Seventh Circuit Review


Disaster strikes and you, as a homeowner, are left with a partially damaged building. That is the first mess. The next mess? Arguing with your insurance company over your replacement-cost policy language. In cases of partial damage to property, replacement cost policies have often been ambiguous regarding what property the insurer will actually replace. If the siding on your house was damaged, you might wonder if the insurance company is replacing the siding on the whole house or just the siding on the side that was damaged? The insureds will argue that entire replacement should occur—for example, all the shingles on the roof or all the siding on the entire house should be replaced—because that will be the only way to achieve a uniform, aesthetically matching appearance. Insurance carriers, on the other hand, argue that the particular replacement cost policy only agreed to pay the cost to replace damaged property, and therefore, aesthetic matching is not necessarily required. In the end, sometimes the difference in cost can be millions—or billions—of dollars. According to the Seventh Circuit’s recent opinion in Windridge of Naperville Condo. Ass’n v. Philadelphia Indemnity Insurance Co., the insured’s argument made more sense. In Windridge, the Seventh Circuit focused heavily on the problem with ambiguous replacement cost policy language and found a way to make the insured whole again without having to reinvent the wheel as it interpreted the relevant ambiguity in favor of the insured, the party with the least bargaining power. This Note argues that the Seventh Circuit’s logical decision based on contract interpretation over “direct loss” and “covered property” likely paved the way for other courts to adopt a similar interpretation of such policy language, which could end the long-lasting debate. There is much to be learned from the impact aesthetic appeal can really have upon property value, and the Seventh Circuit’s recent decision is merely a glimpse into a trend that will likely take the Nation by storm.

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