Virginia Law

A. Insurers shall include loss settlement provisions in accordance with this section.

B. When providing only basic causes of loss for the dwelling and other structures, insurers may provide loss settlement on an actual cash value basis. When providing actual cash value loss settlement, insurers shall apply actual cash value loss settlement as follows:

1. Subject to the limit of liability, insurers may pay the smaller of the following amounts:

a. Cost to repair or replace with like kind and quality; or

b. Actual cash value of the damaged property.

2. Insurers may apply actual cash value loss settlement to:

a. Household and personal property;

b. Outdoor radio and television antennas; satellite dishes;

c. Awnings; or

d. Property described under subsections A and B of 14VAC5-341-40, and permanently installed flooring (including wall-to-wall carpeting) when providing only basic causes of loss set forth in subsection B of 14VAC5-341-60.

C. If the loss settlement provision in subsection B of this section does not apply, insurers shall apply replacement cost less settlement as follows:

1. Insurers shall apply replacement cost loss settlement to the dwelling and other structures, including permanently installed flooring. Wall-to-wall carpeting is permanently installed flooring.

2. Insurers may limit replacement cost settlement to the following:

a. The limit of liability applicable to the dwelling or other structures;

b. The replacement cost of the dwelling or other structures or a part of the dwelling or other structure on the residence premises and intended for the same occupancy and use; or

c. The amount spent in repairing or replacing the dwelling or other structures or a part of the dwelling or other structure and intended for the same occupancy and use.

3. The insured may assert a claim for the actual cash value of the dwelling or other structures without prejudicing the insured's right to make further claim for the difference between the actual cash value and the replacement cost in accordance with § 38.2-2119 B of the Code of Virginia. The claim for the difference must be made within six months of (i) the last date on which the insured received a payment for actual cash value or (ii) date of entry of a final order of a court of competent jurisdiction declaratory of the right of the insured to full replacement cost, whichever shall last occur.

4. When the repair or replacement cost is $2,500 or less, insurers shall be liable for the full cost of repair or replacement before the repair or replacement has been completed.

5. Insurers may apply an insurance-to-value ratio for replacement cost loss settlement as follows:

a. Insurers may require an insurance-to-value ratio of no more than 80% before full replacement cost loss settlement applies.

b. If the insurance-to-value ratio is less than 80% for the damaged dwelling or other structure, an insurer may limit its liability for loss to the larger of the following:

(1) The actual cash value of that part of the dwelling or other structure; or

(2) That proportion of the full cost of repair or replacement without deduction for depreciation of that part of the dwelling or other structure damaged or destroyed that the whole amount of insurance applicable to the dwelling or other structure for the cause of loss bears to 80% of the full replacement cost of the dwelling or other structure.

c. In calculating the 80% insurance-to-value ratio, insurers shall disregard the cost of (i) excavations; (ii) underground flues and pipes; (iii) underground wiring and drains; and (iv) brick, stone, and concrete foundations, piers, and other supports that are below the under surface of the lowest basement floor, or where there is no basement, that are below the surface of the ground inside the foundation walls.

6. Insurers may provide replacement cost loss settlement on household and personal property as authorized by § 38.2-2119 B of the Code of Virginia.

D. Insurers may offer functional replacement cost loss settlement for the property described in subsections A and B of 14VAC5-341-40, under the conditions outlined in this subsection.

1. Functional replacement cost is only permitted at the option of the insured.

2. Insurers may not apply functional replacement cost loss settlement to property that qualifies for an amount of insurance equal to 80% or more of the full replacement cost of the dwelling or other structure.

3. Insurers shall provide the notice required by § 38.2-2119 C of the Code of Virginia.

4. Insurers may limit functional replacement cost loss settlement to the following:

a. The limit of liability applicable to the dwelling or other structures;

b. The amount necessary to repair or replace the damaged property with functionally equivalent property at a lower cost than would be required to replace the damaged property with material of like kind and quality; or

c. The amount spent in repairing or replacing the dwelling or other structure or part of the dwelling or other structure intended for the same occupancy and use.

E. Insurers shall determine loss to property that is part of a pair or set in a reasonable and fair proportion of the total value of the pair or set.

F. Insurers shall adjust losses with the named insured and shall pay the named insured unless another payee is specifically named.

G. Insurers shall restore the limits of liability after a loss .

H. Insurers may apply a property deductible unless prohibited or otherwise limited in this chapter. Insurers may apply a special property deductible for the following causes of loss (i) wind, (ii) hail, or (iii) theft. No more than one deductible may be applied to a loss. The amount of any property deductible may not exceed 10% of the dwelling limit of coverage.

I. Insurers may (i) take all or part of the damaged property at the agreed or appraised value or (ii) repair, rebuild, or replace the damaged property with other of like kind and quality within a reasonable time. Within 30 days after receiving the insured's proof of loss, the insurer shall provide notice to the insured of the insurer's decision to (i) take the property at the agreed or appraised value or (ii) repair, rebuild, or replace the damaged property.