United Policyholders Files Amicus Brief on Overhead and Profit in Pennsylvania

Merlin Law Group previously blogged about Konrad Kurach v. Truck Insurance Exchange,¹ where an appeal was recently filed at the Pennsylvania Supreme Court on this question:

Did the Superior Court err as a matter of law in finding that the limitation of payment of General Contractors Overhead and Profit from actual cash value in a replacement cost policy, although violative of binding precedent, was nonetheless valid and enforceable?

On July 29, 2019, attorneys Chip Merlin, Daniel Ballard, and yours truly of Merlin Law Group, along with co-counsel John Ellison and Timothy Law of Reed Smith, filed an amicus curiae brief on behalf of United Policyholders (“UP”), a consumer protection organization devoted solely to the interests of policyholders.

An amicus curiae (friend of the court) brief is a written document making legal arguments from a person or organization that is not a party to a case, but may have a strong interest in the issue being considered. UP has filed amicus curiae briefs since 1991.

In Kurach, the policy defined “actual cash value” as “the reasonable replacement costs at the time of loss less depreciation for both economic and functional obsolescence.”

The policy also stated the following regarding general contractor overhead and profit (“GCOP”):

e. General contractor fees and charges will only be included in the estimated reasonable replacement costs if it is reasonably likely that the services of a general contractor will be required to manage, supervise and coordinate the repairs. However, actual cash value settlements will not include estimated general contractor fees or charges for general contractor’s services unless and until you actually incur and pay such fees and charges, unless the law of your state requires that such fees and charges be paid with the actual cash value settlement.

The term “replacement costs” was not defined in the policy, but as UP stated in its brief, “that is of no moment because it is undisputed that GCOP is properly part of the reasonable replacement costs at the time of loss.”²

Under the policy language, while GCOP is part of the definition of “actual cash value” in the policy, it need not be paid as part of an ACV settlement unless and until GCOP is paid unless the law of Pennsylvania requires that GCOP be paid with the ACV settlement. UP explained that the plain meaning of the policy supports the lower court’s ruling that the carrier may not withhold GCOP from an ACV settlement because Pennsylvania law requires it to be included.

In the brief, UP focused on the public policy considerations and industry custom and practice surrounding the analysis of whether general contractor overhead and profit (“GCOP”) should be excluded in the context of reaching an actual cash value adjustment of a property insurance claim.

You can read a copy of the filed amicus curiae brief here.

We are happy to help United Policyholders educate the courts on important issues facing policyholders across the country—such as recovery of overhead and profit in the actual cash value adjustment of a property insurance claim.
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¹ Kurach v. Truck Insurance Exchange, (Supreme Court of Pennsylvania Docket Number 12 EAP 2019).
² See Br. at 11.