My client lives in Marin County, California where the costs of the building trades are much higher than in other areas. A dispute has arisen because the cost of painting the house on the inside, via a contractors sub-bid, is roughly double what the Xactimate program estimated the cost to be. The insured will have actually expended an amount in excess of the settlement, based on Xactimate pricing, in doing the actual repair. The insureds position is that the insurer owes what the insured “actually and necessarily” spent for the repair of the like and kind and not what a computer platform estimates it to be, for the purpose of resolving the claim. What would the Insured be entitled to, the amount spent or the estimated amount by Xactimate for the same work?

California Subscriber

You do not mention the policy you're using, so I'm referring to the ISO HO 00 03 05 11; your wording may be different. Under the loss settlement condition, settlement is for no more than the least of: the limit of liability, the replacement cost with like kind and quality, or the necessary amount actually spent to repair or replace the damaged building. While an estimate is important in determining the amount of the claim and Xactimate should be using territory as part of their price determination, the policy language is the final say. If the necessary amount to repair/replace is the lesser of the limit of liability or the replacement cost with like kind and quality, then that is what should be paid. The insured always has the right of appraisal if all other conditions have been met.