Scaffolding Cost Covered by Commercial Property Form?

Q

We provide property insurance for a municipality, written with CP 10 30 04 02 special causes of loss form and an agreed amount endorsement. The insured had constructed scaffolding at his building in order to do substantial maintenance to the building. The cost to lease and construct the scaffolding was more than $165,000.

A number of weeks after the erection of the scaffolding, the insured suffered a covered hail loss to the building. The damage can only be repaired by using at least part of the scaffolding.

The insured feels the insurance company should also contribute significantly to the cost of the scaffolding, since it would have had to pay the expense if the scaffolding were not already in place. The insurer believes it only has the obligation to pay for any additional expense the insured will incur, as the scaffolding was already up for maintenance purposes at the time of the loss.

Does the insurance company have any obligation to participate in the cost of the scaffolding?

Iowa Subscriber

A

Insurance is based on the principle of indemnity, not betterment. The insurance contract pledges to “make whole” the insured to pre-loss condition after a covered event. The fact that the insurance company fortuitously does not have to expend as much to make the insured whole as it otherwise might does not entitle the insured to additional recovery.

In the event the insured can show additional expense resulting from the repairs to damaged covered property (i.e., if the scaffolding had to remain in place for additional time at additional rental or other expense), this amount is reasonably within the claim. If there is no additional expense incurred by the insured, the insurer has no obligation to participate in the cost of the scaffolding.

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