This article originally ran in The Legal Intelligencer on August 30, 2018.
The Pennsylvania Superior Court has ruled that general contractor overhead and profit (GCOP) was not required to be factored into two homeowners’ actual cash value settlements with their insurer for water damage to their properties.
In reversing the ruling of the lower court, a three-judge Superior Court panel consisting of Judges Jack Panella, Correale Stevens and Judith Ference Olson ruled that not only do the Truck Insurance Exchange policies with plaintiffs Konrad Kurach and Mark Wintersteen explicitly exclude GCOP from actual cash value settlements, but there is no state law requiring the inclusion of GCOP in those payouts.
The plaintiffs sued the defendant for bad faith in connection with their homeowners’ insurance policies. The plaintiffs were customers of Truck’s who suffered water damage to their homes that was covered by the policies, according to Panella’s opinion.
Summarizing the facts of the case, Panella said, “Truck reviewed the claims, and determined that the services of a general contractor would likely be necessary to repair the damaged property. Neither Wintersteen nor Kurach pursued the option to repair their damaged property. Rather, they pursued an alternative remedy provided by their policies: actual cash value settlement. Truck calculated the amount of the actual cash value settlement excluding GCOP. Kurach and Wintersteen believe this exclusion is improper under Pennsylvania law. Wintersteen is a putative class action plaintiff, while Kurach seeks only to vindicate his own rights.”
Truck argued there was a policy exclusion regarding GCOP, but the trial court sided with the plaintiffs’ argument that state law required it to be factored into settlement calculations.
“Here, the parties are in conflict over the issue of whether GCOP should have been included in the calculation of the actual cash value settlement,” Panella said. “The homeowner’s policy provides that ‘actual cash value settlements will not include [GCOP] … 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 plaintiffs pointed to the court’s ruling in Gilderman v. State Farm Insurance, in which the parties argued over the meaning of actual cash value in a homeowners’ policy, determined to be the cost of repairs. Panella noted that the decision never went into public policy.
“In contrast, the Truck policy at issue here explicitly defines actual cash value in a manner congruent with Gilderman: ‘Actual cash value—means the reasonable replacement cost at time of loss less deduction for depreciation and both economic and functional obsolescence,’” Panella said. “Also congruent with Gilderman, the policy promises to pay GCOP ‘only … if it is reasonably likely that the services of general contractor will be required to manage, supervise and coordinate the repairs.’ As highlighted above, the policy then precludes GCOP from actual cash value settlements ‘unless and until [the insured] actually incur[s] and pay[s]‘”
Robert Feltoon of Conrad O’Brien represents Truck. “Truck is pleased with the outcome of the appeal, and appreciates Judge Djerassi’s willingness to authorize interlocutory review of his summary judgment ruling. Feltoon notes that the Superior Court devoted a number of pages in its decision to a discussion of its jurisdiction to hear the appeal, even though the plaintiffs did not oppose on that ground,” he said in an email.
Jonathan Wheeler represents Kurach did not return a call seeking comment. Howard Silverman represents Wintersteen and also did not return a call seeking comment.
(Copies of the nine-page opinion in Kurach v. Truck Insurance Exchange, PICS No. 18-1058, are available at http://at.law.com/PICS.).