Homeowner's Replacement Cost only for Replacement (PA)
In Brown v. Everett Cash Mutual Insurance Company, the Pennsylvania Superior Court found no basis for plaintiffs’ breach of contract and bad faith claims against a homeowner’s insurer on a first party claim. Sabrina Brown and her father, William T. Scott, owned a farmhouse in Carmichaels, Pennsylvania. Everett issued a homeowners policy to the named insureds, Brown and Scott. In July 2007, the residence burned to the ground in a fire that qualified as a covered loss under the insurance policy. In January 2008, Everett issued a check for the actual cash value of the house as well as four months of living expenses totaling $1,800 based upon documentation provided by its insureds. Everett denied the insureds’ request for additional living expenses under the policy because the residence had not been rebuilt in a reasonable amount of time following the fire. Under the policy terms, Everett was required to issue the reimbursement checks payable to both Brown and Scott. Scott refused to sign the check, and it expired 180 days after issuance. Everett ultimately reissued another check to Brown and Scott for the same amount. Brown and her husband filed suit against Everett for breach of contract and bad faith (among other claims). Specifically, Brown claimed that Everett breached the contract by only paying her the actual cash value of the house instead of the replacement value. The policy provided that: When the cost to repair or replace exceeds the lesser of $2,500 or 5% of the limit on the damaged building, we do not pay for more than the actual cash value of the loss until repair or replacement is completed. Relying on this language, the Court determined that Brown was only entitled to replacement cost if she actually rebuilt the house, which she never did. Brown argued that she needed the replacement cost money to rebuild the house. The Court quickly dismissed this disingenuous argument based upon evidence in the record that the house had not been rebuilt due to a dispute between Brown and Scott rather than a lack of money. Therefore, she was not entitled to the replacement cost. Brown also argued that she was entitled to the full policy limit for additional living costs. However, Brown provided proof of expenses for only four months – which Everett had paid. Thus, the Court held that Everett was not obligated to pay the full policy limits for additional living expenses. Lastly, Brown argued that Everett acted in bad faith when it failed to issue separate checks to her and Scott. However, Brown’s policy provided that insurance benefits are made directly to the insureds as they are identified on the Declarations page of the policy – in this case Brown and Scott. Everett told Brown to have Scott give his written consent to allow two separate checks to be issued, however, Brown failed to do so. Everett even offered to deposit the funds into court in an interpleader action so that Brown and Scott could determine their entitlement and again, Brown failed to act on this option. Thus, the Court held that Brown’s bad faith claim lacked merit. Thanks to Marcus Washington for his contribution. For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.
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