal coverage, costs and settlements