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We have a claim in Rhode Island involving a tree on the insured property that fell and damaged a very small portion of siding on the risk. The siding is over thirty years old and no longer available. Rhode Island regulations require we replace all of the siding on the entire house. The policy limits coverage due to ordinance and law to 10 percent. Would these limits apply in this case?

Rhode Island Subscriber

You have an interesting situation. While Rhode Island statutes state that all the siding must be replaced, and that is an ordinance or law, it does not necessarily mean that only the ordinance or law provision applies. The provision is for the increased costs incurred due to the ordinance. However, if this is a replacement cost policy, all the siding should be replaced, as otherwise you have not restored the insured to his preloss condition—that of having matching siding. Therefore, ordinance and law provisions should not be invoked because this is how the claim should be settled to begin with, outside of any regulations. The regulation itself agrees with this logic, as follows:

R.I. Admin. Code 11-5-73:9

A. Replacement Cost

When the insurance policy provides for the adjustment and settlement of first party claimant losses based on replacement cost, the following shall apply:

(1) When a loss requires repair or replacement of an item or part, any consequential physical damage incurred in making such repair or replacement not otherwise excluded by the policy, shall be included in the loss. The first party claimant shall not have to pay for betterment nor any other cost except for the applicable deductible.

(2) When a loss requires replacement of items and the replaced items do not match in quality, color or size, the insurer shall replace all such items so as to conform to a reasonably uniform appearance. This applies to interior and exterior losses. The first party claimant shall not bear any cost over the applicable deductible, if any.

Note the last sentence: the state of Rhode Island did not intend for this regulation to allow carriers to invoke ordinance or law restrictions and leave insureds facing potentially extra expenses. The loss should be covered in full.

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