Public Adjusters: What Are Matching Exclusions Within Insurance Policies?

Matthew Hamblin
By: Matthew Hamblin
PublishedApr 22, 2024
3 minute read

Colorado is blessed with nearly 300 days of sunshine a year. Still, from April to September, residents and businesses in the state are vulnerable to hailstorms. Larger hail can cause widespread property damage, especially to roofs and siding. When claims surge after major hail events, some insurance companies try to limit payouts. One way they try is through a certain loophole called a matching exclusion.

What are matching exclusions within insurance policies? These are clauses allowing an insurer to replace only damaged areas of a property without matching the color, texture, or materials of the undamaged portions. This can result in a shoddy, mismatched aesthetic of the “repaired” property.

Obviously, this is a less-than-satisfying outcome for policyholders.

Actual Cash versus Replace Cost Values

There are two main ways insurers determine payout amounts for insured property:

  • Actual Cash Value (ACV): This is the cost to fix a policyholder’s home, minus the decrease in value due to age or use. This is also known as Depreciated Cash Value.
  • Replacement Cost Value (RCV):  This is the cost to repair a home at today’s prices. This includes the current prices of building supplies and/or belongings of similar items.

Matching exclusions can be particularly problematic for homeowners with ACV policies. These people face significant out-of-pocket expenses to achieve a uniform appearance.

However, even with RCV policies, matching exclusions can lead to disputes over what constitutes “like kind and quality” and whether the insurer is obligated to replace undamaged property to ensure a reasonable match.

The Point of Contention with Matching Exclusions 

When only part of a property is damaged, the insurer may argue they only need to cover that specific portion. However, this can result in a visually inconsistent appearance, potentially diminishing the property’s aesthetic appeal and market value. This is a major concern to the homeowner.

Many states have enacted laws and regulations to standardize how insurers handle matching claims. These rules aim to provide consistency and predictability in this area. Colorado has no statutes to address this issue.

How Colorado Interprets Insurance Policy Terms 

Under Colorado law, policy terms are interpreted as follows:

  1. The plain and ordinary meaning is used, unless the contract specifies otherwise.
  2. If terms are ambiguous or have multiple reasonable interpretations, the policy is interpreted in favor of coverage for the insured.

“Ambiguous language in insurance contracts should be construed against the insurer. However, unambiguous contracts should be enforced according to their terms.”Kane v. Royal Ins. Co., 768 P.2d 678 (Colo. 1989).

More recent case law demonstrates this. Where there’s been ambiguity, case law has favored policyholders. Let’s look at two examples involving hail damage:

Hamlet Condominium Association v. American Family Mutual Insurance Company (2017) 

Hamlet Condominium in Colorado faced wind and hail damage to its facade. Despite their policy promising repair with similar quality materials, American Family Insurance only agreed to patchwork. This excluded the skim-coating necessary for a uniform appearance.

Hamlet demanded an appraisal. A panel of two appraisers, an engineer, and an umpire confirmed that skim-coating was essential for a uniform appearance. American Family still refused to pay.

So Hamlet sued, citing precedent from other states that insurers must match repair materials with materials of “comparable,” “similar,” “like kind,” or “equivalent” quality. The court sided with Hamlet, ruling American Family breached the contract by failing to ensure a reasonable match.

Bertisen v. Travelers Home & Marine Ins. (2024)

After hail struck the Bertisens’ home, they faced partial claim denial by Travelers Insurance, which wouldn’t replace their partially-damaged roof even though an appraisal umpire determined that the roof should be fully replaced. The Bertisens’ homeowners policy did not have a specific matching exclusion.

The umpire in appraisal determined that replacing only the damaged tile rather than the full roof could reduce the quality and appearance of the roof. The Bertisens sued Travelers in December 2020 for breach of contract and bad faith.

Travelers argued there was insufficient evidence to determine the cause of the roof damage, and it considered the replacement of the tile roof with all matching tiles to merely be “cosmetic.” Bertisens argued that their policy’s replacement cost coverage (RCV) provides for the replacement of damaged portions of a building with “like kind and quality” materials and, as such, a mismatched roof of differing materials would not be a “like kind and quality” roof.  

The judge ruled in favor of the Bertisens, noting that “Courts have concluded that language requiring that replacement materials be of ‘like kind and quality’ can reasonably be read to encompass matching coverage.” This affirmed the court’s role in deciding cosmetic damages and upholding the binding appraisal award. The judge also noted that Travelers hadn’t contested the appraisal properly nor proven explicit policy exclusion of cosmetic matching.

What Do Courts Consider ‘Ambiguous Language?’ 

This is the key question you must ponder before recommending a lawsuit against an insurer. After all, few homeowners policies are written in clear, concise language. The ambiguity is often intentional and meant to favor the insurance company.

Colorado case law has grappled with the question of ambiguity, holding that:

“A policy term is ambiguous if it is reasonably susceptible to more than one meaning.”Terranova v. State Farm Mut. Auto. Ins. Co. (Colo. 1990).  

But …

“Mere disagreement between the parties concerning the meaning of terms does not create an ambiguity.”Kane v. Royal Ins. Co., supra.

Inevitably, when the insurer and the insured disagree over policy language, especially concerning matching exclusions, the court must decide. This would call for recommending your client to seek legal counsel.

In Summary 

Property insurance policies vary in terms and conditions. In Colorado, coverage for matching depends on:

  • the specific policy,
  • regulations, and
  • case law.

Some policies have endorsements or provisions that expressly grant or exclude matching coverage. However, most first-party property policies only cover “direct physical loss of or damage to” covered property.

When parties are at an impasse, and policy language is ambiguous, it may be prudent to recommend legal action.

Know a Good Attorney to Recommend? Of Course You Do! 

If your client’s insurance company is acting in bad faith, put your client in touch with my team. The first step is to call 303-688-0944 to begin a case assessment.

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