Recently, I had an insurer ask for so much evidence of ALE expenditure I thought the request to be extreme. My client’s home (which was a rental) suffered damage from a fire. The client’s landlord graciously forgave the rent for the time of reconstruction and the client who wanted to stay in his neighborhood was able to find a short term rental by paying rent for a room at a nearby building which cost above and beyond his normal rents. My humble opinion is that my client is owed monies for rents expended above and beyond what would be his normal rents at the very least. Although I do not think the insurer disagrees, the insurer’s request for documents to prove up the additional rents seem beyond the ordinary.
My client paid his friend cash as per the friend’s request for the short term rental payments. The friend, who is not a normal landlord and does not have actual rent invoices or a receipt process has provided a letter to the insurer stating rents were paid and for how much. The client’s normal landlord has also provided a letter that the client moved out after the fire and when he moved back in. Yet, the insurer insists that actual receipts and more documentation from the landlord should be afforded. I am unclear why, as my client has proven his ALE rent payments and the time frame or duration. Why is the evidence provided by the insured deficient?
As stated in my last blog post, California has a stricter standard of ALE payments being triggered as “incurred” than most other states that deem legal liability to be the standard versus actual payments incurred. This begs the question of where the line should be drawn as to proving up ALE being incurred by the insured to the insurer. Although I find it reasonable that the insurer would like to see a money trail of payments via credit card or check, the reality is that among many people, cash is still a predominant method of payment. Proving a cash trail is not always the easiest if that cash is not deposited or taken straight from the bank. This blog addresses the standard of evidence that an insurer may require to see to prove up the “incurred” ALE.
Since we are still talking insurance law, each State governs its own insurance case law differently and interprets issues according to local standards. In Georgia, the “Insured must prove and show ALE is incurred by the insured's testimony about the duration of additional living expenses and amount incurred.”1 The insured’s word must be taken at face value. Where ALE cannot be shown through receipts or bank records, the insured’s testimony can act as a sufficient record. This principal is again codified in the case of Nationwide Mutual Fire Insurance Company v. Wiley,2 where the insurer and insured disputed the value of ALE owed. As Georgia has the most case law documenting ALE and the evidence standards, it should also be noted that in Richards v. Hanover Insurance Company,3 the Georgia Supreme Court concluded that the insured's opinion evidence about living expenses, at a bare minimum, sufficiently proved value.
As official receipts are not always given out in short-term term rentals, the Pennsylvania appellate court ruled the insurer remained obligated to reimburse the insured for ALE incurred even in the absence of receipts where the insured acknowledged the ALE arose from an insured loss, and the insurer knew of the insured's dwelling damage and was aware that other living quarters would be necessary during the time the dwelling was uninhabitable.4 Further, the insurer did not dispute the reasonableness or amount of ALE claimed.
The lesson to be learned from ALE evidence is that it is best to educate the insured before ALE is incurred if possible and that additional rents and food not normally spent is properly documented. Whenever possible, collect receipts, pay with check or credit card so the transaction is recorded. If cash is paid, document that payment and how the cash was received if not an immediate withdrawal from a bank account. An insured’s word should be enough to suffice an ALE claim in many states but the reality is that the standard for ALE documentation depends more on the insurer and whether their need for documentation to believe the ALE claim is satisfied.