​Loss-of-use claim (Fire)

15 Replies

I have a condo that had a fire and the insurance company only paid out the reminder of the current lease.

I am unable to show, lease, or sell the unit while it is being repaired.

Does anyone have any advice on how to convince the insurance company to continue paying loss-of-use?

Any help or advice would be appreciated!

It depends on your policy language. What were you paying for in regards to loss of use coverage and why is it taking longer to get it back on market than the remaining term of the tenants lease.

We need more information. How much was left on the existing policy? If it was 90 days or more, I would say that's sufficient time to renovate the unit and get it back on the market. If it was less than 90 days, the insurance company is probably shorting you some lost rent.

Talk to your insurer. Maybe they will let you file for additional losses if the work takes longer.

The fire was in the common area, my unit got smoke damage only, but the the city permits took a while to get.  I only had about a month left on the contract.  I have talked to them a few times and keep pressing.  I told them that a the lease should have rolled into a month to month, etc.  I don't know if I will get anywhere with that line of argument.  I also thought about trying to argue that I had a lease in place at the time of the loss and I was unable to show the unit due to the loss so they are liable for loss of use post lease.

I wonder if there is some gray area or is this black and white?

@Thomas S.   Below is all the language in my policy that refers to Loss of Use

OUR PROMISE—Loss Of Use Coverage

No Deductible Applies

These coverages are not limited by the expiration of this policy.

“We” will not pay for loss or expense due to the cancellation of

any lease or agreement.

This coverage does not apply to loss caused by “fungi,” wet or

dry rot, or bacteria other than as provided under ADDITIONAL

PAYMENTS, Fungi, Wet Or Dry Rot Or Bacteria Coverage.

Fair Rental Value

If an insured property loss covered under PROPERTY

PROTECTION—SECTION I, OUR PROMISE—Dwelling Coverage,

OUR PROMISE—Other Structures Coverage or OUR PROMISE—

Personal Property Coverage, makes “your” “residence premises”

uninhabitable, “we” will pay for “your” loss of normal rents

resulting from the loss, less charges and expenses which do not

continue while the rented part of the “residence premises” is

uninhabitable. “We” will pay this loss of normal rents only until

the rented part is habitable. These payments will not exceed a 12

month period.

Did you have Business Income - Dependent Property coverage? If so, your getting screwed, but it sounds like you have a rental dwelling policy that pays loss of rent to you for the time period it takes to reasonable repair the insured dwelling, not the attached common area.

Keep disputing, might get you a few bucks, but it seems that smoke damage could be cleared in one month. So it’s a sound denial.

@Derek Lacy you are correct, it is just a rental dwelling policy.

 They insurance company picked the restoration company, the smoke damage is all covered under the condo policy due to bylaws.  They couldn't work on my unit until permits were pulled due to some detail the fire department noted.  

They are denying because they say it is "not rented now" (lease expired) and hence I am not actually recognizing a loss.

Oh. Yes an official denial reason helps. If that’s all they got. Was it rented at the time of the occurrence (the fire)?

I can see a denial based on reasonable time. I can see a denial based on no damage to subject property (as you stated all loss, but loss of rental income, was that of the COA).

I don’t see how they deny because the lease may have expired (because it may not have).

@Derek Lacy thanks for your comments.

It's a pretty messy situation.  The place had one month left on the lease.  Insurance did pay out that one (last) month of the lease.  They say they don't have to pay more since I do not have a current lease in place.  

Also, I had let the tenants move out early prior to the fire, but never cancelled the lease.  That said, there was nothing keeping the tenants from exercising their right to turn the lease into a month-to-month (albeit unlikely).

I mentioned this to the supervisor, but he suggested that line of reasoning would not get approved.

Originally posted by @David Green :

@Derek Lacy thanks for your comments.

It's a pretty messy situation.  The place had one month left on the lease.  Insurance did pay out that one (last) month of the lease.  They say they don't have to pay more since I do not have a current lease in place.  

Also, I had let the tenants move out early prior to the fire, but never cancelled the lease.  That said, there was nothing keeping the tenants from exercising their right to turn the lease into a month-to-month (albeit unlikely).

I mentioned this to the supervisor, but he suggested that line of reasoning would not get approved.

I wouldn't push for additional loss of rent and consider the existing payout a bonus. You have a weak case given the unit was vacant at the time of the loss. a tenant would not be able to notionally renew month-to-month if there was no tenant to begin with. Insurance companies always ask for a lease to show evidence of actual income that you were expecting. Additionally, if you had tenants that were about to move in and a lease signed prior to the fire, that would be evidence that you had a valid loss of rent claim. I had a similar situation with a flood claim prior to getting vacancy filled, and because there was no lease signed, there was no claim to be made of loss of rent. anything else is projection and they would get bogus claims for rent being $4000/ month for 12 months. Its hard to prove a future loss if there is no documentation accompanying. The master condo policy obviously pays for the repairs in common area, but doesnt have a loss of use clause for landlords either. good luck!

@David, 

I'm an insurance coverage attorney. I'm happy to take a look at the policy language. Since it was occupied at the time of the fire, and you can't fill it until the repairs are complete, you are suffering a loss of rental income. While there's some speculation involved in calculating the amount because the lease was ending, you may be able to argue based on your vacancy time exceeding expected (historic or pro forma) vacancy rates.

@Michael Pepe   thanks for your reply.  That is how I felt too.  I have not had a single day of vacancy in 5 years.  It is very easy to rent and I am unable to show it.  I will reach out to you if they come back with a "no" from my last request.

IMHO it is pretty shady for insurance companies to not payout loss of use under the vacancy rule.  It's not something I knew about, and I suspect most people are not aware of it until they get burned (no pun intended).  This creates a huge risk for anyone simply turning over a property which for some properties is 10% of the time.  So basically 5-10% of the time they can deny your claim.  

David,

Looking through your facts you presented here I see:

1.  You have a covered loss.  Your policy extends coverage for normal rents resulting from the loss during the period of restoration. 

2.  The period of restoration includes obtaining permits for the restoration.

3.  Vacancy provisions don't kick in unless the property is truly vacant (not unoccupied) for 30 or 60 days, and that is usually only limited to certain types of losses, i.e. vandalism.  I have never seen that provision applied to a fire (12 years, thousands of claims, most in the Chicago area).

4.  The lease was to expire within 30-60 days.  They don't pay for the expense due to the cancellation of a lease so don't demand that, but there's no language on limiting coverage relative to the expiration of a lease.  Demand normal rent for the period of restoration.

Don't speculate or get too creative with adjusters or supervisors.  Stick to facts and policy language and be firm about it.

Tim

@Tim W.   Thank you so much for your reply.  I plan to follow up with the supervisor this week (they never call me back or meet their follow up commitments).   I will stick to the facts you listed and see how he responds.  


We are talking at least 6 months of rent now at 2100/month.  It is creating a lot of pain for my family!!!

Thanks

Along the same topic - does it make sense to even pay extra for loss of rents coverage in the first place. I ask because it appears that most damage to a rental (in my case townhomes) would likely take a month or so to fix. So u just get one months rent. Plus more importantly i will always try my best to avoid making an insurance claim if possible because once u make it ones insurance premium will most likely increase on the subject property as well as any other properties you may have (in the CLUE database). So its a costly move to make unless there is substantial damage. I currently have loss of rents coverage for my 5 townhomes but am considering removing it. Any thoughts on this.