The Pennsylvania Supreme Court granted certiorari in Wintersteen v. Truck Insurance Exchange to examine the appellate court’s holding that general contractor overhead and profit (“GCOP”) was not required to be factored into two homeowners’ actual cash value payments from their insurer for property damage. The appellate court reversed the trial court’s holding that GCOP was required by state law to be included in actual cash value payments. The Supreme Court granted review to address one issue: whether the Superior Court erred as a matter of law in finding that the limitation of payment of GCOP from actual cash value in a replacement cost policy, although violative of binding precedent, was nonetheless valid and enforceable.
In its opinion, the Superior Court analyzed the policy language regarding actual cash value. The policy provided 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 court then examined prior case law to determine if it required GCOP to be a part of actual cash value payments. It found that the case relied upon by plaintiff did not set forth binding Pennsylvania law defining how actual cash value is calculated because it defined the term in the absence of any policy definition and had to examine the intent of the parties.
In the instant case, the court recognized that the policy explicitly defined actual cash value, unlike the case relied upon by Plaintiff. The court also analyzed another case relied upon by Truck Insurance and found that it held that explicit policy language could overcome definitions established by case law. That case also recognized that the definitions supplied by case law in Pennsylvania demonstrate the parties’ intent only where the policy does not explicitly provide for a different outcome. Since the language in Truck Insurance’s policy clearly and obviously provided that GCOP will not be paid to an insured until the insured actually incurs that cost, the court concluded that the trial court erred and that Plaintiff was not entitled to receive payment for GCOP until the cost was incurred.
If the Supreme Court affirms that Superior Court’s ruling, other insurers will likely look to add specific definitions of actual cash value and GCOP to policies that are similar to Truck Insurance’s policy in order to prevent the payment of GCOP when an insured is not going to make repairs. A reversal by the Supreme Court would be advantageous to Pennsylvania policyholders, who will receive GCOP payments even when they choose not to repair their homes. It is likely that the Court will receive many amicus curiae briefs on both sides of the issue as this is an important issue to insurers and policyholders alike.
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