Published in Property Insurance Law Committee Newsletter, Spring 2007. Copyright © 2007 by the American Bar Association. Reprinted with permission.
In the unpublished opinion of Weiler v. Union Insurance Company, No. A-05-454, 2006 Neb. App. LEXIS 150 (Neb. Ct. App. Aug. 22, 2006), the Nebraska Court of Appeals considered whether the terms of an insurance policy required the insurer to replace the siding on an entire house where hail had damaged only one side of the house, but the color of the replacement siding could not be matched to the faded color of the other sides. The court determined that the unambiguous terms of the insurance policy only required the insurer to replace that part of the insured property that was actually damaged.
At the district court level, Union Insurance Company, doing business as Continental Western Group, moved for summary judgment to dismiss Weiler’s claim for hail damage. Continental Western had paid to replace the hail damage to the roof and one side of property and argued that the insurance policy did not require it to pay anything more than damage to the property. The parties stipulated to the following facts: (1) one side of the Weiler’s residence was damaged by a hailstorm during the coverage period of the policy, (2) the metal siding on the residence was old and faded, and (3) it was impossible to match the existing siding with replacement siding. The district court granted summary judgment in favor of Continental Western. Weiler appealed.
On appeal, the Nebraska Court of Appeals reviewed the lower court’s decision regarding the interpretation of the policy de novo and affirmed the summary judgment in favor of Continental Western. The policy at issue covered:
[T]he cost to repair or replace, after application of deductible and without deduction for depreciation, but not more than the least of the following amounts:
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(b) The replacement cost of that part of the building damaged for like construction and use on the same premises
The insured argued that the phrase “direct loss” and “like construction and use” were ambiguous. The Nebraska Court of Appeals disagreed and found that the phrase “direct loss” could be interpreted to mean that Continental Western need only replace the siding damaged by the hail. Because the court determined that the terms of the policy were not ambiguous, the court declined to consider extrinsic evidence offered by Weiler to alter that clear and unambiguous language.
The court also found that the terms “like construction and use” were unambiguous, based the reasoning of Eledge v. Farmers Mut. Home Ins., 6 Neb. App. 140 (1997) – an earlier published opinion by the Nebraska Court of Appeals analyzing an identical policy provision. In Eledge, the court noted that the plain reading of the replacement cost provision “does not require the replacement of the whole when it is factually shown that the whole can be satisfactorily repaired by replacement of a ‘part.’ So long as the building is returned to ‘like construction and use’ as a result.” The Weiler court adopted this reasoning and held that the replacement of the siding on just one side of the building would return the residence as nearly as possible to its pre-damage condition. It is noteworthy that the Weiler court specifically refused to take aesthetic considerations into account in making its decision.
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