The policy states:

 When an insured loss causes the residence premises to become uninhabitable, we will cover the necessary increase in cost you incur to maintain your standard of living for up to 24 months. Our payment is limited to incurred costs for the shortest of: (a) the time required to repair or replace the premises; (b) the time required for your household to settle elsewhere; or (c) 24 months. This coverage is not reduced by the expiration of this policy.

 The insured decided to move into a 1000 square foot, 2 bedroom, 1 bath home incurring a monthly rental amount of $650.00 excluding utilities. The insured is required to pay her utilities. No claim was made on behalf of the insured related to utility expenses. The insurer agreed to the rent and provided furniture for the home at a considerable savings due to the size of the temporary home.

 The insured's pre-loss expenses at her residence premises were minimal as she owned her home outright therefore, no monthly mortgage payment. Her combined utility cost at her residence premises is approximately $300.00.

 Despite enjoying a considerable savings on the cost of the home and furniture due to the insured's choice of temporary home the insurance company audited the utility expense and determined the pre-loss combined utility expense at her residence premises was approximately $300.00 per month and her new combined utility expense at the temporary rental home is $150.00.

 The adjuster reduced the additional living expense amount due by $150.00, the difference between her pre-loss utilities and her current utility expense.

 PART I

 Under the terms of the policy and the facts of the claim is the insurance company entitled to the adjustment?

 PART II

 Please provide your opinion on the following.

 In light of the fact the insured's temporary location does not meet the bar set by the terms of the policy, in particular the part of the clause that states “…we will cover the necessary increase in cost you incur to maintain your standard of living…” we propose the following:

 In order to make the temporary home meet the insured's standard of living we propose making the temporary home more in line with her normal standard of living. Her standard of living includes a home that is HUD compliant and ventilated (i.e. air conditioned) as she is the foster mother of two minor children and had an air conditioned home. The insured did not realize the children would not be allowed to live with her in her temporary dwelling until she took possession and relocated. Clearly a miscalculation she regrets. We researched the scope and cost to make the temporary home meet her standard of living and find the cost to be considerably less than the other option available to her which is to move to a home that is equal to her residence premises in size and amenities and furnished accordingly.

 We believe our proposal comports with the intent of the coverage part and more specifically the terms of the policy in that the proposed modifications to the home are “necessary ” in order for the insured to maintain her “standard of living” and will represent an “increase in cost” to maintain such standard of living.

 We believe our proposal for modification to the temporary home is not only within the contemplation of the insurance policy, but the proposed adjustment allows a savings to the insurance company all while making its insured happy.

 Do you believe such a proposal comports with the terms of the policy and is fair to the insured and insurer under the terms of the policy?

 North Carolina Subscriber

As far as the utility expenses, did the $300 cost decrease when the insured left the premises? In most cases it drops so then the amount of extra expense is adjusted. For example, pre-loss the insured's utilities are $300; after the loss her expenses drop to $100 since the electricity is on but not being used; the utilities at the temporary location are $150. This is a total of $250 for utilities between the existing residence and the temporary residence, less than the insured's normal pre-loss expenses of $300; therefore the insured is not incurring extra expense due to the loss, the normal expense is just rearranged. Therefore, the insured does not receive any extra expense funds for utilities since there is no real extra expense.

Making permanent changes to a home not owned by the insured is not contemplated in the payment of additional living expenses; the carrier is not in the business of upgrading miscellaneous homes, even though it might save on additional living expense costs. You can make such a proposal to the carrier, but it does not have to accept it. The insurer is within its rights to have the insured move to a separate location.