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HO Coverage: When Does the ‘Pair’ or ‘Set’ Condition Apply?

After a small kitchen fire causes both fire and smoke damage to an insured's kitchen cabinets, the carrier only wants to allow coverage for the cabinets that suffered fire damage. Can the insured avoid ending up with mismatched styles?
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An insured causes a small kitchen fire when he places a pan of oil on the stove to make fries and forgets about it. The incident results in fire and smoke damage to the range, hood, kitchen cabinets above the hood and cabinet to the left, as well as smoke damage to the remaining kitchen cabinets in the L-shaped kitchen.

The prior homeowner had installed additional cabinets above the original upper cabinets, filling a gap between the upper cabinets and the ceiling with two mismatched cabinets. The carrier only wants to allow coverage for the two cabinets damaged by the flames of the fire—not the rest of the cabinets that suffered smoke damage—and the insured is concerned he will end up with three different styles of cabinets if the carrier does not agree to replace all the upper cabinets.

Q: "Does the insurance carrier have a duty to replace all the upper cabinets so they will all match? Would you consider the cabinets to be a 'set'? The insured is also worried about removing the smoke smell completely from the upper cabinets. While he understands the upper cabinets likely won't match the lower cabinets no matter what happens, he isn't concerned about that."

A: “The issue is exactly the same as the shingle-matching, siding-matching and carpet-matching issues people have been arguing over as long as there’s been replacement coverage. A literal reading of the ISO HO-3 policy in this case results in the conclusion that only direct damage is covered—not the consequential indirect loss of value due to mismatching.

Some state laws govern the matching issue (for example, California § 2695.9). Additional Standards Applicable to First Party Residential and Commercial Property Insurance Policies says, ‘When a loss requires replacement of items and the replaced items do not match in quality, color or size, the insurer shall replace all items in the damaged area so as to conform to a reasonably uniform appearance.’

The ‘pair’ or ‘set’ clause says:

D. Loss To A Pair Or Set

In case of loss to a pair or set we may elect to:

  1. Repair or replace any part to restore the pair or set to its value before the loss; or
  2. Pay the difference between actual cash value of the property before and after the loss.

While insurers traditionally use this clause to adjust losses involving sets of china, golf clubs and clothing, nothing in the policy says an integral grouping of kitchen cabinets or shingles cannot constitute a ‘set.’

The consensus is this isn’t covered unless you can cite a legal precedent that specifically addresses this in statute or a court case—or unless you can convince the insurer that the ‘pair or set’ condition applies.

Want more information? Check out the Big ‘I’ Virtual University for an article called ‘Direct vs. Consequential Damage in the Homeowners Policy.’”

Bill Wilson is director of the Big “I” Virtual University.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email to request login information.

Tuesday, June 2, 2020
Personal Lines