Determining the value the policy is obligated to pay is something a policyholder must prove at trial. The insurance company has the same obligation under the good faith adjustment obligation, but a value is needed for proof at trial.
For example, a federal judge in New York wrote a lengthy opinion to determine that a covered collapse of an old roof occurred.1 The judge then ruled for the insurer because the policyholder was unable to establish any actual cash value for the collapsed roof while the insurer provided evidence that it was worth nothing. The judge first noted the policy language:
[p]the payment will not exceed the lesser of: (a) the actual cash value of the injured party [or] destroyed … property at the time of the loss; (b) the amount required to repair or replace the damaged [or] destroyed … property with another of a similar kind and quality.
Then the insurer decided to find the following:
The purpose of an action on a[n] … insurance aims to try to put the insured in as good a position as he would have been without [loss] occurred, by awarding him the actual cash value of the property lost or damaged. Fair cash value (as determined with appropriate deductions for impairment) means fair value expressed in money.̵7; Incardona v. Home Indem. Co., 60 AD2d 749, 749, 400 NYS2d 944 (1977) (construing similarly worded fire insurance as providing “that the amount recoverable is “the actual cash value of the property at the time of the loss, but not in excess of the amount it would cost to repair or replace the property with material of similar kind and quality within a reasonable time after such loss”). “The determination of actual cash value is made under a broad evidentiary rule that allows the trier of fact to consider all facts and circumstances that could logically lead to the formation of a proper estimate of loss.” Cass v. Finger Lakes Co-op. ins. Co., 107 AD2d 904, 905, 483 NYS2d 849 (3d Dep’t 1985) (internal quotation marks omitted). ‘[T]o recover damages for breach of contract, an insured “is required to prove damages arising from that breach, and their failure to do so [is] fatal to that cause of action.’ Alpha Auto Brokers, Ltd., 286 AD2d at 310, 728 NYS2d 769 (reversing the jury’s verdict in favor of the insured and dismissing the complaint where the insured “presented no evidence of the value of the premises before or after the fire”). Consequently, ‘[a]n insured who cannot determine … the value of the damage cannot be recovered under the policy.’ Prendergast v. Pac. ins. Co., no. 09-cv-6248, 2012 WL 1044568, at *5, 2012 US Dist. LEXIS 43084, at *13 (WDNY Mar. 28, 2012) (citing Victoria Camera, Inc. v. Guiffrida, 566 F.Supp. 796, 798 (S.D.N.Y. 1983)).
For the reasons discussed above, the plaintiff’s loss under the policy is limited to the collapse of the roof. The plaintiff failed to adduce any evidence as to the value of the roof or to infer its value, for example, the market value of the building before and after the collapse or the cost of replacing the roof with something of similar type or quality. On the other hand, the evidence adduced showed that the roof was worthless. Herbert Cannon, Allstate’s architectural expert, opined that the roof structure had no value whatsoever before the collapse. He testified that, because of the condition of the structure, … the roof had absolutely no value [and] there was nothing that could be saved.’ After considering all the evidence at trial, the court finds that Mr. Cannon’s opinion on the value of the ceiling is credible and well-founded. The plaintiff is therefore not entitled to damages for the loss of the roof.
Follow the policy valuation language. Providing three estimated proofs of replacement cost, repair cost and fair cash value is often the wisest evidence when value is disputed.
Strive not to be a success, but rather to be of value.
1 Iannucci v. Allstate Ins. Co.354 F. Supp. 3d 125 (NDNY 2018).