Insured property owners need to be thoughtful about two important deadlines that often fall on the same date but are not the same. These two deadlines are the deadline to claim or complete repairs to recover replacement cost benefits, also known as RCBs or depreciation, and the statute limitations. The two are not the same and need to be separately considered by property owners.

Deadline for Replacement Cost Benefits

Many insurance policies include a deadline that pertains to completing repairs.  If the deadline is not met the insurer can claim it only needs to pay the actual cash value of the property and not the replacement cost value. For those new to these terms, the actual cash value is the value the property just before the loss (fire, hail, wind, etc.), The replacement cost value is the cost to repair or replace the damaged property. The gap between the two is often known as depreciation because the actual cash value is calculated by the cost of repair minus the depreciation in the property.

Not all deadlines to recover replacement cost benefits or depreciation are written the same. There are very important distinctions.  Note the following examples:

Example No. 1:

You may make a claim for loss covered by this insurance on an actual cash value basis instead of on a replacement cost basis. In the event you elect to have the claim settled on an actual cash value basis, you may still make a claim on a replacement cost basis if you notify us of your intent to do so within 180 after the loss.

Example No. 2:

If you receive an actual cash value settlement for damaged or stolen property covered by replacement coverage and you have not reached your limit, you may make a further claim under this condition for any additional payment on a replacement cost basis provided:

    • You notify us within 180 days after the loss of your decision to repair or replace the damaged or stolen property; and
    • repair or replacement is completed within one year of the date of loss.

The underlining is my emphasis.  The first example only requires the notice of your intent to repair. The second example requires notice of an intent to repair, and in addition, the work actually has to be completed within one year.  Those are two very different requirements.

What does your policy contain? I urge you, or professional, to read what your policy actually says. Do not rely on oral statements by any agent or adjuster no matter how much you to like them, trust them, or find them credible.  In the end what really matters is what the document says.

I have seen many insurance companies argue that repairs must be completed within one year. Yet when I review the policy I see no such requirement. The only requirement is notice of an intent within 180 days.  What applies in your situation? Read that policy.

Deadline for a Lawsuit

Property policies also include a deadline to file suit. This is a different deadline even if it falls on the same day as the replacement cost deadline. This deadline is usually in a section of the policy labeled “suit against us” or something similar. It states that all lawsuits arising from an insurance claim must be initiated within the deadline or else the claim expires.

This deadline is often driven by a state law. State law will mandate that policies that encompass the peril of fire be written with a one-year or two-year deadline. The deadline depends on the state law for where the property is located.  Minnesota has a two-year statute of limitations whereas Wisconsin has a one-year statute of limitation.  Yet Wisconsin also has a statute that includes many exceptions such as a demand for appraisal or agreement with an insurer.  When there is a proper appraisal the period of limitations is tolled.

Many property owners confuse these two deadlines.  Do not do that. I would separately calendar the deadlines and take appropriate action.

If you need help with the deadlines found in your policy do not hesitate to contact me.