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   Coinsurance clause-non application due to total loss
P:  12/27/2007 3:45:17 PM
jarebalo

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This query relates to coinsurance clause application (or in this case non-application) for a property that is located in the state of New York.  It is commonly held that if a risk suffers a total loss, there will not be a coinsurance clause determination. The query is....where is it written? I checked  several commercial property forms (Common Policy Conditions IL0017, Commercial Property Conditions CP0090 and Building and Personal Property Coverage Form CP0010). Neither form references non-application of coinsurance clause feature given a total loss scenario. Also checked New York Insurance Law, New York Codes Rules and Regulations, New York Circular Letters and Opinions of the General Counsel State of New York but this issue does not appear to be addressed. So, where is it written?     


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 There are 13 replies to this message.  There are 13 replies on this page.

P: 12/27/2007 9:08:26 PM
Huskercat

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Assuming your underlying form is the CP0010 Comm Bldg & PP form, the coinsurance clause requires that a % be shown on the Dec Page in order for a coinsurance requirement to be enforced.  Furthermore, if the Optional Coverage "Agreed Value" is selected, then the coinsurance requirement is waived.  Having not worked any NY claims, I'm not in a NY state of mind.  But if your underlying coverage is a form other than the CP0010, I have seen some specific company forms that also waive the coinsurance requirement if the optional RC coverage is purchased. 

Whoever caused you to question this should also be able to give you the source to back it up.  I personally would not do anything without specific instruction from the carrier and a copy of the policy language.  If it is a NY thing, it should be right there in black and white on a policy endorsement...such as "New York Changes", or something of similar description.

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P: 12/28/2007 10:08:35 PM
marcd

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Complying with the typical coinsurance clause (80 percent) does not guarantee that the insured will receive full recovery on a total loss, if the amount of the loss exceeds the limit of liability. The clause sets only the minimum amount of insurance required. If the insured suffers a total loss and is insured to exactly 80 percent of the actual cash value of the covered property, he or she must still look to their own resources to cover the uninsured 20 percent. The insured always has the option of insuring 100 percent of the property's value, even though the coinsurance clause may only require 80 or 90 percent coverage.
The CP forms in use since 1986 apply the deductible after the calculation of the coinsurance penalty. This is in contrast to the pre-1986 forms. Those forms applied the deductible prior to calculating the coinsurance penalty, which is more advantageous to the insured

Marc Dubois Executive General Adjuster M.G.D. Claim Services Inc "Your Commercial Claims Solution"

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P: 5/16/2008 5:49:02 PM
kliney

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jarebalo,

 
Did you ever receive a satisfactory reply to this question?  I am in a similar situation and would like an answer.   

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P: 5/17/2008 1:03:42 PM
TCS

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  I cannot say about New York law, however, in many other states there are Valued Policy Statutes. These statutes say if there is a total loss by Fire the insurer is liable for the policy limit on the structure.
  These statutes negate any co-insurance language in the policy. I am confident that further research will find such a statute in N.Y.
  Following the legal theory of the Valued Policy Statutes regarding fire losses, some companies apply this theory to other total losses, such as,wind, water, etc.

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P: 6/3/2008 11:24:24 PM
groupelms.ca

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If a property is a total loss (without any salvage), the co-insurance will have no effect on the indemnity.

It's a simple matter of mathematical logic!


Ex.:

Amount of insurance: 250 000
Value of insured property : 400 000
Co-insce clause : 80%
Damage : Total loss (400 000)

The calculations:  (250 000/320 000 ) X 400 000=312 500

The theorical amount payable is the limit of the policy (250 000), as 250 000 < 312 500

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P: 6/4/2008 12:30:06 AM
Huskercat

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"It's a simple matter of mathematical logic"...........WHAT??

It's evident from your post that you are a public adjuster, and in addition from Canada.  Now whether you are right or wrong on your answer, no one has verified yet.  But I have yet to see an insurance policy with coverage determined on "mathematical logic".  This specific loss has to do with state law, not multiplication tables or the 20% PA fees based on loss totals.
  

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P: 6/5/2008 12:12:30 AM
Huskercat

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My last post might have come off as being from a "cranky" old xxxx, and I apologize....but it seems like some of the responses while maybe having merit just lack foundation and support for those responses.  So please forgive me if I've hurt any feelings.  (But if you've been adjusting claims for any length of time, your feelings probably can't be hurt anymore, ha!!)   Just trying to stimulate a little discussion.

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P: 8/15/2008 7:37:52 AM
rgibbons

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 Yes, your comment did come across as ignorant.  All the respondent to your question was trying to explain, that there is a Co-Insurance formula that needs to be applied as long as a Co-Insurance % is shown on the Declaration Sheet. 

That example show will determine with the entire liability limit is paid or not.  (Did/Should x Loss = Amount Paid).
 
It does not matter if you are from the USA or Canada, and having worked in both places as an Independent Adjuster, the application of Co-Insurance is the same, unless it is VALUED Policy or 100% Co.

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P: 8/18/2008 11:58:56 PM
Huskercat

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A little confused here as to whom you are accusing as being arrogant.  Or ignorant....or confused...or responding questionabley due to lack of significant coverage information in order to give a somewhat intelligent answer.  The initial post didn't provide enough information coverage-wise to make an answer possible.  And the reason for that was obvious.  When the query was made, the question remained.  Coverage form comes first, and then the math, but never mathematical logic first.  Sometimes you have to consider the source of the question & the motivation.

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P: 8/19/2008 11:02:03 PM
Huskercat

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RGIBBON, I see that you chose to edit your your previous post.  Therefore, my 08/18/08 response to it will make absolutely no sense to anyone who wasn't reading from the beginning.  But for anyone who has followed the topic--and for any experienced adjuster that goes back to the original post--I and others tried to extract a little more information in order to give an informed answer.  Coverage form examples were also presented to try and give an answer.  If you want to call that ignorance (or arrogance, as you edited out of the previous post), so be it.  At least I apologized and 'fessed up the first time around about being a cranky old flatulence.  (maybe that word won't get "x'd" out).   

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P: 9/23/2008 5:53:52 PM
insprojohn

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In 1986  I learned that the NY Standard Fire Policy is the model that FL based its property and liability insurance polices upon.  What is my point?  FL has a VALUED POLICY LAW.  I would be surprised to hear that NY does not have a valued policy law.   If there is a total loss due to a covered peril then the face amount of the policy is payable.   So I am betting this is a valued policy situation. The NY Dept of Insurance can tell you if NY has a valued policy law.

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P: 9/23/2008 6:02:32 PM
insprojohn

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AC/AR x Loss = payment.   However, I have never heard of any insurance company paying in excess of policy limits for a coverage "A"  dwelling loss; unless debris removal and supplemental coverages are INCLUDED.  But never will an insured get more than policy limits for a coverage "A" loss.   There was at one time a RC policy available but AFTER 1992 Hurricane Andrew, there has never been a RC policy written by ISO.  At least not in FL and I took the Program in General Insurance back in 2006 and this was a national exam and it was never mentioned that RC would be available for a coverage "A" Dwelling Loss that are in excess of policy limits.  I am only aware that an inflation guard endorsement is available for purchase.

 

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P: 9/23/2008 6:05:16 PM
insprojohn

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Well now I understand that the maximum payable is $250k NOT $312k.  That [$250k] is what I thought was correct. 

Revisions : 0   |    Posted:  9/23/2008 6:05:16 PM    |    IP:  Recorded    |    Report this post

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