California Requires Real Estate Payment and Code | Merlin Law Group

California has a code that requires insurance companies to pay the actual amount lost under a replacement cost policy if the payment of replacement benefits is dependent on the owner repairing, rebuilding, or replacing the damaged property. Here is the code provided:

§ 2051.5. A measure of compensation based on the cost of repair, reconstruction or replacement; Less time; Limiting or refusing to adapt to changes in restricted areas; Exceptions to presumptive fraud; Time to change policy forms


(1) Under the open policy that requires the payment of the value of the lost value, the measure of interest is the amount that would cost the insured to repair, rebuild, or restore the thing that was lost or injured, without deduction due to physical impairment. , or policy limits, whichever is less.

(2) If the policy requires the insured to repair, rebuild, or restore the damaged property to take all additional costs, the insured will pay the actual cost of the damaged property, as described in Section 2051, up to the damage. goods are repaired, rebuilt, or replaced. When the house is repaired, rebuilt, or changed, the insurance seller will pay the difference between the actual payment of the amount paid and the total amount paid to replace the damaged property, up to the limits specified in the policy.



(A) A time limit of at least 12 months from the date on which the first payment of the actual cost of money is made will not be imposed on the insurance to cover all the money lost, according to the limits of the policy.

(B) In the event of a loss related to an “emergency,” as defined in Section 8558 of the Federal Code, the time limit shall not be less than 36 months from the date of the first payment to the actual cash value. it will not be insured to collect the total amount of the loss, subject to the policy limits.

(C) This section does not prohibit an insurance company from allowing an additional period of insurance to collect the full replacement cost.

(2) The insurer shall provide to the depositor one or more additional six months for good reasons pursuant to clause (A) or (B) of clause (1) if the insurer, faithfully and promptly, meets. delay or delay in acceptance, or reconstruction of a building or buildings that cannot be controlled by the insured. Circumstances beyond the control of the insured include, but are not limited to, delays in building permits, lack of necessary construction materials, or unavailability of contractors to perform required work.


(1) In the event of a total loss of the insurance plan, the policy issued or issued in this state does not contain a section that prohibits or rejects, because the insurer has decided to rebuild in a new place or purchase. an existing building on a new site, paying the cost of upgrading the building or the replacement cost, including the reimbursement of any additional cost, to the extent that the cost is affected by the terms of the policy or acceptance of any policy. However, the amount of interest shall not exceed the replacement cost, including the cost of raising the building and any additional cost, if possible, to repair, rebuild, or restore the insured building to its original location.

(2) Notwithstanding any other provision, in respect of residential property insurance, the amount of damages available to the claimant for the purpose of rebuilding or restoring the insured property to another location shall be the amount that would have been recovered if the insured property had been rebuilt. on its actual site, and a deduction for the cost of the land on the new site shall not be allowed in the measure of damages. However, the compensation will not exceed the cost, including the cost of upgrading the building and additional costs, if possible, to rebuild the insured building in its original location.

This code was part of my discussion with Merlin Law Group California attorneys for my post yesterday, The Devil Is in the Details When Making a Decision with Church Mutual Insurance Company. The post discussed whether the representative should make a decision to pay the actual amount or receive nothing if the home is not repaired, rebuilt, or replaced.

The California Code was discussed in a 2021 California case, Westmoreland v Fire Insurance Exchange,1 where the court was held:

The insurer states that sections (a) and (c) of the former section 2051.5 must be read together and considered as a whole, this provision does not conflict with the Settlement Loss policy provided by the insurer which reduces the payment of the Insured to the value of the ‘lowest’ of the three specified amounts, including ‘money expended to repair or replace’ the lost building. In contrast, the plaintiffs argue that former section 2051.5(c)—which itself contains no language prohibiting indemnification or damages—is the only valid section of the law when, as here, the insured suffers a loss and contemplates construction on the property. except for insured premises. Using standard principles of statutory construction, we hold that subsection (c) cannot be read in isolation and that the statute must be read as a whole.

When reading former subsections (a) and (c) together, former section 2051.5 makes clear that the measure of damages for any replacement value policy is the same regardless of whether the insured decides to rebuild or recover after the loss. That is, for the insured who decided to build or otherwise change, the measure of interest is the lesser of the following: (1) the amount that can be sold to rebuild or restore the house in the insured area; and (2) the amount of the limit specified in the policy. Therefore, if the replacement cost of the property is higher or lower than the insured’s estimated replacement cost, former section 2051.5 guarantees to both the insured and the insured that the entire portion of insurance. The increase in the additional cost of the policy will be available to the insured regardless of their location
the lost house is replaced.

Plaintiffs have already received all the compensation they are entitled to because they were paid the actual value of the insured home ($372,000) and built a replacement home without incurring additional costs beyond that amount.

These results are unusual and follow long-standing guidelines for property insurance, with the exception of those discussed in the post, The Devil Is in the Details When Making a Decision with Church Mutual Insurance Company.

When it comes to determining the amount of real income, California is different and has a set of codes that are discussed California Low Energy Use – Understanding the Guidelines.

Thought of the Day

When the Okies left Oklahoma and moved to California, they raised intellectual awareness in both areas.
– What Rogers
1 Westmoreland v. Fire Ins. Exchange73 Cal.App.5th 269 (Call. App. 2021).