(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the fourth in a series she is writing on valued policy laws).
“Actual Cash Value = Replacement Cost – Depreciation” is one of the most common insurance valuation mantras. However, when dealing with Actual Cash Value (ACV) provisions, insurance professionals should keep in mind that that, in Florida, this formula is more fluid and lenient than it sounds.
In New York Central Mutual Fire Ins. Co. v. Dikis, Fla. 69 So.2d 786 (Fla. 1954), the Supreme Court of Florida adopted the broad evidence rule and established that in determining the ACV of a damaged or destroyed property at the time of the loss, courts should consider any evidence that logically tends to establish a correct estimate of the value of the property. Therefore, under the broad evidence rule, valuation will go beyond mere price points and recovery will not be barred because the damages are difficult to ascertain. Of course, mere speculation or conjectures will not suffice, but evidence that logically tends to establish the correct valuation of a damaged property will be admitted.
A few examples are of rigor. In attempting to determine the ACV of stolen goods from an antique dealer, the insurer argued that the ACV was the equivalent to the price at which the insured could have sold the property at the time of the loss. Under the broad evidence rule, however, consideration may be given to the original cost, the cost of replacement and expert opinions on the value and gainful uses of the property to determine the ACV. Mew v. J&C Galleries, Inc., 554 S.W. 2d 249 (Tex Civ App. 1977). In a claim to recover the value of a herd of pedigreed and registered chinchillas the insured’s contract to sell and deliver 12 pairs of chinchillas was admissible even though the demand for chinchillas at the time was falling and the contract was solicited by an inexperienced buyer. Pinet v. New Hampshire Fire Ins. Co., 100 N.E. 346 (1956).
In Florida, Courts have held that under the broad evidence rule, replacement value and wholesale value are factors, not shackles, by which to determine ACV. J&H Auto Trim Co., Inc. v. Bellefonte Ins. Co., 677 F.d 1365 (11th Cir. 1982). Courts in Florida have also held that a sworn statement in proof of loss and a contractor’s estimate can constitute probative evidence from which a jury can make an ACV determination. Barret v. Prudential Prop. Casualty Ins. Co., 790 F.2d 842 (11th Cir, 1986).
While the broad evidence rule applies to any claim, its use and practice is particularly crucial in business interruption claims since courts will admit any evidence that tends to shed any light to the actual value of the insured property at the time of the loss, including self-serving testimony and opinions as to any gainful uses to which the property may have been put, but not otherwise incurred. However, like any other evidence rule, the opponent will be free to offer rebuttal evidence to challenge the weight and credibility of the conflicting evidence before a jury. Join me next week to discuss Replacement Cost Coverage and more valuation topics.