The insurer raises two issues. First, that the roof was not being renovated, and is therefore not covered under the policy. Second, the insurer says that even if the loss were covered they would only owe to replace the damaged asbestos panels with acceptable material and renail the remaining asbestos panels down. They estimate replacing about 10% of the panels, although they may likely damage more in nailing them down.

We do not think this is a reasonable settlement. What is your opinion?

California Subscriber

A

Having reviewed the builders risk coverage form, there is nothing to exclude the loss to the roof. The insuring agreement—the “building under construction” — meaning the building or structure described in the declarations, applies to the warehouse. There is no exclusion for wind damage to the roof.

In the case of Patton v. Aetna Insurance Co., 595 F.Supp. 533 (1984), a builders risk policy was issued to cover a building scheduled for renovation. When fire destroyed a portion of the building before renovation began, the court held that the insured and insurer understood that renovation was intended, and so therefore “construction” could be interpreted as alterations of any type.

This appears similar to your situation. The insurer, the insured location on the builders risk form, and the amount of coverage requested were identical to the location and amount of coverage on the prior commercial property form. The insurer does not appear to have raised the question as to why a commercial property policy was replaced with a builders risk policy, if renovations were all that were intended.

We are of the opinion the loss is covered, and that the entire roof must be replaced in accordance with policy terms.