Coinsurance does not apply to a total loss.
The insureds' home was destroyed by fire in August 2005. Their loss exceeded their policy coverage limits, and the insureds opted not to rebuild. In New York, a coinsurance clause reduces the recovery in case of a partial loss; however, in case of a total loss, the insurer is liable for the amount named in the policy. Additionally, the applicability of a coinsurance claim is an affirmative defense that must be pleaded. As such, where it is undisputed that the insureds have suffered a total loss, a coinsurance clause does not apply.
Case Law Alert - 2nd Qtr 2012