After an insured suffers a covered loss, he or she may be surprised to know that his or her insurance policy doesn't provide sufficient limits for debris removal. Debris removal insurance coverage is usually an additional coverage included in many property insurance policies, and it provides coverage for the expenses to clean, haul, remove, or dispose of debris of covered property damaged or destroyed by a covered peril.
After a covered loss, debris can accumulate on a property for a number of reasons. For example, a house could burn down, causing the buildup of charred wood debris; or a tree could fall down on a property; or a hurricane could knock parts of a house off, and so on. Insurance companies recognize that the removal of debris can represent a financial burden, not to mention the cost of the repairs to the property.
How Debris Removal Insurance Works
Generally, most policies may include coverage for debris removal up to the policy limits of the applicable covered property. But when policy limits are exhausted, especially after a major loss, there may be no or very limited additional debris removal coverage remaining. Although most policies may include an additional five-percent limit if the loss exceeds the policy limits, an insured must regularly review the policy limits or consult with his or her agent to increase the limits when needed, including purchasing higher amounts for debris removal.
When calculating the costs involved with repairing and replacing property after destruction or damage, the costs of removing the debris and cleanup are in addition to—rather than a part of—the value of the damaged property. As such, the impact on the total amount of the loss, and the coverage limitations on these costs in most standard property insurance policies, are frequently overlooked.
What to Consider When Determining How Much Debris Removal Coverage Is Needed?
While there is no benchmark that can be used to estimate the pre-loss cost of debris removal, one suggestion is to request a cost estimate from a local demolition or debris removal contractor based on an assumption of a total loss. An increase in coverage sub-limit, and overall location limit, can be requested as deemed appropriate.
When determining debris removal coverage, consider the following factors:
- Age of the building
- Proximity to other buildings (i.e., maneuverability of equipment)
- Type of structure (wood frame or steel frame; steel will be more expensive to cut, clear, and remove)
- Existence and type of hazardous materials
- Availability of contractors
How much insurance coverage do I have for debris removal?
The amount of benefits available for debris removal depends on your insurer and your policy. You either have to use part of your building coverage, or there may be additional benefits for debris removal in addition to your building limits.
This extra coverage maybe 5, 10, or 15% of your building coverage limits. It may be tied to the amount of the loss, or it may be a fixed dollar amount labeled as “Additional Coverage.”
Coverage A = $400,000
Damage = $100,000
Additional Coverage = $15,000
Debris removal coverage may be:
$40,000 (10% of Coverage A) or;
$10,000 (10% of the amount of the damage) or;
$15,000 (Additional coverage limit)
Before removing the debris: Notify your insurance company
Photograph all recognizable items in the debris before they are taken away, particularly items that your insurer removes for cleaning or salvage. Your insurer may bring in a company to clean and store items. Their fees usually get deducted from your insurance benefits for contents. You may also provide notice of your intent of removing the debris so you are not accused later of spoiling the evidence.
Disagreements often arise over whether damaged items are salvageable and can be cleaned or whether it makes more sense to replace them. Examine the items your insurer or cleaning company deem salvageable. If you feel they really can’t be cleaned, or that cleaning and storage costs will exceed the cost to replace them, work it out with the adjuster. After these costs are deducted from your contents insurance coverage, you’ll be left with less money to replace destroyed items.
Helpful Hint: You should ask the insurance company for written confirmation that they have fully inspected the loss location to its satisfaction and agree that you can move forward with debris removal and clearing of the site.
Other issues related to debris removal
Hazardous material removal and disposal issues may come up. And, if your foundation needs to be removed, the soil under it will may need re-compacting. Any work that is necessary to restore your property to its pre-loss condition should be covered up to the limits in your policy, and subject to exclusions (as long as those exclusions are written in plain, clear and unambiguous wording).
If your insurer refuses to cover necessary expenses, is relying on an exclusion that is vague or ambiguous, or does not seem applicable, you should immediately consult with a property insurance attorney.
About the Author
Rabih Hamawi is a principal at the Law Office of Rabih Hamawi, P.C. and focuses his practice on representing policyholders in fire, property damage, and insurance-coverage disputes against insurance companies and in errors-and-omissions cases against insurance agents. He may be reached at (248) 905-1133.