Westmoreland v. Fire Insurance Exchange
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Westmoreland owned a Cobb, California dwelling that was insured for fire loss, with a coverage limit of $372,000. The “open policy” provided up to 125 percent of the limit for “Extended Replacement Cost” coverage ($465,000) for repairing, rebuilding, or replacing the dwelling after a fire. In 2015, the Cobb house was destroyed when the Valley Fire swept through Lake County. The estimated cost to rebuild or replace that dwelling at the Cobb location was $422,676. The Insurer paid Westmoreland $372,000, the actual cash value of the lost dwelling. Westmoreland built a replacement home at a different location for no more than $372,000, then demanded an additional $50,676–the difference between the actual cash value amount and the estimated cost to rebuild at the Cobb location.
Insurance Code 2051.5(c) provided that, where a “total loss” of an insured structure occurs, the insurer cannot limit or deny payment of the replacement costs if the insured “decides to rebuild or replace the property at a location other than the insured premises,” and in such cases, “the measure of indemnity shall be based upon the replacement cost of the insured property and shall not be based upon the cost to repair, rebuild, or replace” at the other selected location.
The court of appeal directed the dismissal of Westmoreland’s suit. Neither section 2051.5 nor the insurance contract requires the Insurer to indemnify Westmoreland for replacement costs that they did not actually incur.
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