...in violation of ordinance or law and that it needs to be repaired or replaced, the burden of proving that the loss is excluded will fall upon the insurer — if the policy is an “all risks” or causes of loss special form. The insurer, therefore, must be able to point to a specific exclusion to sustain its denial of loss. Conversely, the burden of proof rests with the insured if a named peril policy applies (basic or broad form). In other words, the insured must prove that one of the insured perils caused the loss in order to activate the coverage.
If a building is suspected of being subject to code changes since its original construction date, the owner would be well served to obtain the counsel of an architect or builder to determine its exposure to loss. This is a particularly important consideration when a building is in an earthquake or wind zone.
Whether the insured has sufficient limits of protection is a burden that falls solely upon the insured. Even though limits can be difficult to determine, no one but the insured is to blame if they are insufficient. As noted, increased cost of construction coverage does not become payable until after the property has been repaired or replaced.
Also, if coverage applies for increased cost of construction, then the time element coverage needed to account for the longer- than-anticipated time to repair or rebuild would be activated, to the extent that it was purchased. Like coverage applicable to property policies, time element coverage, such as loss of business income and/or extra expense, does become payable until there has been an otherwise covered loss involving the property.
Mr. Malecki is a principal of Malecki Deimling Nielander & Associates, LLC, an insurance and risk management firm. He began his career over 50 years ago and has held the titles of insurance underwriter, broker, insurance company claims consultant, archivist, historian and teacher.
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