I was living in a house owned by family when the Eaton Fire displaced me. I have a lease that lists a rent, but I wasn’t actually paying anything due to financial hardship. My insurance wants to base ALE on my lease. Can I say that I wasn’t actually paying rent? Would that jeopardize my coverage?
Christy Denes asked 2 months ago 1 Answers
Robert Crown Expert answered 1 month ago Hi Christy,
Well, you cannot misrepresent the truth, so yes you would have to answer the question with clarity and conviction. It is likely that your insurer would say, that because you were not paying rent, they don’t owe you that money, and if they do, no more than what you would have paid if you could.
In part, if they did agree to pay you the same amount now, two other questions arise from the answer:
1) would you owe it to them (your relative and would you pay it?) or
2) would you then use it to house yourself now and would that be enough to cover you current housing.
Either answer would also come with a litmus test: Loss of rental income and Additional living expenses are two very different things. Fair rental value might entitle you to collect the same amount of money you weren’t paying but ALE (additional living expenses) would obligate you to spend or pay it.
If you are obligated to pay it, they are not going to necessarily write you check for rent owed to a family member for you to put in the bank, they would insist that the family member show your insurance company an IOU or some other form of promissory note, and make sure the check goes to them, and/or be incurred.
However, a separate question (or two) arises:
1) are you looking to have your current rent paid by your insurance company and
2) is it for more than what you would have paid to your relative before the house burned down?
If the home you rented from your relative has its own policy and the relative’s policy insures for loss of rental income, are they getting paid for their own loss separately too? If you say, “At the time of my lease with my family member, I was experiencing financial hardship” and now you are essentially homeless, I don’t see why they would deny your claim, but they might only pay the difference between the lease amount (you couldn’t afford to pay) and the amount you are now incurring. If they do that, you may not be getting the full amount of what you are likely paying now, only a fraction of it. This will be tricky no doubt.
Depending on the insurance company, they may see the request as economic opportunism, even if the circumstances of your situation are legitimate and heartfelt. However, you can say with impunity, the lease and rental agreement was predicated on me paying $____.00 per month, and had I gotten back on my feet financially, my obligations to my family would not have changed, and I am still obligated to that rental agreement. So, I would have simply paid them back, which I am still obligated to do.
Kindly, Robert
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