Our commercial property insured is a condominium complex. When we applied for the policy, we requested a blanket limit on the buildings of $1.3 million. We also included building code upgrade coverage. We attached a statement of values showing the replacement cost of each building in the complex. 

Recently a fire destroyed one of the buildings in the complex. On the statement of values the replacement cost for this building was shown as $250,000. As it turns out, the insured will need about $300,000 to replace the building, haul away the debris, and do some code upgrades. We told him that there was no problem because of the blanket limit.

However, the adjuster and his supervisor are adamant that the $250,000 shown on the statement of values is the most they will pay. When we put blanket coverage on this complex, we did it for just this reason—to make sure that a building would be truly replaced in the event of a total loss.

We think that the adjuster and his supervisor are reading the policy incorrectly and would like your opinion.

Alabama Subscriber

You are correct. When a blanket limit applies to buildings on a policy, that amount is the total available for any loss—whether it is a loss to one building or to all buildings. Since code upgrades and debris removal are included in the limit of insurance, those costs are also included in the $1.3 million.

By including the statement of values that lists the buildings, their description, and an amount for each one, you were not requesting that amount of coverage for each building. That list was a guide for the underwriter. Its intent is to help the underwriter price the risk and to let the insurer know exactly what its total exposure is.

The most important thing to remember about blanket coverage is this: in the event of a loss to the property covered under the blanket amount, that entire amount applies to the damaged property, whether one building is damaged or all of them are damaged.

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