If the amount the inured pays for repairs is less than the amount estimated and that which settlement of the claim was based, is the insured entitle to recovery a pro-rata amount of the recoverable depreciation withheld? Or if the insured has the work repaired for less than the amount on which settlement was based, is the insured unable to collect the recoverable depreciation withheld?

Florida Subscriber

I'm looking at the HO 00 03 05 11. While it is a replacement cost policy and paid at acv until repairs are completed, when the difference between rcv and acv is returned to the insured, the language clearly states that the most paid out is the least (emphasis added) of policy limits, replacement with like kind and quality, or the amount actually spent to repair or replace the damaged building. An example works best.

If the rcv settlement is for $20,000 and the acv is $15,000, yet the insured spends $17,000 to restore the property to its preloss condition, then the insured is only entitled to $17,000. That is the lesser of the limits, replacement cost or necessary amount to repair/replace the damaged parts.

However, if the rcv settlement is $20,000 and the acv is $15,000 and the insured spends $20,000 to restore the property to its preloss condition, then the insured receives $5,000 for the depreciation.