Ronald and Shirley Hines filed a proof of loss under the HO policy issued by Allstate for fire damage to their home on May 23, 1992. Their policy included (1) loss of contents, (2) repair costs on structure up to $68,000 or full replacement costs in the event the repairs exceeded that amount, and (3) additional living expenses during the time needed to repair or replace the structure, "using due diligence and dispatch."

Allstate paid the insureds the maximum amount for the contents in January 1993, and paid $63,343.94 for the structural loss on August 18, 1993. At that time, the insureds demolished the remains of their home and started rebuilding it. It was completed in February 1994. Allstate made partial payments of their living expenses, which included a payment in November 1992, $8,457 in June 1993, and $1,425 on July 26, 1993.

The parties began negotiating the repair costs immediately after the fire but could not agree upon the settlement for the structural loss until Allstate threatened to terminate reimbursement for living expenses in November 1992. At that time the insureds offered to settle for $68,000, but Allstate rejected the offer. At about the same time, Allstate notified the insureds it would not reimburse them for living expenses as of December 15, 1992, because of their failure to exercise due diligence and dispatch in resolving the structural claim.

In June 1993, Allstate exercised its right to have the amount of the structural loss determined by appraisal and arbitration. On June 29, 1993, the insureds accepted Allstate's offer to settle the claim for structural loss for $62,900. On August 11, 1994, the insureds filed this action seeking $18,839 for additional living expenses for the period from December 16, 1992, through February 28, 1994, the date the home was completed.

The trial court found the insureds did not fail to exercise due diligence, but it declined to allow living expenses until the home was completed and, instead, awarded living expenses through the date the repairs could have been completed had it not been for the dispute about the amount of structural loss. The court calculated those expenses would have been $14,751.58, and it entered judgment against Allstate for that amount. Allstate appealed.

On appeal, the higher court noted that the insureds used their own funds to replace the house, indicating that their position that there had been a total loss under the policy was in good faith.

Allstate also contended that the insureds did not file this action within the period allowed by the policy--one year after the date of the loss. The policy involved here did not limit additional living expenses to one year, but only to whatever time was necessary to repair or replace. In this case, the limitation for filing suit was tolled until the time Allstate paid the claim for the structural loss.

The judgment entered in the trial court in favor of the insureds was affirmed.

Ronald Hines and Shirley Hines v. Allstate Insurance Company--No. 4-97-0368-Appellate Court of Illinois, Fourth District--August 11, 1998--698 North Eastern Reporter 2d 1120.