Actual Cash Value and Broad Evidence Value Settlements

Our office recently assisted two truckers with big semi-truck claims. With both claims, the insurers found comparable vehicles to set valuations. We, of course, had to ascertain that the values offered were adequate. They were not but eventually, we concluded the claims. I made the argument that the comparable vehicles had to be in the local area unless the insurer paid for transportation to allow the insured to bring the truck to his area. It seemed only fair that the insurer would pay for transportation of the big truck when they said, “here is a comparable, go get it”! However, the insurer responded with the statement that: “we are only going to pay Actual Cash Value”. (ACV is usually considered the replacement that costs less depreciation.)

One of the insurers realized the validity of our argument and found a comparable vehicle in the local market but the other, Farm Bureau, did not after the Super Dump Truck was located at the other end of the country.

The term “Actual Cash Value” is found on seven pages in the insured’s policy but the term is not defined under the definitions. Because of the lack of definition, insured’s in other cases similar to this one, have had to ask a court for interpretation, noting that Actual Cash Value is frequently understood to mean “replacement cost minus depreciation.” While that definition remains a part of the idea of actual cash value, the definition used by many courts has been expanding over the years. The definition most often used today incorporates what is known as the “broad evidence rule.”

The Broad Evidence Rule is a valuation that does not adhere to the principle that the traditional measure of actual cash value (ACV) is the sole measure of value at the time of loss. This rule provides for the examination of every standard of value having a bearing on the property under consideration. In its simplest terms, the broad evidence rule means that the determination of the actual cash value of any property should include all relevant evidence an expert would use to set the value of the property, including replacement cost less depreciation and fair market value (which takes into account location, obsolescence, the present value of expected income from the property, and economic conditions at the time of the loss). The rule applies equally to real property and personal property, commercial property and personal lines property, fixed equipment, mobile equipment, semi trucks, and automobiles.

Since Farm Bureau is clinging to the idea that the insured must absorb the shipping cost to obtain a settlement, allowing Farm Bureau to reap a windfall in the process, we are going to have to call in reinforcements, because we are right on this one and at Brown – O’Haver we always fight for our clients.