Insurable Interests Defined: A Blog Series – Episode One, New Jersey

An extremely important, yet sometimes overlooked issue concerning property insurance claims is whether the person or entity making the claim has an insurable interest in that property. This blog is the first in a series which will discuss a state-by-state breakdown of exactly who or what holds an insurable interest in that state. This first episode in the series will look at my home state of New Jersey.

In the Garden State, the courts have held that, “[i]n order to recover proceeds on an insurance policy, the insured must have an insurable interest in the realty, chattel or person covered by that insurance.”1 The test to determine whether an individual or entity has an insurable interest in that property is, “whether the insured has such a right, title or interest therein, or relation thereto, that he will be benefited by its preservation and continued existence or suffer a direct pecuniary loss from its destruction or injury by the peril insured…


Does Actual Cost Value Equal Fair Market Value When it Comes to Property Damage?

When reading insurance policies it can be confusing to a policyholder regarding the differences in valuation of real property and personal property when terms like “fair market value”, “actual cost value”, and “replacement cost value” are referenced without explanation. Insurance companies use these terms as if everyone should understand their meaning and sometimes, these terms are used in a context that almost seem like they are interchangeable. However, these terms are not interchangeable because these terms may affect the valuation and actually will dictate what is to be paid under the insurance policy.

In California, Insurance Code 2071 and case law defines these terms and guides insureds as to what should be paid under the policy according to these confusing terms of actual cost value and fair market value. Insurance code 2071 is clear in that “Actual cash value,” as used in loss settlement provisions equivalent to that found in…


Depreciation of Property to Determine Actual Cash Value is Different in California

In a key win for policyholders in California, a California state court trial judge recently found that insurers must consider the actual condition of personal property at the time of a loss when determining the property’s actual cash value.1

The case arose from a class action lawsuit against State Farm General Insurance Company alleging that the insurer’s practice for determining actual cash value for personal property losses violated California law.

The parties had argued for different interpretations of how actual cash value should be interpreted under California law. State Farm argued that the term was synonymous with fair market value of the lost property at the time of the loss. The policyholders argued that actual cash value was the cost to replace an item with a new item of like kind and quality, less reasonable depreciation based on the physical condition of the item at the time of the injury.

After an eight-day trial, the court found in favor of the policyholders. The court…


More Money for Less Coverage

In Florida, you can rely on three things with certainty-death, taxes, and high property insurance premiums. The reason for the latter is the subject of an intense debate that plays itself out in the halls of Tallahassee and on the editorial pages of our leading newspapers. I will not rehash the debate; our blog archives are full of articles on that subject. However, I want to highlight an article in the Sun-Sentinel I recently came across: Insurers widening lists of things they won’t cover.

Unfortunately, this article lists some specific examples of (soon to be) ineligible risks:

Risks with aluminum single strand (solid) wiring (Federated National).

Applicants with a prior water damage loss of $10,000 or more in the last three years (Federated National).

Risks that do not show pride in ownership or are in a state of disrepair (People’s Trust).

Risks with roofs that exceed their maximum useful life expectancy (People’s Trust).



New Florida Sinkhole Law Effective July 1, 2016

Under a new law that takes effect July 1, 2016, insurers may offer a new type of personal lines residential sinkhole coverage. Florida Governor Rick Scott signed CS/CS/SB 1274 into law, which created Section 627.7151, Florida Statutes, allowing insurance companies, at their option, to provide limited sinkhole coverage for a “sinkhole loss” to homeowners-which is a lower threshold of damage than “catastrophic ground cover collapse”-and is defined as “structural damage to the covered building, including the foundation, caused by sinkhole activity.”

Even with this change, the current requirements remain that if the insured’s professional engineer determines that the repairs exceed the policy limits, then the insurer must pay to complete the recommended repairs or tender the full policy limits to the homeowner.

The limited sinkhole coverage is subject to the statutory requirements for sinkhole insurance in ss. 627.706-627.7074, F.S.,…


Trial Court Finds Carrier Not Bound by Exclusions Cited in Claims Handling Process and Not Estopped From Raising New Exclusions in Litigation

When I get hired on property damage cases, part of the materials I receive from the policyholder, or the public insurance adjuster, is a full or partial denial letter in which the carrier fairly specifically sets out reasons and quotes policy provisions supporting the denial of coverage. If I am hired on a case and I don’t see a denial letter or the reasons for the denial are not clear then I will ask the carrier to set out in writing the specific reasons for the denial and I ask them to cite policy provisions.

One reason for a denial letter is to set in stone in a written record exactly why the carrier says there is no coverage. During the ensuing litigation if the carrier comes up with a bunch of other excuses, I want to show what the real reasons were during the claims handling process and prove that any new excuses are just those…excuses.

In a recent case out of the Northern District of Oklahoma, the trial court found that, in Oklahoma, an insurance carrier can come…


Public Adjusters Argue For Class Action Certification Against Roofer Accused of Unauthorized Public Adjusting

Roofers and contractors must be extremely careful not to step over the line and act as public insurance adjusters. I have given three speeches to insurance restoration contractors and roofers over the past year warning that there are serious legal ramifications for doing so and that it is illegal. I even brought the topic to a public discussion earlier this year in Unauthorized Practice of Public Adjusting and the Lon Smith Roofing Case Should Scare Contractors and Roofers with Contingent Contracts.

The National Association of Public Insurance Adjusters and The Texas Association of Public Insurance Adjusters jointly filed an amicus brief supporting class action certification against a roofer accused of public adjusting. Here is a summary of their argument:

Strong public policy concerns support class-wide relief to enforce Section 4102.051(a) against Lon Smith. The contract gave Lon Smith a full obligation and full authority to negotiate directly with the Keys’ insurance…


Mending the Hold, Part 2 – New Jersey

In my prior post, I discussed the concept of mend the hold. Essentially the doctrine provides that a party who takes a position can later be estopped from asserting a different, inconsistent position. This is the first in a series of blogs discussing how different states apply the doctrine. The first stop on our tour is my home state of New Jersey. While there is no case law dealing directly with the Mend the Hold doctrine in the insurance context in the Garden State, the doctrine is alive and well and waiting to be used in such circumstances.

In the case of Schanerman v. Everett and Carbin,1 the New Jersey Supreme Court ruled that a party to a real estate transaction that backed out of the deal could not rely upon the alleged financial inability of the buyer to close the deal when they canceled the deal for other reasons altogether. The court stated:

In situations comparable to that before us many courts have invoked doctrines of waiver and estoppel to preclude the defendant from…


Considering Loss Profits and Loss of Business Value on the Commercial Claims

When you have an insurance claim for a business loss, when a covered peril has interrupted business to a point there has been a landslide in business value or the doors are closed completely, you need to carry out a business valuation. Interestingly some of the best court cases discussing proper business valuation are not for property damage cases but other types of losses. Situations for business valuations and the methods used can come up in other types of cases and are helpful in our research.

Looking at Coastal Fuels of Puerto Rico, Inc., v. Caribbean Petroleum Corporation1-an antitrust case-we see a legal standard for business valuations that is important to note. In Coastal, the trial court had ruled that the damages for the business loss was too high because the damages included monopolization. At the second trial, only a claim for price discrimination was considered, the monopoly count was not re-tried. However, the jury awarded three times the damages of the first…


The Licensing of Public Adjusters in Alabama

As many readers know, Alabama does not currently license public adjusters. The Alabama State Bar takes the position that the actions of a public adjuster constitute the unlicensed practice of law.

However, Representative Jimmy Martin recently introduced Alabama House Bill 181 on February 11, 2016. The bill provides for the licensing and regulation of public adjusters.  

The bill has not yet been voted on in the House of Representatives but is pending to be read for the third time April 21, 2016.

I will keep an eye on the progression of this bill and whether it makes it to the Alabama Senate for a vote.