Our insured is a hotel that suffered damage to some of its rooms as a result of water damage. The insured is a franchisee and has an agreement with the hotel chain that requires replacement of damaged decor with current decor; all of the rooms on the same floor must be updated to the current decor. The hotel has a replacement cost policy, but the other furniture was not damaged. The carrier's position is that it is not responsible for the non-damaged rooms. What should the carrier pay?

California Subscriber

This scenario differs from the matching issue about which we often receive question. The carrier is correct in not paying to bring all of the rooms up to the current decor. There is no loss or damage to the other rooms, and while the rooms would not match each other, this is not something that would be apparent to guests. Nothing in the self-contained rooms themselves would be mismatched.

If the chain requires franchisees to maintain a uniform look to all rooms on a floor, that falls more under the cost of doing business. If the rooms themselves are not damaged, it is not an insurance matter to bring them up to speed with the other rooms.

If items in the rooms themselves are not matched, that would be a different matter. For instance, if a headboard needed to be replaced on one bed but a matching one could not be found, then both headboards should be replaced.

This premium content is locked for FC&S Coverage Interpretation Subscribers

Enjoy unlimited access to the trusted solution for successful interpretation and analyses of complex insurance policies.

  • Quality content from industry experts with over 60 years insurance experience, combined
  • Customizable alerts of changes in relevant policies and trends
  • Search and navigate Q&As to find answers to your specific questions
  • Filter by article, discussion, analysis and more to find the exact information you’re looking for
  • Continually updated to bring you the latest reports, trending topics, and coverage analysis