Wildfire Evacuation, ALE, and the Two-Party Check
A wildfire evacuation order forced Priya and her family out of their Grand Junction home for 45 days. Their homeowners policy has ALE coverage of $30,000 for up to 12 months and requires 'necessary increase in living expenses' incurred because the residence is uninhabitable. The insurer paid 14 nights of hotel at $150/night and then stopped, saying the family could have stayed with relatives. Priya's family did stay 10 nights with her brother but then rented an apartment for $2,400/month for the remaining 21 days and incurred $1,800 in restaurant meals above normal. The dwelling claim is $95,000. The insurer issued a $60,000 check payable to Priya and 'Mortgage Co.' The insurer's settlement letter offers $95,000 total and asks Priya to sign a release of 'all claims, known and unknown, arising from the wildfire.' Priya's public adjuster, Grant, wants to help her get the full ALE and close the dwelling claim.
1. Evaluate ALE entitlement and calculate a supportable ALE claim.
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ALE covers the necessary increase in living expenses while the home is uninhabitable, subject to the $30,000 limit and 12-month period. Supportable expenses: hotel 14 × $150 = $2,100, already paid; apartment 21 days at $2,400/month = $1,680 pro rata; meals above normal = $1,800. Total = $5,580. The 10 nights with the brother produce no lodging expense, so no claim for those nights. The unpaid balance is $5,580 − $2,100 = $3,480. The public adjuster should obtain the evacuation order, hotel and apartment receipts, the lease, meal receipts or a reasonable expense log, and proof that the home was uninhabitable. The claim should not include ordinary living costs the family would have incurred anyway.
2. What are the legal and ethical issues with the $60,000 check and the release?
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The $60,000 check payable to Priya and Mortgage Co. triggers the mortgage clause. Grant cannot endorse the check, sign Priya's name, or negotiate it; he should coordinate with Priya and the lender and obtain written authorization for claim information. The release is the bigger issue: 'all claims, known and unknown' would include ALE and supplemental dwelling damage. Grant should advise Priya not to sign it without independent legal advice and should seek a release limited to the specific dwelling items paid, reserving ALE and supplements. He may explain the document but not give legal advice. Conditioning an undisputed payment on a broad release may also raise unfair-claim-practice issues.
3. How should Grant respond to the insurer's argument that the family could have stayed with relatives?
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The insurer's argument that the family could have stayed with relatives does not eliminate ALE. ALE is based on reasonable necessary increased expenses, not on whether the insured could impose on relatives indefinitely. The 10 free nights reduce the lodging claim, but the apartment and above-normal meals are recoverable if documented and within the limit. Grant should present a timeline, receipts, and a comparison to pre-loss expenses, and ask the insurer to identify the policy language it relies on. He should not claim hotel-level expenses for the free nights; credibility matters. If the insurer still refuses, he can invoke the policy's appraisal or complaint process.