Fire insurance policies were just addressed by NY’s highest
Court. Real estate agents should get familiar with these policies because
value-add agents are successful agents, particularly in the commercial setting
where fires often spur relocations and the availability of multiple brokerage
commissions.
In the case before the Court, the insurance company
disclaimed coverage because its policy had a time limit for claims, but required
that the cost of replacement be known in order to recover for a loss. However,
the cost wasn't known until construction was complete, which didn't happen
until after the time limit for the claim. Hence the predicament for the insured
building owner.
Specifically, in Executive
Plaza LLC v. Peerless Insurance Company, it took the building owner over 3
years to renovate over one million dollars in damages to its property, but the
policy only gave the owner 2 years to submit its loss.
Great news – the Court ruled that “such a contractual
limitation period, applied to a case in which the property cannot reasonably be
replaced in two years, is unreasonable and unenforceable.”
So, the policy’s purpose of insurance except where you need
it was negated by the Court.
Now, you understand a predicament
faced by your commercial building owners and you understand that in NY,
insurance companies can no longer play the game of impossibility to avoid
paying out a claim. So, go armed with knowledge when you help commercial
tenants relocate after a fire and when you help a new building owner with their
purchase and getting insurance.
