180 days: no reporting deadline

Insurance departments exist, in part, to protect consumers from improper actions by insurance companies. One such measure is the improper handling of claims. A recent example is homeowners’ claims and supposed late reporting of hail damage. The timing facts are:

• May 3, 2021: a hailstorm occurred that may have caused damage to the roof;
• February 22, 2022: The damage was discovered and the carrier was reported.
• February 23, 2022: The office control officer spoke with the insured and explained “180 days saved”
• March 4, 2022: The insurer (Universal North America) issues an ACV (for about half the replacement cost amount);
• On or about March 16, 2022: The insured submitted a complaint to the Insurance Department of the Higher Committee; And the
• On or about March 29, 2022: The Insurance Department of the Supreme Council issued a decision siding with the insurance company.

The policy facts are as follows:

• Coverage is written on ISO Form HO 00 03 10 00; And the
• No approvals to change replacement cost (RC) or ACV loss adjustment terms

Universal, in its response to the Insured and the SCDOI, stated that because the claim was reported more than 180 days after the damage occurred, the insurer lost its right to claim the replacement cost. The carrier message reads:

“Because you have failed to timely and actually report this claim for more than 6 months (180 days) from the date of the reported loss, this claim will be treated in actual monetary value only as a time frame for the collection of any depreciation that would have expired.” .

To support its position, Universal quotes this ruling from the homeowners’ ISO model:

2.e. You may disregard the replacement cost loss adjustment provisions and file a claim under this policy for losses to buildings on an actual monetary value basis. You may then claim any additional liability in accordance with the provisions of this Clause C. Loss Adjustment, provided that you notify us of your intent to do so within 180 days after the date of the loss.

After investigation, SCDOI stated: “The company’s response indicates that since the loss was reported more than 180 days after the date of the loss, the time period for collecting recoverable depreciation has expired. We reviewed your homeowner’s policy contract, inspection report, and hail history report. After careful review, it appears to have been Process your claim in accordance with the terms and conditions of your policy contract.

Unfortunately, this 180-day myth is often a misapplied policy clause. Carriers regularly attempt to improperly apply this wording. This has become a reality (unfortunately) and not the real problem. The real problem is that the body charged with regulating the insurance industry in the country erred. SCDOI should know and understand the language of politics much better than this.

Let’s review what this policy says (remember that there are no approvals to change this language).

SECTION I – TERMS

c- Loss settlement

2.e. You may disregard the replacement cost loss adjustment provisions and file a claim under this policy for losses to buildings on an actual monetary value basis. You may then claim any additional liability in accordance with the provisions of this Clause C. Loss Adjustment, provided that you notify us of your intent to do so within 180 days after the date of the loss.

Within this provision, there is no authority for the insurance company to make any decision or take any action. All power is given to the insured. Note who can ignore the replacement cost loss adjustment clause – you (the named insured). The insured can, if Treplace decide, opt for an ACV settlement. And if that’s the decision made, they (the insured) can change their mind and bear the cost of replacement – provided they do so within 180 days of the loss.

Nowhere in this provision does it say that the insured must discover the loss within 180 days of the damage to obtain the replacement cost. This formulation simply does not exist. The ISO Uncertified Homeowners Policy states that coverage is provided on a replacement cost basis provided certain conditions are met, specifically:

• The insured fulfills the condition of insurance up to the value; And the
• The building/structure has already been repaired or replaced.

If the insured meets these conditions, the replacement cost is due. If an insurer wants to limit coverage to the ACV for claims reported after 180 days, there are specific property endorsements used by the many carriers available to achieve this goal. If the 180-day myth was true, there would be no reason for such an endorsement.

It’s bad enough when an insurance company fails to understand their own policy. It is even worse when the entity charged with protecting consumers from harm does not understand the policy. Unfortunately, SCDOI was wrong and did financial harm to one of the members of the public it was supposed to protect. Carriers are supposed to look for coverage; But even more so than carriers, insurance departments are supposed to find coverage if there is any ambiguity (which in this case does not exist).

For a more detailed analysis of this 180-day myth, see: