Actual Cash Value Depreciation Deduction and the Broad Evidence Rule

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Sheila E Salvatore

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____________________ 1 Goorland v New York Property Insurance Underwriting Association Supreme NY 106212/08 4/5/2011. 2 The advantages to an insured of SFP wording have cropped up in several places in recent years. For example, because there is no terrorism exclusion in the SFP, fire damage resulting from otherwise excluded terrorism would be covered in SFP states. Insurers have sought a change that would permit the terrorism exclusion to apply to fire, the SFP notwithstanding. Many states have complied. The latest is Massachusetts, which amended its law as of 4/13/2011. Although that eliminates the SFP as a source of terrorism coverage in those states, it affirms the validity of claims based on SFP wording in other cases. 3 Source: http://www.aaisonline.com/terrorism/SFP_NSFPchart.html. In many of these states the mandate does not apply to Inland Marine insurance and in some it does not apply to terrorism losses. 4 There is no rate increase when the replacement cost option is selected, but most companies require an increase in the amount of insurance, which increases the premium. 5 121 N. Y. S. 2d 122, affd. 281 App. Div. 672 1952. 6 2003 PA Super 502; 841 A.2d 1038; 2003 Pa. Super. LEXIS 4588 Appeal denied by Kane v. State Farm Fire & Cas. Co., 2005 Pa. LEXIS 470 (Pa., Mar. 15, 2005). 7 247 NY 176 159 N.E. 02 1928. 8 Prior to the 1960s insurance companies would only provide small amounts of insurance on any one risk and it was necessary to place coverage with multiple companies to cover most properties. 9 Dennis M. Perlberg, Esq. and Gina M. Fortunato, “The Broad Evidence Rule” http://www.longislandweb.com/ speyer/pages/news/cashvalue.pdf. 10 The first seven are from an article by Joshua Mallin, Esq. “Actual Cash Value vs. Replacement Cost Coverage Defined and Distinguished” http://www.wegandmyers.com/Articles/Article-29.aspx. 11 At the present, these buildings, if they’re still standing, can sell for seven-times annual rents or more. 12 “First Party Property Claims Desk Reference” Edward J. Ryan, editor, 2nd Edition, 2010, Munich Reinsurance America, Inc. Broad Evidence is discussed on pages 40 through 46.

Jerome “Jerry” Trupin is a partner in Trupin Insurance Services located in Briarcliff Manor, New York. He provides property/casualty insurance consulting advice to commercial, non-profit and governmental entities. He is, in effect, an outsourced risk manager. Trupin is the co-author of over 10 insurance texts used in CPCU and IIA programs including the CPCU texts Commercial Property Risk Management and Insurance and Commercial Liability Management and Insurance . He has been an expert witness in numerous cases involving insurance policy coverage disputes and has spoken across the country on insurance topics, taught CPCU and IIA courses, and regularly contributes articles to CPCU Interest Group Newsletters, the Insurance Advocate , and other publications.

Jerome Trupin, CPCU, CLU, ChFC

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“If I could make the rules, I would focus on betterment. That is, is the insured in a better position after the loss is paid than it was before the loss? If so, a deduction is in order. If not, then replacement cost should be the standard.”


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