..and water supply. Suddenly, the magnitude and nature of the loss are much different than originally believed.
The insured, their broker and the adjuster are now facing a much more difficult task in determining what’s covered, what’s not—and what better protection might have been available when the coverage was arranged.
When calculating the many costs involved in repairing or restoring property following its destruction or damage, keep in mind that the costs of removal of the debris from the damaged property and the cleanup of possible pollution resulting from the property damage are in addition to—rather than a part of—the value of the damaged property.
As such, their possible impact on the total amount of the loss, and the coverage limitations on these costs in most standard property insurance policies are frequently overlooked in arranging the coverage initially. Often the result in such cases is disappointment with the recovery made under the policy after a loss occurs.
In examining the coverage available for these costs, a brief look at the history and development of debris removal coverage may be helpful. Under the 1943 New York Standard Fire Policy and its predecessors, no mention was made of debris removal costs as either covered or excluded. This gave rise to controversy, with some insurers routinely including these costs as a part of the claim settlement and others rejecting or resisting payment, contending that this cost was a consequential, rather than a direct, result of the loss, and as such, was not covered.
To clarify the intent of the coverage as including these costs, a debris removal clause was added to the forms attached to the Standard Fire Policy. It simply stated that the coverage extended to include the cost of removal of the debris resulting from the property loss. The debris removal coverage was within, and did not increase, the limit of liability. Debris removal costs were not considered in determining compliance with the coinsurance clause of the policy; however, if a coinsurance penalty was found to apply, reducing the recovery of the property loss, customary adjustment practice was to apply the same limitation to the payment for debris removal.
The coverage was thus limited by the amount of insurance carried, so that in a substantial loss, the property loss plus the cost of debris removal might well exceed the amount of insurance carried, unless debris removal costs had...