Significant losses make it difficult to quantify the size of the damage that can be compensated for personal property. Property insurance adjusters will sometimes find all personal property consumed in the fire. There is very little left to see. Refreshing the policyholder’s mind with the types, amounts, and condition of personal property consumed in a major fire requires patience, time, and a lot of expertise to adjust the property insurance to evaluate the amount owed under the insurance.
A recently unpublished opinion in Georgia discussed some of these issues and the statutory evidence of fire loss valuation of personal property under a housing policy.1 As a warning, the case is unique as it involves serious allegations of fraud and possible involvement in a fire on the part of the policyholder. I do not analyze the fraud issues that were not decided by the court and I only discuss the personal property adjustment and the evidence required by Georgia law which was extensively reviewed by the Federal Court of Appeal which interpreted Georgia law.
Facts about the personal property inventory and the requirement are as follows:
Dobbs submitted a comprehensive list of his personal property damaged by the fire. Dobbs testified that the list was provided to him by an Allstate claims adjuster who told Dobbs to fill out the form. He further testified that he provided the cost of his personal items either by looking up the cost or writing down what he paid when he bought the items. Dobbs insurance stipulates that if the insured party does not repair or replace damaged personal property, the amount paid for that damage is based on the “real cash value” of the personal property – in practice the real market value of the property at. the time of the loss. If the insured party repairs or replaces the damaged personal property, Allstate will reimburse the insured party for the cost in excess of the actual cash value.
One of the most important steps a policyholder should take after a loss is to keep copies of all invoices and proof of payment of expenses. This proof of actual payment is required under all property insurances that first pay at a fair cash value and then pay more with proof of the replacement cost. Some companies sell insurance that pays the replacement cost directly, but most insurance is similar to the one Dobbs received.
Dobbs did not keep his proof of the cost of repair or replacement. So the discussion in the case was about proving the “real cash value” of fire-damaged personal property.
At the trial, Dobbs’ representative admitted that Dobbs had no receipts to exchange or repair his property. Thus, there would be no way of determining the cost of compensation without documentation of what Dobbs paid to compensate or repair his damaged belongings. Instead, Dobbs could only get back the actual cash value of his belongings, according to the policy.
Georgia has followed one fair market value at the time of the loss analysis, with many qualifications, when it comes to valuing damaged movable property insured under a property insurance and considering what “fair cash value” means. An older Georgia case2 said:
It follows that the basic measure of the loss under this insurance is not the original cost or replacement value claimed by the responding insurer, but is fair value that has been defined as the fair market value of the property at the time of the loss. National Fire Ins. Co. v. Handrail, 104 Ga. App. 13 (121 SE2d 46). While it has been considered in a case concerning the loss of an inventory that the actual cost of such goods for the insured “would be least their actual cash value ‘… (General accident & c. Corp. v. Azar, 103 Ga. App. 215, 221, above), fair cash value or fair market value is not necessarily limited to original cost …
Georgia’s Supreme Court ruled in Braner v. Southern Trust Insurance Company,3 had this discussion about what evidence is needed:
The existing rule on evidence of damage to movable property that has been destroyed is that a witness’ opinion on the value of such property based on the purchase price alone has no probative value, while a witness’s opinion on the value based on the purchase price plus a view of the property’s condition and condition immediately before the destruction has probative value. Hoard mot Wiley, 113 Ga. App. 328, 334 (147 SE2d 782) (1966); Cunningham vs. Hodges, 150 Ga. App. 827 (1) (4) (258 SE2d 631) (1979) …
We consider that this rule is too strict in the circumstances of this case and others similar to it for several practical reasons. In case of fire, the proof of the purchase price for the destroyed property (receipts, bills, canceled checks, etc.) may also have been destroyed by the fire. Testimony of the condition of each property immediately before its destruction (draperies, curtains, carpets, furniture of all kinds, plates, glasses, kitchen utensils, food storage, condiments, mattresses, pillows, bedspreads, blankets, sheets, towels, shirts, pants, dresses, underwear, socks, sweaters, coats, swimwear and other garments, to name just a few) are unnecessarily time consuming. Under the existing rule, it also benefits a defendant not to cross-examine the property owner with regard to any particular matter that may be suspicious, since the defendant, by exercising the right to cross-examination, runs the risk that the witness may reveal its condition. Instead, a defendant chooses not to object to the testimony of value and not to go so as to consider it insufficient, but to seek a directed judgment after the evidence has been closed, even though liability has been proven and the destruction of property has been established.
For the above reasons, we adopt the following rule: When a homeowner or homeowner’s spouse testifies about either the purchase price or the replacement cost of household furnishings, personal clothing and other commonly used personal property destroyed by fire, and the approximate date of purchase or acquisition of any such item, the evidence is sufficient for the jury to be able to find the actual cash values of such common and well-known property.
The latest Dobbs court found:
[P]purchase price or replacement cost and date of purchase are sufficient to prove the actual cash value of household items destroyed by fire.
It is true that the list provided by Dobbs is not perfect and does not indicate the date of purchase for all items. However, for several items, such as their microwave oven, Dobbs indicated the product’s brand, age, original cost and place of purchase. Interestingly, Dobbs testified that the form on which he filled out the list was provided by an Allstate claims adjuster. And the form does not provide a specific space for the object’s condition as it does for other information such as the object’s age and original cost. Dobbs further testified that the claims adjuster did not dispute what he wrote on the form and that he did not exaggerate anything. At reconsideration, Allstate’s agents did not question Dobbs ‘concerning any particular matter which may be suspicious’, id.
While the rule statement in Champion provides that the plaintiff must prove things such as condition and real market value at the time of the loss, the court found there that these facts could be concluded by a jury. For example, the insured party in Champion tried to recover for his business equipment that was destroyed during a fire …. While the insured party stated the purchase price of the equipment and how it had been stored, “she did not specifically prove the dates of the purchase or individually state the permit immediately. before the fire other than that which had been preserved in the ordinary course of business. ‘ … The court reasoned, however, that the jury could conclude on the real market value and condition of the inventory based on the insured’s testimony about how the inventory was kept and that none of the inventory could be saved.
So while Georgia says it is trying to determine the “real market value” at the time of loss when determining the “real cash value” of an item, the case law is a bit more liberal because it seems to allow the purchase price and date of purchase of the item as evidence. It is difficult to understand how a dated old purchase price is relevant for determining the fair market value of an item at the time of the loss.
Determining the true market value of personal property used in non-business activities is often a ridiculous exercise. There is usually no market for the personal items used. If one were to try to buy a half-used roll of toilet paper, there would be no place to find a similar thing. The market that would allow one to go and buy a similar kind and quality product often does not exist. The only markets where you can really buy the items are in markets where the items are new.
The best practice for personal property adjusters in Georgia is to read the guidance policy. If the policy does not define the actual cash value, try to determine the original purchase price and time of purchase. Most policyholders will give “best guesses” about the purchase price and the time of acquisition. Determine a condition and the amount of use based on the policyholder’s memory. Determine what the current replacement cost is with all acquisition costs included. If there is any basis for a reported fair market value, make sure that it is noted.
After that, the Georgian courts do not provide much direct guidance on how this information will then suggest a reasonable market value for a second-hand product. For example, what does the jury do with price information for new goods when the condition is described as “good”.
From the policyholder’s perspective and based on previous cases, perhaps the best solution is to get an agreement to take depreciation or a percentage of some current replacement cost.
From my perspective, the broad rule of evidence is best used with personal property in determining the actual cash value. Reasonable market value is only relevant for items where there is a living market – such as used cars.
A nation that is afraid to let its people judge the truth and lies in an open market is a nation that is afraid of its people.
-John F. Kennedy
1 Dobbs v. Allstate Indemnity Co., no. 21-13813, 2022 US App. LEXIS 14473 (11th circa 26 May 2022).
2 American Casualty Co. v. Parks-Chambers, Inc.., 111 Ga. App. 568 (Ga. App. 1965).
3 Braner v. Southern Trust Ins. Co.255 Ga. 117 (Ga. 1985).