Additional Living Expense Once the Insured Moves

July 2, 2018

My client incurred a fire at their home which was under contract for sale. The date of closing was scheduled for 3/22/18 and the fire occurred on 3/17/18. As a result of the loss they incurred extensive fire and water damage throughout the majority of the building. The building will not be able to be put up for resale or be occupied for at least 8 months. The insured has already purchased another home in Florida, moved and has an additional mortgage and normal living costs on the home in Florida. With the home sale now cancelled, the insured is forced to incur additional expenses that will be above their normal standard of living having to pay for the cost of 2 homes for the next 8 months or until the home is repaired and sold again.

 A claim is being filed for the additional expenses of mortgage, tax, insurance, utility costs that the insured will now be forced to incur to repair the property as a result of this fire. The insurance company is covering the repairs to the building but has been hesitant on their interpretation of the policy coverage for loss of use claim.

The following is the language in the policy (form HO-3 06/91) regarding Coverage D – Loss of Use:

 "1. Additional Living Expense. If a loss covered under this Section makes the residence premises uninhabitable, we cover any necessary increase in your living expenses incurred by you so that your household can maintain its normal standard of living. Payment shall be for the shortest…"

 Are we correct in interpreting that the increase in living expenses being incurred by this insured i.e. the additional mortgage, taxes, insurance, utility costs on the home damaged by the fire should be covered within this policy?

Kentucky Subscriber

 You need to look at the rest of the language for ALE – payment is for the shortest time required to repair or replace the damage, or if you permanently relocate, (emphasis added) the shortest time for your household to settle elsewhere. The insured has resettled; while it is unfortunate that the insured cannot now sell the house that had a fire, and has significant additional expenses, the insured has settled into a new home and that is the end of ALE payments.

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