180 Days: Not a Reporting Deadline

Departments of Insurance exist, in part, to protect consumers from improper actions by insurance carriers. One of these actions is improper claims handling. A recent case in point involves a homeowners’ claim and the supposed late reporting of hail damage. The facts of the timing are these:

• May 3, 2021: Hailstorm occurred which may have caused roof damage;
• February 22, 2022: Damage was discovered and reported to the carrier;
• February 23, 2022: Desk adjuster spoke with the insured and explained the “180-day provision;”
• March 4, 2022: Insurance carrier (Universal North America) issued an actual cash value (ACV) loss payment (for about half of the replacement cost amount);
• On or about March 16, 2022: Insured filed a complaint with the SC Department of Insurance; and
• On or about March 29, 2022: SC Department of Insurance issued decision siding with the insurance carrier.

The facts of the policy are these:

• Coverage is written on the ISO HO 00 03 10 00 form; and
• There are no endorsements changing the replacement cost (RC) or ACV loss settlement conditions

Universal, in its response to the insured and the SCDOI stated that because the claim was reported more than 180 days after the damage occurred, the insured had lost its right to claim replacement cost. The carrier’s letter read:

“As you failed to report this claim in a timely manner and actually reported it more than 6 months (180 days) from the reported date of loss this claim will be addressed at Actual Cash Value only as the time frame to collect any depreciation that will be withheld has expired.”

To support its position, Universal quoted this provision from the ISO homeowners’ form:

2.e. You may disregard the replacement cost loss settlement provisions and make claim under this policy for loss to buildings on an actual cash value basis. You may then make claim for any additional liability according to the provisions of this Condition C. Loss Settlement, provided you notify us of your intent to do so within 180 days after the date of loss.

After its investigation, the SCDOI stated, “The company’s response indicates that since the loss was reported more than 180 days from the date of loss, the time-period to collect recoverable depreciation has expired. We reviewed your homeowner’s policy contract, the inspection report, and the hail history report. After careful review, it appears that your claim was processed in accordance with the terms and provisions of your policy contract.”

Unfortunately, this 180-day myth is an often-misapplied policy provision. Carriers regularly attempt the improper application of this wording. This has become the reality (sadly) and is not the real problem. What is disturbing and is the real problem is that the body charged with regulating the insurance industry in the state got it wrong. The SCDOI should know and understand policy language much better than this.

Let’s review what this policy says (remember that there are NO endorsements changing this language).

Section I – Conditions

C. Loss Settlement

2.e. You may disregard the replacement cost loss settlement provisions and make claim under this policy for loss to buildings on an actual cash value basis. You may then make claim for any additional liability according to the provisions of this Condition C. Loss Settlement, provided you notify us of your intent to do so within 180 days after the date of loss.

Within this provision, there is NO authority for the insurance carrier to make any decision or take any action. All authority is given to the insured. Note who can disregard the replacement cost loss settlement provision – the YOU (the named insured). The insured, if Treplace decide, can opt for ACV settlement. And if this is the decision made, they (the INSURED) can change their mind and take replacement cost – provided they do so within 180 days of the loss.

Nowhere within this provision does it state that the insured must discover the loss within 180 days of the damage to get replacement cost. Such wording is simply NOT present. The unendorsed ISO homeowners’ policy states that coverage is provided on a replacement cost basis provided certain conditions are met, specifically:

• The insured has met the insurance-to-value condition; and
• The building/structure is actually repaired or replaced.

If the insured met these conditions, replacement cost is owed. Had the insurance carrier wanted to limit coverage to ACV for claims reported after 180 days, there are specific proprietary endorsements used by many carriers available to accomplish this goal. If the 180-day myth was true, there would be no reason for such endorsements.

It’s bad enough when an insurance carrier fails to understand their own policy. It’s worse when the entity charged with protecting the consumer from harm doesn’t understand the policy. Sadly, the SCDOI was wrong and financially harmed a member of the public it is supposed to protect. Carriers are supposed to look for coverage; but even more than the carriers, Departments of Insurance are supposed to find coverage if there is ANY ambiguity (which there isn’t in this case).

For more detailed analysis of this 180-day myth, see:

• Replacement Cost and the 180-Day Myth; and
• 180 Days and Replacement Cost: Dazed and Confused