Chip Merlin | Property Insurance Coverage Law Blog | April 15, 2019
Buy Bill Wilson’s book! This is the least I can say after quoting him about “resulting” or “ensuing” loss provisions following “wear and tear” exclusionary language. I am certain his book helped a judge understand how the coverage works.
Here is what he says:
Wear and Tear Exclusions
Just about all that needed to be said on this subject was discussed in the Definitions section of this chapter. The only thing I’ll add is an anecdotal caution that, of all the wear and tear claim denials that agents have brought to my attention, the majority were improperly denied. Now, admittedly, they were likely only brought to my attention because the agent was convinced of this, so I don’t want to imply that a majority of all wear and tear claims are improperly denied. Just be wary whether you’re the denier or deny-ee (I may have just invented another new word).
If a wear and tear exclusion applies, it often applies ONLY to the property that is worn and torn, not ensuing damage. In many cases, wear and tear impacts valuation and not coverage. If a property has a condition or maintenance issue, that should be discovered and dealt with during the property inspection and underwriting phase, not after loss occurrence other than its possible impact on an ACV valuation.1
These situations happen all the time. The judge made up his own example of ten old bolts giving way and then the rest of what the bolts failed to hold up, crashed and broke the rest of the old structure. The worn-out bolts may not be covered, but if you have the right ensuing loss provisions after the “wear and tear” clause, the rest of the loss is covered—even if the rest is old.
The older parts of the structure are the ensuing loss. They did not suffer a loss because they were worn out and broke. They suffered a loss because other parts of the structure broke from “wear and tear.” Those ensuing parts of the loss are depreciated on an actual cash value basis. If replaced, they are then valued at Replacement Cost.
Please read the “resulting” or “ensuing” loss provisions carefully. Depending on the language, you can get a different result.
If you are a public adjuster, insurance agent or an insurance adjuster trying to wrestle with a hard to understand coverage provision and not make a wrong decision, please buy this book and use it. Insurance is important. We defeat its purpose with over-broad use of exclusions.T
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1 See William C. Wilson, Jr., CPCU, ARM, AIM, AAM, When Words Collide: Resolving Insurance Coverage and Claims Disputes (1st ed. 2018) (Emphasis added)