How Many Deductibles for Multiple Loss Locations–Using FC&S to Help Judges Make the Correct Decision

Many commercial property owners and investors hit by Hurricane Matthew may insure multiple buildings under one policy. Depending on the insurance coverage form, one or multiple deductibles may apply. I was thinking about this while reading a recent case indicating that multiple deductibles applied.¹

As I read the opinion, I kept thinking, “did the policyholder attorney ever show other policy forms which are much clearer and state words to the effect that “locations damaged from one event or occurrence will have the deductible applied separately to each location?” I then read the policyholder’s brief and there was no such argument or showing.

Most judges are not experts analyzing insurance contracts and depend upon attorneys for the parties to educate them. Judges certainly are not thinking about deductibles to multiple locations occurring during a storm like Hurricane Matthew. But, insurance agents, adjusters, and my other nerdy friends who read this blog are thinking about these things. These issues arise all the time at apartment complexes and the answer often depends on the policy form.

The policyholder attorney in the referenced case should have consulted the FC&S Bulletin and an expert in these forms. For instance, the FC&S Bulletin has at least two question and answer discussions on this which could have led to a different result:

Deductible Application for Multiple Locations Loss

Discusses application of deductible when more than one property is insured on single homeowners or dwelling fire policy, or when two separate policies are in place, and the same covered loss damages both properties.

August 1, 2008

Deductible Application for Multiple Locations Loss

If an insured has two separate locations insured on the same ISO homeowners policy, and each location is destroyed by the same tornado, should one deductible apply or two? Would the answer change if they were insured on separate policies? Would the answer change if these are dwelling fire forms?

Michigan Subscriber

The answer depends upon which edition of the homeowners policies is being used. The 1991 homeowners forms are silent as to application of the deductible, so the insured would probably get the benefit of the doubt. However, if a separate deductible was shown applying to each location, then an argument could be made that both should apply. Two policies, with two declarations, would appear to argue for two deductibles.

In the 2000 edition the deductible provision states that “subject to the policy limits that apply, we will pay only that part of all loss payable under Section I that exceeds the deductible amount shown in the Declarations.” Here, if both properties are insured on the same form, an argument can be made that one deductible applies to all Section I damage. But with two policies, it would appear that the deductible would apply separately. Obviously, then, it is to the insured’s advantage to insure both properties on one policy.

If the properties are insured on one dwelling fire form, the 1989 edition does not address application of a deductible. If two forms were used, then, similarly to the homeowners, the presence of a deductible on each declarations page argues for two being applied. The 2002 form states that “Subject to the policy limits that apply, we will pay only that part of the total of all loss payable that exceeds the deductible amount shown in the Declarations.” Here, it appears that even if two properties were insured on one form, presumably each would have a separate property limit of liability, so an argument could be made that two deductibles apply. On the other hand, the “total of all loss payable” could just as easily refer to both properties, and therefore one deductible would apply. The benefit of the doubt would go to the insured.

And,

One Deductible or Two?

How many deductibles should be applied for losses at more than one location?

April 8, 2014

A CP 00 10 form was written on three properties for the same insured, all located at different addresses. Each location is listed with a limit of coverage and deductible on the declarations.

A storm caused damage to two of the three locations.

My superior states that both losses to the buildings will be covered with one deductible taken. I felt that since there is a deductible listed for each location, a deductible would be taken for each loss.

What is the correct interpretation?

Mississippi Subscriber

The CP 00 10 states that when there is loss to more than one item of covered property and separate limits apply, a deductible is applied only once per occurrence. Nothing in the CP 00 10 addresses a situation where different deductible amounts apply to each location. There are other forms that state only the higher deductible will apply, which could be the case with your situation. But absent any other policy language pertinent to the application of deductibles, only one would apply.

Subscribe to the FC&S and do not solely depend on judge made case law to interpret insurance contracts.
1 Sandia Partners, LLC v. Foremost Ins. Co., 2016 WL 5661717 (E.D. Pa., September 30, 2016).