April 8, 2010

When an insured is a tax-exempt entity or has a certificate of sales tax exemption, and a claim is paid on repairs to insured buildings or contents, is the insurer obligated to include sales tax in the claim settlement? Proceeding under the assumption that the tax is assessed for materials only and the tax is charged on the basis of a sale of those materials to the insured who is the contractor’s customer, if the insured is not obligated to pay tax it would seem that making the insurer pay the tax in settlement of loss could constitute unjust enrichment of the insured. What do you think?

Wisconsin Subscriber