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Claimed Casualty Loss Deductions
A. Rain and Wind Damage to Home and Personal Property in
1988
In February 1988, petitioners contracted for the
construction of an addition to their home. Because the
contractors informed petitioners that they were not bonded in
case of a loss, petitioners contacted their homeowners' insurance
agent, Eustis, Dees & Outzen, to make sure that any potential
construction-related losses were covered by their existing
homeowners' insurance policy. Petitioners were told by their
insurance agent that any construction-related losses were covered
by their existing policy.
In preparation for construction to the upper floor of
petitioners' home, a portion of the roof was removed during the
day on March 10, 1988, and, at the end of the work day, the open
area of the roof was covered with a protective cloth. In either
the late evening of March 10, 1988, or the early morning of March
11, 1988, high winds blew off the protective cloth covering the
opening in the roof and rain water entered through the opening,
flooding the home. The next day an insurance adjuster from
United States Fidelity & Guaranty Co. (USF&G), for which Eustis,
Dees & Outzen was an independent agent, appraised the damage and
advised petitioners that their existing homeowners' insurance
policy did not cover the loss. Despite their denial of coverage,
USF&G offered petitioners $5,000, as a good-faith gesture, which
they refused.
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