Determining the "Cost of Replacement" of the insureds' home was before the court in Nunez v Allstate Ins Co., 2010 U.S. App. LEXIS 8362 (5th Cir. April 20, 2010). 

   The insureds' home in Louisiana was destroyed by Hurricane Katrina.  The insureds received flood policy limits of $75,000 for structural damage and $30,000 for contents.  Under the homeowner's policy, Allstate paid $19,856.08 for wind-related structural damage to the house. 

   After the hurricane, the insureds moved to Houston and used the money received from Allstate to purchase a new home for $172,000.  Meanwhile, the insureds gutted their Louisiana house, elevated it and patched the roof.  In a deposition, the insureds stated they intended to repair and someday return to the property.   Additionally, the insureds received money from a Louisiana state program after stating they intended to keep their Louisiana home.

   The insureds sued Allstate, alleging Allstate only made partial payments for the damage caused by wind and wind-driven rain.  Allstate moved for summary judgment, contending that because the insureds did not repair or replace their property, their recovery was limited to the actual cash value of the property.  With an actual cash value of $113,914, less the recovery under the flood policy, the insureds had already been paid for the damage to the home. 

   The insureds argued that the policy provided for replacing the damaged building through purchase of an existing structure.  They claimed that the purchase of the Houston home replaced the insured property, and that it was irrelevant that they intended to someday return to their Louisiana property.  Allstate responded that the insureds did not replace their Louisiana property because they gutted it, elevated it and patched the roof.  Further, purchase of the Houston home was not a replacement of their damaged home because they accepted funds from Louisiana based on their statement they intended to someday repair and return to their original home.

   The policy did not define the term "replace."  The common meaning of the word, however, was "to place again, restore to a former place position, or condition."   Under this plain meaning, the insureds' purchase of their Houston home did not constitute a substitute or replacement under the policy.  Accordingly, the insureds could not recover under the replacement provision.