Hotel Chain Suffers Water Loss: What Will the Carrier Pay?
Inside a Property Casualty article discussing property damage repairs and what the carrier will cover in replacement costs, there is a question regarding a water loss at a hotel chain with a replacement cost policy. Read below:
Question: Our insured is a hotel that suffered water damage to some of its rooms. The insured is a franchisee and has an agreement with the hotel chain that requires replacement of damaged decor with current decor; all of the rooms on the same floor must be updated to the current decor. The hotel has a replacement cost policy, but the other furniture was not damaged. The carrier's position is that it is not responsible for the non-damaged rooms. What should the carrier pay?
Answer: This scenario differs from the matching issue, about which we often receive questions. The carrier is correct in not paying to bring all of the rooms up to the current decor. There is no loss or damage to the other rooms, and while the rooms would not match each other, this is not something that would be apparent to guests. Nothing in the self-contained rooms themselves would be mismatched.
If the chain requires franchisees to maintain a uniform look to all rooms on a floor, that falls more under the cost of doing business. If the rooms themselves are not damaged, it is not an insurance matter to bring them up to speed with the other rooms.
If items in the rooms themselves are not matched, that would be a different matter. For instance, if a headboard needed to be replaced on one bed but a matching one could not be found, then both headboards should be replaced.
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