Watch the full video at https://rumble.com/v2opxf2-insured-obligated-to-set-policy-limits.html and at https://youtu.be/e69E1KdZsD0
Mark and Michelle Callahan sued their insurer and its agent to recover damages after their home was destroyed in a fire. The district court granted summary judgment in favor of the insurer and its counsel and the Callahans appealed.
IN Mark and Michelle Callahan vs. Jeb Brant, an individual, and Shelter Mutual Insurance Company314 Neb. 219, No. S-21-1006, Supreme Court of Nebraska (May 12, 2023), the Supreme Court concluded that the valued policy statute established the value of the property at the time of a total loss.
ACTUAL BACKGROUND
In 2011, the Callahans purchased homeowner’s insurance for Shelter Mutual Insurance Company (Shelter) through a licensed insurance producer, Jeb Brant. Before issuing the policy, Brant used a reconstruction cost estimator to estimate the cost of rebuilding Callahan’s home, using information obtained from Callahan and from the Clay County assessor’s website. Brant prepared a report estimating reconstruction costs at $250,481.
In May 2019, the parties agree that Callahan’s home was completely destroyed by an electrical fire. The Callahans filed a claim on the policy with Brant’s assistance, and it is undisputed that Shelter subsequently paid the Callahans all amounts due and owing under the policy. The Callahans claim that when they later received a quote for the cost of rebuilding their home, they were told that “the cost to rebuild was significantly higher than the amount of insurance coverage.”
The Callahans sued Shelter and Brant. They claimed Brant negligently advised them of the estimated replacement value of their home and misrepresented the adequacy of their policy limits in the event of a total loss.
The declaration page of the policy states that Callahan’s home was insured in the amount of $267,400 and the policy contained a “Valued Insurance” provision. Shelter and Brant generally relied on the language of the policy, as well as Nebraska case law regarding the duties of insureds and insurance agents, to argue that it was the Callahans’ duty to know the value of the property they insured and to request the insurance coverage they desired. Shelter and Brant argued that the limit of insurance for the home was unambiguously stated in the policy and represented the full measure of Callahan’s damages in the event of a total loss.
The district court gave judgment in favor of Shelter and Brant.
ANALYSIS
Nebraska law on this matter is well settled. When an insured asks an insurance agent to obtain insurance, it is the insured’s duty to advise the insurance agent of the policy desired, including the limits of the policy to be issued. An insurance agent has no obligation to predict what coverage an insured should have.
The Callahans admitted they never asked Brant to obtain coverage for a higher amount on their home. They specifically alleged that they “would have increased their insurance limits if Brant had informed them that they needed more coverage to replace their home in the event of a total loss.”
Nebraska’s valued policy statute definitively determined the fair value of the Callahans’ loss in the event of a total destruction of the property, and it precludes them from offering evidence that the fair value was anything other than the amount the home was insured for.
Nebraska’s Valued Policy Statute
Nebraska’s valued policy statute is currently codified at Neb. Reef. State. § 44-501.02 (Reissue 2021). The valued insurance policy definitively establishes the true value of the insured property at the valuation written in the policy, and when there is a total loss, that amount is the measure of recovery.
The valued policy statute must be part of every fire policy issued in this state, and the statutory language was expressly incorporated into the Shelter policy issued to the Callahans.
Neither the language of the valued insurance statute nor the general policy objectives underlying that statute provide a principled basis for limiting the application of the ultimate fair value determination only to circumstances where an insurer seeks to pay less than the policy limit because of a misrepresentation , and not to circumstances where an insured seeks to recover more than the policy limit due to a misrepresentation. In both scenarios, after a total loss, the appraised policy determines the fair value of the insured property at the amount specified in the policy.
The Supreme Court concluded that “the valued insurance statute applies to Callahan’s misrepresentation claims against Shelter and Brant, and it conclusively establishes that the true value of Callahan’s home is $267,400—the amount for which it was insured. Moreover, it bars the Callahans from offering evidence of that the true value of their home was something other than the amount for which it was insured. And without such evidence, the Callahans cannot prevail on their claims of negligence or negligent misrepresentation.”
Nebraska’s valued insurance statute definitively determines that the true value of the insured property is the amount written on the policy. The trial court did not err in granting summary judgment in favor of Shelter and Brant and the judgment is affirmed.
Setting a replacement value for a home for homeowners insurance is—much to the surprise of the insured—the responsibility of the person seeking insurance, not the insurer or the insurance agent. Nebraska’s valued property statute was designed to protect insurers and agents against the type of claims brought by the Callahans. Each insured person can take their chances and rely on the estimates made by the agent or seek the advice of a professional fire rebuilding contractor to provide an estimate. With inflation, most estimates made last year are out of date. Be careful.
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