I am sure all of us have been watching the news and learning more about the destruction left behind by the tornadoes that devastated parts of Texas and Oklahoma. My colleague in our Houston office, Nyanza Moore, wrote an excellent blog offering helpful tips to those stricken by tornadoes and dealing with insurance claims.
In continuing with the series on total loss, this week I direct my attention to Nebraska, which along with Texas, Oklahoma, and Kansas, forms the region commonly known as “Tornado Alley.” The test for total loss varies from state to state.
We have previously covered Texas and Kansas, which use the “restoration to use” test. This requires one to look at what part of the structure is left and determine whether it would be reasonably prudent to proceed with restoration using the remnants. Oklahoma uses the “identity” test, which focuses on whether the building loses its character or identity after the peril; the building need not be totally destroyed or obliterated.
Nebraska also uses the “identity” test.
My research took me to an 1895 case decided by the Supreme Court of Nebraska. In Insurance Co. of North America v. Bachler,1 the Court held it is not necessary to show that the material of which the building was composed was transformed by the fire to cinders, smoke and ashes, i.e., completely destroyed. The Court expanded:
We conclude from the evidence in the record…that the insured premises were reduced to a wreck by the fire; that what remained of the building was practically valueless. There were some boards and some bricks, and some pieces of material, and parts of the floors and walls, that were not consumed, but after the fire the building insured did not exist as a building. An insurance upon a building is an insurance upon a building as such, and not upon the materials of which it was composed.2
So, for policyholders who experience property loss or damage by fire or a larger catastrophic event such as a tornado, it is important to make sure the insurance company is using the proper “total loss” standard.
1 Insurance Co. of North America v. Bachler (1895) 44 Neb. 549, 62 N.W. 911, 914