Federal Court Holds Replacement Cost Value Coverage Requires Completed Repairs and an Actual Cost Value Estimate

The District Court granted summary judgment in favor of the insurance carrier in a dispute arising from a hurricane property damage claim. The court found that the insured was not entitled to replacement cost value (replacement cost value) damages because repairs had not been completed and no actual cash value (actual cash value) estimate was submitted. Citing Florida precedent, the court held that under the unambiguous policy terms, the insurer’s obligation to pay replacement cost value damages does not arise until repairs are made.

Following a property damage claim which arose out of Hurricane Sally in 2020, United States District Court Judge T. Kent Wetherell, II granted Axis Surplus Insurance Company’s motion for summary judgment. Following the loss, the insured submitted a sworn proof of loss for the whole loss in the amount of $662,144.84, which was based on a replacement cost value estimate. No actual cost value estimate was submitted on behalf of the insured. Axis determined coverage was available for the loss; however, it concluded the damages were below the deducible. Although the insured made some repairs, the cost of the restorations did not exceed the deductible. The insured claimed to not have the funds to make all of the repairs.

The judge agreed with Axis that the policy was unambiguous and required the insured to complete the repairs before Axis became liable for replacement cost value damages. Further, the insured had only submitted a replacement cost value estimate; as such, there was no competing actual cash value damage estimate to support a claim for breach of contract.

In the ruling, the judge cited to the Florida Supreme Court case of Ceballo v. Citizens Prop. Ins. Corp., 967 So. 2d 811 (Fla. 2007), which found that an insurance company’s liability for replacement cost does not arise until the repair or replacement has been completed. In addition, the court pointed out that it had previously granted summary judgment in favor of an insurer where an insured was seeking additional damages when only a replacement cost value estimate had been submitted (no actual cash value estimate) and the undisputed evidence showed that no repairs had been made to the property. See, Metal Prods. Co., LLC v. Ohio Sec. Ins. Co., 2021 WL 1345525, at 2 (N.D. Fla. April 12, 201), aff’d, 2022 WL 104618 (11th Cir. January 11, 2022). 

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