January 20, 2022

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Additional Living Expenses: What Does Your Policy Cover and For How Long?

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What are additional living expenses?

Additional living expenses are typically included as a coverage in homeowner property insurance policies under “Loss of Use.” In a recent blog post, Is Your Insurance Company Threatening to Prematurely Terminate Loss of Use Benefits, Merlin Law Group attorney Dan Veroff discussed Loss of Use benefits and what carriers are doing to curtail those benefits prematurely. As stated in that blog post, Loss of Use benefits are intended to cover the cost of temporary placement when the insured premises suffers a covered loss that renders it unusable until repaired.

What do “additional living expense” policy provisions generally look like?

The following provision is an example of what “additional living expense” coverage provides:

C. COVERAGE D – Loss Of Use
The limit of liability for Coverage D is the total limit for the coverages in 1. Additional Living Expense, 2. Fair Rental Value and 3. Civil Authority Prohibits Use below.

1. Additional Living Expense.
If a loss by a Peril Insured Against under this policy to covered property or the building containing the property makes the “residence premises” not fit to live in, we cover any necessary increase in living expenses incurred by you so that your household can maintain its normal standard of living.

Payment will be for the shortest time required to repair or replace the damage or, if you permanently relocate, the shortest time required for your household to settle elsewhere.

Or the following provision:

D. Coverage D – Loss Of Use
The limit of liability for Coverage D is the total limit for the coverages in 1. Additional Living Expense, 2. Fair Rental Value and 3. Civil Authority Prohibits Use below.

1. Additional Living Expense
If a loss covered under Section I makes that part of the “residence premises” where you reside not fit to live in, we cover any necessary increase in living expenses incurred by you so that your household can maintain its normal standard of living.

Payment will be for the shortest time required to repair or replace the damage or, if you permanently relocate, the shortest time required for your household to settle elsewhere. This coverage does not apply to additional living expenses incurred during any time period wherein you voluntarily and/or through municipal mandate evacuated your “residence premises” in anticipation of a “Hurricane Occurrence” and/or following a “Hurricane Occurrence”.

The language in both policies reveal two important things about payments for additional living expenses:

  1. Such payments are meant to ensure that policyholders maintain their “normal standard of living,” and
  2. such payments are available for the shortest time required for damages to be “repaired” or “replaced.”

How do insurance carriers cut off payments for additional living expenses prematurely?

The scenario where I have most often seen carriers attempt to cut short payments for additional living expenses are water losses with ensuing mold issues. Following such losses, carriers will often pay a preferred contractor or remediation company to perform some water remediation or mold remediation services. Carriers will then issue payment under the policy’s “additional living expense” coverage for the policyholder to live elsewhere while these services are performed. Once the initial “dry out” process has been performed, however, the carrier will then cease payment for additional living expenses. Carriers will reason that they are no longer obligated to make payments for additional living expenses since the dry out process is complete. The issue, however, is that the dry out process entails primarily demolition—tearing out certain materials such as drywall, carpeting, etc.—but does not necessarily include the “reconstruction” of any affected areas.

Contrary to what some carriers may lead homeowners to believe, policy language and reality both indicate that additional living expenses are necessary until the damages are “repaired” or “replaced.” It is unfortunate that some insurance carriers will pressure their insureds to return to homes where hazardous conditions remain by cutting off payments for additional living expenses. Coverage for additional living expenses represents the very reason why consumers purchase property insurance—to ensure that the roof and walls which keep them out of harm’s way remain in intact. But what good does purchasing property insurance do if insurers can place consumers in harm’s way by cutting off payments for additional living expenses prematurely?

If you have a property insurance claim and feel that your carrier has prematurely cut off payments for additional living expenses, reach out to an attorney at Merlin Law Group to take a look.

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