Getting Insurance Coverage for Termites

As I wrote in my last post, the typical homeowner’s insurance policy excludes coverage for damage from insects. 

However, a careful reading of the insurance policy can save the day.

In a case which I tried a few years ago, we recovered a homeowner’s repair costs from termites.  Ordinarily, this is excluded.

        The clients, husband and wife, owned a lovely brownstone in the Park Slope section of Brooklyn.  To their horror they discovered that termites in the basement had eaten away most of the support joists holding-up the first floor.  The clients had emergency repairs, such as the replacement of the wooden joists, beams, and flooring.  The construction costs exceeded $100,000.

The clients’ insurance company, Reliance Insurance Company, denied the claim on the ground that the insurance excluded coverage for damage due to insects.  However, at a full jury trial we were able to prove coverage because of faulty language in the policy.

The policy was not the ordinary policy with insurance forms promulgated by the Insurance Services Office or ISO.  The ISO forms appear on 99% of all homeowners’ policies.  The ISO policy had a clear exclusion for termites.  However, our homeowners had a “manuscript policy” which was specially written by the insurance company.  The insurance company offered this policy through a special program marketed to New York City brownstone and townhouse owners.  The policy’s exclusion was ambiguous;  the exclusion was not clear. 

Since the policy could be read to offer coverage, the language was ambiguous.  Under the law if the policy is ambiguous it is construed against the insurance company which wrote the policy.  Therefore, the clients recouped their construction costs.

An interesting footnote is that one of the homeowners was an insurance broker and teacher at the College of Insurance.  She saw the ambiguity and was aware of the law.  Ordinarily, most homeowners would have accepted the insurance company’s reasoning and would have “eaten” the loss.

Mark E. Seitelman, 10/15/10,


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