Our non-attached studio is covered under “Other Structures,” but rebuilding at another location in California on a very small lot, where it is attached: covered? Rebecca Braslau asked 11 months ago
Our non-attached studio is covered under “Other Structures,” but rebuilding at another location in California on a very small lot, where it is attached: covered?

Hello,

We lost our home on two acres in the CZU fires in California, which included an unattached studio. The studio is clearly covered under “Other Structures.” In our rebuild, we are building in town on a very small 4,200 sq foot lot, so the studio is being built above the garage, with a shared wall to the primary dwelling.

Our insurance is denying payout of the “Home Protector” (extended coverage). They say “However, the ADU/Studio is permanently attached to the primary dwelling and as such does not meet the criteria for coverage on the Other Structures Protection. For this reason, the Home Protector Endorsement, HO-125 (07-08), only applies to the Dwelling.” Is there any provision specific to California (or in general) that allows us to rebuild the unattached studio in other configurations (attached) to the main structure?

Thank you,

Rebecca

1 Answers
Daniel Veroff Daniel Veroff Expert answered 9 months ago
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Hi Rebecca,

Thank you for your question. I am unaware of any specific law on point, and so any dispute would be resolved based on a court’s interpretation of the insurance policy terms as a legal contract. I will provide a brief overview of the law on contract interpretation as may be applied to this policy form. The HO-125(07-08) form grants an additional 25% of coverage for other structures or dwellings if needed to rebuild what was lost. The form does not appear to state what configurations the structures need to be rebuilt as to qualify for the additional payment. A court may find that the insurance policy terms explicitly grant you the right to rebuild in your fashion, or, a court may find that the insurance policy terms are ambiguous because both the terms can reasonably be interpreted in either your favor or the insurer’s favor. If the court finds the language is ambiguous, the court will look to determine the reasonable expectations of coverage by the objective policyholder based on the policy as a whole. If the court does not believe there were any reasonable expectations, it will construe the policy in your favor.

Practically speaking, because there appears to be no definitive law on point, an insurance company will likely stick to its position unless challenged in court, at which time it may offer to settle the case or a portion of its potential liability, before a definitive ruling occurs. The insurer may also settle if threatened with legal action, or if there is a DOI complaint process ongoing, but less likely. Without any of the above, however, the insurer is unlikely to change its position.