Functional Building Evaluation Endorsement as Applied to Partial Loss
December 10, 2009
We have written an old church on a standard ISO form with a Functional Building Evaluation endorsement, CP 04 38 10 00. The building value is a fraction of what it would cost to be replaced but the limit is sufficient to put up a building of the same square footage that would be functional.
The insured suffered a partial wind damage loss. We adjusted the loss based on replacement cost less depreciation and offered that amount.
The insured's agent is demanding that the partial loss be paid without the depreciation, at full replacement cost. Can you please advise if we are entitled to depreciate the loss because it is the smaller amount to settle the claim?
Connecticut Subscriber
It is our opinion that you are not entitled to depreciate the loss. The CP 04 38 states that the insured will receive the cost to repair or replace the damaged portion of the building with less costly material, if available, in the architectural style that existed before the loss or damage occurred. This is not the same thing as receiving a depreciated amount, but is less than the full replacement cost because less costly materials are used.
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