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Appeals Court Remands Dispute Due to Unknown Facts Concerning Valuation of Damages (PA)

November 23, 2022

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The Superior Court of Pennsylvania recently held that a property insurance dispute concerning “soft costs” following water damage must, in the absence of policy definitions, be resolved with the trial court delineating whether specific expenses fall into the category of “rental loss,” “extra expense,” “soft cost,” or another type of claim. In <a href=""><em>Post River Rd., LLC v. Aspen Specialty Ins. Co.</em>,</a> the case involved a dispute between the developers of a New Jersey apartment complex and the insurer of that complex. The complex was damaged when a pipe burst and water flooded finished and unfinished units within the complex. The question before the court was whether certain “soft costs” were covered by the property insurance policy issued to cover the complex.

The insurer paid approximately $250,000, on the basis that “soft costs” should be calculated within the line item designated “business costs.” The insureds, on the other hand, argued for an expansive reading of “soft costs” that would include a total of $1.5 million in mortgage interest, payroll, insurance, real estate taxes, and advertising expenses. The insured developers sued the insurer for breach of contract, seeking the difference between the $1.5 million demand and the $250,000 payment.

The trial court held that that the definition of “soft costs” was not within the scope of the policy’s appraisal provision. The insured developers appealed, in part based on the argument that the trial court conflated their claims for “soft costs” with “extra expenses” that were not at issue in the lawsuit.

On appeal, the Superior Court openly questioned why this litigation could provide any resolution as to the distinction between “soft costs” and “extra expenses” when the developers’ argument was anchored in the idea that “extra expenses” was “wholly unrelated” to the complaint. The Superior Court remanded the case to the Court of Common Pleas for determination of the proper value of “soft costs,” “lost rents,” and “extra expenses.” The Superior Court noted, importantly, that the trial court would be tasked with resolving “which expenses constitute a rental loss, ‘extra expense,’ ‘soft cost,’ or other type of claim.”

Thanks to Jason Laicha for his contribution to this article.  Should you have questions, contact <a href="">Matthew Care</a>.



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