Making the Policyholder Whole: Property Insureance Coverage for Both the Damaged and Undamaged Parts of a "Pair of Set"



A policy will rarely define what qualifies as a “set.” The basic Webster’s definition of “set” is “a number of things of the same kind that belong or are used together.” ( Merriam-Webster’s on-line dictionary 2015). Under a “plain reading” and common sense, a hotel owner or manager could rightfully argue that all of the furnishings in the hotel are part of one “set” as they are “things of the same kind that … are used together” throughout a hotel. This is an example of where an insurer should understand its policyholder client’s business so as to appreciate the coverage it is providing.

There is little case law addressing the “pair and set” clause, but what there is generally favors the policyholder. For example, in Employers Ins. of Wausau v. Avondale Shipyards, Inc., Civ. A. Nos. 82-4034, 82-4185 and 82-4186, 1991WL 329580 (E.D. La. Sept. 6, 1991), a tug boat that sank was part of an integrated tug barge (“ITB”), with the tug and the barge it moved connected and designed to operate together. The court awarded coverage for both the tug and barge, holding that because the entire “ITB was insured under a ‘pair and set’ clause . . . the loss of [the tug] resulted in the constructive total loss of the ITB under the relevant hull policies.” Id. Thus the insurers were liable for the entire value of the barge, notwithstanding that the barge was not lost.

In the examples discussed above of undamaged furniture that is part of a larger matching set, the furniture becomes useless if it cannot be paired with identical furniture to furnish the entire hotel. A couch of a certain design style, standing alone (or worse, clashing with a new décor), is useless in the hotel world. In such cases, there is, as the Avondale Shipyards case provides, a “constructive loss” of the entire set.

Indeed, the concept of a “constructive loss” is inherent in the idea of “replacement cost” coverage, such that it may not be necessary to rely on specific “pair and set” coverage for the clause to be found in the policy. Replacement cost coverage implies “pair and set” coverage, which would normally be covered unless specifically excluded. This was the court’s conclusion in Holloway v. Liberty Mut. Fire Ins. Co., 290 So.2d 791 (La. Ct. App. 1974), where despite the absence of the “pair and set” clause, the court found coverage for replacement of an entire carpet even though only part of the carpet was damaged. See also, Cedar Bluff Townhome Condo. Assoc. Inc. v. American Family Mut. Ins. Co., 2013WL 6223454 (Minn. Ct. App. Dec. 2, 2013) (the court upheld an appraisal award that covered both damaged siding and its matching components under the “like kind and quality” provision of the standard replacement cost valuation clause); Trout Brook South Condo.

A couch of a certain design style, standing alone (or worse, clashing with a new décor), is useless in the hotel world.