Navigating ALE coverage during COVID-19 stay-at-home orders

Coverage Q&A: With stay-at-home orders in place, how will insurers respond to additional living expense coverage?

Every claim is different, and some insurance policies can be difficult to interpret for unique situations. FC&S Expert Coverage Interpretation, the recognized authority on insurance coverage interpretation and analysis for the P&C industry, makes it simple to find credible answers to your complicated coverage questions. Analysis brought to you by our FC&S experts. 

Editor’s Note: Business interruption coverage has received a tremendous amount of attention during the coronavirus pandemic, and rightfully so. However, it is not the only line of business impacted by the virus. This week’s question explores how homeowners insurance coverage also can be affected. 

Question: The COVID-19 pandemic is challenging the Insurance Industry in areas of coverage interpretation that were not a component of the underwriting and rating process. Under a Residential Homeowner HO3 policy, how are the following scenarios responded to:

  1. The home sustained a covered loss, before the COVID-19 pandemic outbreak, making the house uninhabitable and triggering additional living expenses (ALE) coverage for the insured(s). Because of limitations in place, directly and indirectly related to the various stay-at-home orders, contractor repair activity is taking longer than usual. This involves suspensions of service and extended repair time. Does ALE coverage respond to this delay, which increases the ALE cost of the claim?
  2. The home sustains a covered loss, but the house remains inhabitable. The insured(s) is seeking ALE coverage while the repairs are being made out of the fear of coming into contact with a potentially infected construction worker, even though the workers are taking the necessary precautions in compliance with CDC guidelines and social distancing. Does the ALE policy respond?
  3. The home sustained damage from a covered loss and became uninhabitable. The insured(s) were placed in temporary housing, and ALE coverage was provided. The repair to the house is now completed, but the Insured(s) do not want to return to the house since it is located in a ‘hot spot.’ Does the policy ALE respond?

— Washington Subscriber

Analysis: If an insured has a physical loss to the dwelling, many issues can arise. Should the insured be relocated if one part of the home is damaged, and should the risk of potential COVID-19 exposure be considered? Also, should the level of virus in the community or the health of the insured be factored into the decision, and how should additional living expenses be reviewed?

Answer: To learn the answer to this week’s coverage Q&A, please log into your FC&S Expert Coverage Interpretation account.

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