The Water Damage Claim and the Missing Receipts
Ms. Nguyen owns a condominium unit insured under a homeowner's form with $250,000 building coverage, $80,000 contents, and a $1,000 deductible. A supply line to the washing machine failed while she was at work, flooding the unit and damaging hardwood floors, drywall, and furniture. The condominium corporation's insurer also pays for damage to the common elements and to the unit below. The adjuster attends two days later. The restoration contractor estimates $34,000 for the building repairs. The contents claim is $22,000, including a leather sofa ($4,500), a rug ($3,000), and electronics ($6,000). Ms. Nguyen has receipts for the electronics but not for the sofa or rug, which she bought abroad. The policy contains a by-law or loss-assessment endorsement and a clause on pairs and sets. The unit below has already submitted a $9,000 claim to the corporation's insurer, which has indicated it will subrogate against Ms. Nguyen.
1. How should the adjuster handle the contents claim where receipts are missing, and what is the effect of the pairs-and-sets clause?
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Missing receipts. The insured bears the burden of proving the loss and its value. Absence of receipts is not fatal; the adjuster should seek alternative evidence:
- Bank or credit-card statements showing the purchase;
- Photographs of the items in the unit before the loss;
- Manufacturer or retailer confirmation of the model and price;
- The insured's statutory declaration describing the purchase.
For the sofa and rug, the adjuster should establish the age and condition. Most homeowner forms settle contents on a replacement-cost basis only if the item is actually replaced; otherwise, actual cash value applies, which means depreciation. A five-year-old leather sofa may be worth 40–50% of replacement cost. The adjuster should present a depreciation schedule and give the insured the option to replace and claim the difference within the policy period.
Pairs and sets. If the sofa and rug were part of a matched set, and only one item is damaged, the clause limits recovery to the value of the damaged item plus the reduction in value of the remaining items, rather than the full set value. The adjuster should determine whether the items were in fact a set and document the reasoning.
Deductible. Apply the $1,000 deductible once to the claim, and confirm whether the policy applies it separately to building and contents.
2. Explain the coordination with the condominium corporation's insurer and the subrogation exposure.
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Coordination. The corporation's insurer covers the common elements and, under the condominium's by-laws, may also cover improvements to the unit. Ms. Nguyen's policy contains a loss-assessment endorsement that responds when the corporation assesses her for a loss below the corporation's deductible. The adjuster must:
- Obtain the corporation's insurance certificate and by-laws to establish the boundary between unit and common elements;
- Confirm which insurer pays for the hardwood and drywall (often the corporation's, if the by-laws treat them as common elements);
- Avoid double recovery by coordinating with the corporation's adjuster and sharing the restoration estimate.
Subrogation. The corporation's insurer has paid $9,000 to the unit below and will seek recovery from the party at fault. Ms. Nguyen's failed supply line makes her the likely target. Her liability policy, if any, or her homeowner's liability section may respond. The adjuster should:
- Notify the liability underwriter and open a liability file;
- Preserve the failed supply line for examination by a plumber or engineer, since a manufacturing defect could shift responsibility to the supplier;
- Consider whether the corporation's insurer's subrogation is barred by a waiver-of-subrogation clause in the condominium documents, which is common;
- Reserve for the subrogated claim separately from the first-party contents and building claim.
The adjuster should communicate in writing to Ms. Nguyen that the first-party payment does not resolve the third-party claim, and should explain the subrogation process so she is not surprised.