Allemand v. State Farm Ins. Co – Case Brief Summary (Washington)

In Allemand v. State Farm Ins. Co. (2011) 160 Wn.App. 365, the insureds had a house built in 1940, which was severely damaged by fire in 2007. The policy limits were $89,866, with Option OL providing "an additional sum, equal to 10 percent of the policy maximum, for costs resulting from building code enforcement." (Id. at p. 112.)

While it cost the insureds about $97,000 to replace the house "under modern building requirements," the insurer paid only about $60,000. (Ibid.)

That $60,000 consisted of roughly $51,000 to repair the house to preloss condition (that is, without allowance for required code upgrades), plus about $9,000 from Option OL (10 percent of roughly $90,000).

The Allemand court noted that $9,000 consisted of "the maximum OL coverage for the code upgrades." (Ibid.)

The insureds sued the insurer for the $37,000 difference between the cost to replace the house and the $60,000 the insurer paid. And while they won at trial, they lost on appeal.

The Allemand court reasoned this way: The normal coverage under the policy (Coverage A) did not cover the cost of code upgrades. That left only Option OL, and it was limited to 10 percent of the policy limits of $90,000. The insurer had thus paid everything it was required to pay--the cost of repair independent of code upgrades ($51,000) plus another $9,000, under Option OL, to pay for code upgrades. (Allemand, supra, 248 P.3d at pp. 114-115.)