Home Owners Policy – Rebuild Costs

The San Antonio Division, Western District, issued an opinion dealing with rebuild costs under a homeowners policy that insurance attorneys need to read.  It is styled, Kirk McClelland and Tamre McClelland v. Chubb Lloyd’s Insurance Company of Texas, and Robert Lynn Pritchard.

This is a dispute over coverage and the conduct of Chubb in its payments totaling $145,290.72 to the McClellands.  The McClellands assert they are entitled to greater amounts and sued Chubb and its adjuster for breach of contract and various violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act.  The Court granted summary judgment in favor of Chubb and the McClellands seek to alter that judgment.  The course refused to alter the judgment.

The background facts are summarized as follows.  The McClellands garage apartment was destroyed by fire.  Chubb insured the property under a “Texas Standard Homeowners Endorsement” as well as a “Texas Platinum Homeowner’s Endorsement.”  Their extended policy limits allowed for “reconstruction cost even if this amount exceeds the limit of liability for your dwelling or other structures as shown on the declarations page.”  The Platinum Endorsement defined “reconstruction cost”:

“Reconstruction cost” means the amount required at the time of loss to repair, replace, or rebuild, whichever is less, at the same location, your dwelling or other structure, using like design, and the quality of materials and workmanship which existed at the time of the loss.

“Reconstruction cost” does not include any amount requird for:

a. the excavation, replacement or stabilization of land under or around your dwelling or any other structure;

b. conforming to any law or ordinance that regulates the repair, replacement, rebuilding or demolition of your dwelling or any other structure; or

c. removing the debris of a covered loss or the property that caused a covered loss.

The McClellands contractor submitted an estimate for the cost of repair excluding the non-covered expenses for $211,450.00.  The cost of the rebuild itself was $106,156.84.

Some contractors were paid directly but the McClelland’s received $145,290.72 directly to themselves.

The Court found that the McClellands presented no evidence in the summary judgment as to how much it would cost to rebuild a dwelling of like design or quality.  Rather, they had presented evidence of what it cost to build a dwelling that was 30% larger than the one destroyed (1,204 square feet to 1,584 square feet).  This Court found that the McClellands had therefore presented no evidence as to breach or to damages of the contractual claims and thus, no evidence of the extra-contractual claims.