The Matching Dispute Between Policy Owner and Insurance Carrier

What happens if a loss occurs to your home and the insurance company covers the cost to repair and replace damaged areas – but, due to age, shape, size, color, or availability of materials, the newly rebuilt parts of the property failed to match the appearance of other undamaged sections?

This “matching” issue is frequently in dispute between insurance carriers in its insureds. Generally, matching is a principle in the insurance industry that seeks to ensure that uniformity is maintained after an insurance company pays for repairs and replacements on a property. If the property owner then determines that a lack of uniformity exists between the repaired and undamaged portions of the property, they may seek payment from the insurance company to repair or replace the undamaged portions so that everything matches.

Insurance companies generally will argue that they are only required to provide coverage for “direct physical loss or damage to property.” They argue that their obligation as an insurance company is to only repair or replace damaged property, not the undamaged portions that might not match the newly repaired portions. Insurance policyholders, on the other hand, argue that any repairs on a property should result in a uniform, matching appearance. They want the insurance company to cover the costs of ensuring that the whole property remains as it was before the damage occurred.

 

What is required in Illinois? An opinion from the Seventh Circuit Court of Appeals from August of 2019 shows how a court approaches the issue. There, hail and windstorm directly damaged the siding of 2 sides of the buildings. Philadelphia Indemnity Insurance Company agreed to pay $2.1 million to the condominium association for that damage. However, the condo association sought additional money to replace the siding on the other two sides of the buildings because matching siding was no longer available – they argued that they were entitled to have the buildings repaired so that, as before the storm, the siding matched on all 4 sides. The insurance company refused to pay the additional amount.

In deciding the issue, the Court started by examining the terms of the insurance policy and noted that the policy was a replacement-cost policy. According to the Court, a replacement policy provides a make-whole remedy that must strive to approximate the situation the insured would have occupied had the loss or damage not occurred. The policy in question required the insurance company to pay for direct physical loss to covered property caused by or resulting from the storm, with the amount of loss being the cost to repair the lost or damaged property with other property of comparable material and quality and used for the same purpose. The court thought that this language favors the interpretation that the unit of damaged property is the building as a whole, and not solely each elevation or each panel of siding. According to the Court, the storm altered the appearance of the buildings such that they were damaged. Condominium buildings with mismatched sidng are not a post storm outcome that the insured was required to accept under the replacement cost policy.

Also important here is that the Court noted that their decision was based on the “specific contract language used” in the insurance policy. Cases involving different contract language from different areas of the country were “not that helpful.” It also mentioned that their approach left plenty of room for common sense in situations involving more limited damage. For instance, if one shingle at the corner of a slate roof is damaged and no matching replacement shingle is available, a building owner would not be entitled to an entire new roof.

 

With this case in mind, insureds should be wary when an insurance adjuster tells them that Illinois is a “no matching state.” To the contrary, each individual insurance policy must be examined to determine whether that particular insurance policy provides for matching coverage. Also, common sense should also dictate whether matching should come into play. Just as the Court noted that one damaged shingle from a roof should not result in the replacement of the entire roof, many damaged shingles might warrant a total roof replacement.

To know more about this important issue, you can read the full opinion: Windridge of Naperville Condo. Ass’n. v. Philadelphia Indemn. Ins. Co., 932 F.3d 1035 (7th Cir. 2019), or contact Mag Mile Law for more information.

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