Question

discuss and respond to the following Application 

Pedro owns a sixplex apartment building and lives in one unit. The building is insured under the Dwelling Property 1 (basic form) policy for $320,000. The replacement cost of the building is $400,000. Explain to what extent, if any, Pedro will recover for the following losses
a.   A fire occurs in one of the apartments because of defective wiring. The actual cash value of the damage is $20,000, and the replacement cost is $24,000.
b.   The tenants move out because the apartment is unfit for normal living. It will take three months to restore the apartment to its former condition. The apartment is normally rented for $900 monthly.
c.   A tenant’s personal property is damaged in the fire. The actual cash value of the damaged property is $5000, and its replacement cost is $7000.
Explain your answers.

Answer 1

Case 1 : loss due to faulty / defective wiring.
Most of the insurance policies do not cover losses that occur due to faulty or defective work. Done by contractors / builders. Which essentially means the insurance companies expect the builder / contractors to do 100% job as to their work is concerned.
Hence, pedro will recover nothing in this case.
case 2 : fair rental loss
Normally client can insure for the loss of fair rent value in case of any damages or repairs make the place unlivable.the only condition is that whatever that caused the loss of rental must be covered under the insurance scheme.
However basic policy do not cover the loss where it is due to non availability of conditions for normal living. Hence this fair rental will not be covered.
Pedro will not receive any amount
Case 3 :
In basic form policy only the property of the land lord is insured against the perils and not tenants. That is to. Say, tenants personal property is not covered under here.
Hence pedro will not receive any amount.