Velma Beard, an Illinois policyholder, suffered a catastrophic fire loss to one of her rental properties on September 5, 1988. Ms. Beard reported her fire claim to Mount Carroll Mutual Fire Insurance Company. A disagreement over the amount of loss ensued, and Ms. Beard demanded appraisal under the terms of her policy. Mount Carroll refused to participate in appraisal because the property was completely destroyed. Ms. Beard filed a lawsuit.

The trial court held the policy unambiguously allowed Ms. Beard to demand appraisal as a result of the dispute over the amount of the loss. Mount Carroll appealed.

The Illinois appellate upheld the trial court’s order and explained even though the appraisal process may be more difficult, there are other ways to determine the value of the property:

We recognize, as did the trial court, that where there has been total destruction of the property, as in the instant case, the appraisal may be made more difficult because there is no property left to view. We do not think, however, that this precludes appraisal. Information as to the value of the property may be obtained by the appraisers from other sources. For example, the owner of the property, as well as its tenant or neighbors, may have knowledge of the condition of the premises prior to the fire. There may be recent photographs of the premises. The appraisers themselves may even have had prior knowledge of the value of the property. ¹

Illinois is not alone. In Drescher v. Excelsior Insurance Company of New York, ² the United States District Court for the District of New Jersey held that the appraisal clause applied in the case of a total loss, basing its decision on similar reasoning:

[R]egardless of whether any property remained to be viewed, that would not affect the giving of evidence by witnesses as to their knowledge of the value of what was destroyed.

Catastrophic losses are tragic. When a property is completely destroyed, it is difficult for a policyholder who disagrees with a carrier’s determination regarding the amount of the loss. The good news is the policyholder may have the right to require the carrier to participate in appraisal, even if the property is totally destroyed. Nonetheless, it is a good idea to routinely take pictures of your properties and have certain personal items appraised and scheduled into your policy. This will help substantiate your claim if a loss occurs.

¹ Beard v. Mount Carroll Mut. Fire Ins. Co., 561 NE 2d 116 (Ill App. Ct., 5th Dist. 1990).
² Drescher v. Excelsior Insurance Co. of New York, 188 F. Supp. 158 (D. N.J. 1960).