I believe that they owe coverage for the flat part of the roof whether or not the insured had it repaired after the first loss. Company B accepted the risk on a replacement cost basis when they insured it, so it is my opinion that they owe replacement cost coverage for any covered loss. However, the adjuster says that it is like insuring a pre-damaged car. This does not seem reasonable because cars are insured for actual cash value, not replacement cost.

In my opinion, this situation is different from one where a company pays for damage, no repairs are done, there is subsequent damage to the same part of the property, and coverage is denied by the company. It would not be fair to have the company pay twice for the same thing. It just seems to me that a new company accepts the house as is when they choose to insure it. We would appreciate your comments.

New Mexico Subscriber.

A

Insurance companies routinely accept coverage on structures that are in many stages of deterioration, offering an insurance contract that promises to replace, new for old, any part or all of the structure if it is damaged by an insured peril. It would be unthinkable to have an insurance company on a homeowners risk ask for a warranty that the structure is brand new, or that the roof had been replaced in a certain year, or that the wood surfaces had been freshly painted not more than six months before the inception of the contract, etc. So, an insurer may not come along after a loss and pick out the parts of the home that it will cover because they meet certain guidelines for soundness or newness.

It is unfair that another insurer may end up paying in part for work that should have been done after a previous loss. If that is true, it is due to sloppy claims handling on the part of the previous insurer. The insured should have recovered only actual cash value until replacement cost recovery was supported by receipts and bills showing that the work had been done.

Nonetheless, the homeowners contract only calls for the insured to provide “specifications of damaged buildings and detailed repair estimates.” Having done that after damage by a covered peril, the insured should be able to rely on the insurer to abide by the terms of the contract or prove why it is not required to do so. Although fraud by the insured can absolve the insurer from payment for a loss, if any fraud occurred in this case it was against the previous insurer and could easily have been prevented as suggested above.