Question about Additional Replacement Cost funds Johanna Tackitt asked 2 years ago
Question about Additional Replacement Cost funds

Hi there! My family and I lost our homes in the Mountain View Fire in Coleville, CA on November 17, 2021. After the fire, and the emotional rollercoaster ride that goes along with that experience, we ultimately decided to rebuild our home. We have our plans, permits, and are beginning to break ground. Travelers insurance is insisting that we cannot access the ARC (part b 50% rider: $217,500) funds until we have fully exhausted part A ($435,000) primary coverage. As you can imagine our funds are quickly evaporating with the accrued costs such as power, water, plans, windows, doors…and we are concerned that there will be a delay in receiving part b when the part A funds are depleted. I am sure you have known many fire victims who have experienced the lack of services such as contractors and trades and we live in a rural area where we have very limited skilled labor. Our question is: Are we entitled to the ARC funds prior to part A being depleted? Travelers initial estimation to replace our home is $622,000 which is $30,000 shy of our max policy. Our rock deck, as our adjuster explained, would easily make the $30,000 shortfall for max policy. Our actual costs will be well over the max policy and understand we will need to make up the difference. However, times are tough right now and we need piece of mind knowing we will be able to fund the $652,000 max policy to replace our home. We have more than proven that we are committed and actively moving forward to rebuild our home. Another factor is our contractor came out of retirement to help our locals. He is 71 and if we have a delay we are concerned that we will lose him. Can you let us know what your thoughts are?

Johanna Tackitt

1 Answers
Daniel Veroff Daniel Veroff Expert answered 2 years ago

Hi Johanna,

This is a very common and stressful scenario. Your insurance policy includes a base dwelling limit and an extended replacement cost limit. The base limit is payable up to the limit whether or not you incur any expenses, as long as the actual cash value of the loss is at or higher than the base limit. Actual cash value is the estimated cost to rebuild minus depreciation for age and condition of parts of the home that are normally repaired and replaced (common exclusions are foundations and framing). If your insurance policy’s extended replacement cost provision states that it is not payable until incurred, California courts have held that language is enforceable. Once you spend a dollar more than your dwelling base limit that has been paid to you, you will start to incur costs and be able to make a claim within the extended replacement cost limits. You may also get Travelers to agree to issue payments once you sign a contract for work that will exceed your base limit payment, as opposed to making you spend money first and then seek reimbursement. Carriers do not always agree to that, but we always argue the costs are legally incurred once you undertake an obligation to pay them, even if you are paying when work is completed, etc.