I have a VA policyholder. I don't have the exact policy form yet but it is an HO 03 policy with Travelers.

A hail storm damaged the risk in June 2016. The policyholders subsequently sold the house in July 2016. After the new owners closed and moved into the property, they were advised of hail damage to the cedar shake roof by a contractor.

The new owners contacted the policyholders through their realtor and the policyholders – who now no longer owned the house – agreed to file a claim for the damage.

Travelers extended coverage for the loss.

The contractor disputed the claim amount. Travelers subsequently sent a letter to the policyholders stating they would not extend any more coverage – they would not even release depreciation on what they already covered – because the policyholders lost the insurable interest in the property when they sold the house.

The policyholders then agreed to hire me as a public adjuster at the request of the new owners and signed an assignment of benefits to the new homeowners. The insurer is refusing to change their stance.

My thinking is:
1. The insurer was the insurer on record when the loss occurred and therefore owes for the loss.
2. The policyholders have the right to use the funds at a different location.
3. The insurer already extended coverage so they waived their rights to deny payment on the claim.
4. Benefits were assigned to the new owner so there is still an insurable interest in the house. (That was done after the sale, however.)

Do the policyholders have a case to pursue the claim or have they lost that ability?

Ohio Subscriber

I'm looking at the HO 00 03 05 11; the Travelers policy may be different. The ISO form provides coverage for losses that occur during the policy period. The insured's owned the property when the damage occurred, so they had insurable interest at the time, and they gave prompt notice as is required by the policy.

The ISO from requires the assignment to be approved in writing by the carrier. Did Travelers approve the assignment? If the assignment was accepted, then you have a claim being made beyond the policy by people who didn't own the property at the time; that could be a problem. However the policy at issue was in effect at the time of loss, so it should still apply.

Who received the original payment, the original insureds or the buyers? Travelers paid part of the loss and is now claiming that the original insureds have no further claim, even though they paid part of the loss. But if the assignment was accepted, then the payment should have been made to the buyers, and the rest of the claim should be paid. Travelers accepted the loss and made payment, the rest of the claim should be paid.

You have an issue of fact as to who received the original payment and when the assignment took place. I think that's a large part of the issue. If the assignment wasn't accepted, then the original insureds are making a claim for property they no longer own.