Insurance Claims - Building & Real Property - Part I

Published: 03rd October 2010
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Where a building has been damaged so that a partial loss has been suffered by the insured, then his loss is prima facie the cost of restoring the property to its condition immediately preceding the loss, so that it can be used for whatever purpose the insured intended at the time of loss. Where the building has been totally destroyed, then the loss is the market value of the property immediately proceeding the loss.

However, an indemnity may mean different things to different people. The insurer having agreed to indemnify the insured, the question as to what properly compensates the insured is of course viewed from the perspective of the insured. The insured's "relationship" with the wrecked building appears to fall into one of three categories:

- He may have wished to use the building in its actual pre-loss state;

- He may only have been concerned with the suitability of the building for his particular purpose;

- He may have held the building as an investment only.

The distinction between (a) and (b) was demonstrated in Reynolds and Anderson v. Phoenix Assurance Co. Ltd. [1978] 2 Lloyd's Rep 440. The Plaintiffs had purchased an old maltings which they later insured for 628,000 and used for the storage of grain. 70 per cent of it was destroyed by fire and the court had to decide whether the insured was entided to the cost of replacement in the pre-loss condition, estimated at 250,000, or the cost of a substitute building which would have served the storage purposes of the insured, at about 50,000. The court held that the insured's intention had been to use their maltings in their actual condition prior to the fire, so that their actual loss was 250,000. Where the insurer contends that the insured does not intend to reinstate, then the onus is on the insurer to prove it and, in the absence of proof, indemnity will be the cost of reinstatement less depreciation.

Willis J. Watson is a freelance writer since 2006, living in United States and he writes about he enjoys the policies. If you want to read more informations about Landlord Insurance Quote and also read more reviews about Commercial Insurance Quotes, you can check out his websites.

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