A ruling published by the Supreme Court of Florida earlier this month held that general contractors are entitled to overhead and profit charges under a replacement cost homeowner's policy, according to an update from the Restoration Industry Association (RIA).

In Trinidad v. Florida Peninsula insurance Company, the Supreme Court said,  ”...we hold that an insurer's required payment under a replacement cost policy includes overhead and profit, where the insured is reasonably likely to need a general contractor for the repairs, because the insured would be required to pay costs for a general contractor's overhead and profit for the completion of repairs in the same way the insured would have to pay other replacement costs he or she is reasonably likely to incur in repairing the property...”  

The ruling also clearly outlines what is considered overhead and profit. “Specifically, overhead includes 'fixed costs to run the contractor's business, such as salaries, rent, utilities, and licenses,' and profit 'is the amount the contractor expects to earn for his services.'“

In addition, the ruling goes on to say that “because replacement cost insurance provides coverage based on the cost to repair or replace the damaged structure on the same premises, we conclude that overhead and profit necessarily must be included within the scope of a replacement cost policy where it is reasonably likely a general contractor would be needed for the repairs. Accordingly, overhead and profit are a necessary component of replacement costs, just as they are for actual cash value, because replacement cost insurance is intended to compensate the insured for what it would cost to repair or replace the damaged property.  

“This is great news for the restoration industry,” said Harvey Cohen, Esq., of Cohen Battisti. “Florida leads the world in laws protecting property owners and the restoration industry.”