A federal court ruling earlier this year discussed a fairly common scenario of an insurer claiming that no roof damage occurred and even if it did, the policyholder failed to introduce evidence of actual cash value because it only had a replacement cost estimate.1 The point of this post is to show that the safest way to present a property insurance claim in Florida is with a combined replacement cost estimate and an actual cash value estimate. However, fully understanding those concepts and Florida statutes on the subject is important.

I would suggest that readers review a post by Shane Smith, Calculating Actual Cash Value, Part 1: Florida, and I highlight where she stated:

Actual cash value (ACV) is typically calculated in one of three ways:

1. The cost to repair or replace the damaged property, minus depreciation;
2. The damaged property’s ‘Fair Market Value’; or
3. The ‘Broad Evidence Rule’ – considering all relevant evidence of the value of the damaged property such as age of the property, the profit likely to accrue on the property, and the property’s tax value.

In a post, Valuation Issues in Florida, Part 4: Actual Cash Value and The Broad Evidence Rule, Florida’s broad evidence rule was discussed:

In New York Central Mutual Fire Ins. Co. v. Dikis, Fla. 69 So.2d 786 (Fla. 1954), the Supreme Court of Florida adopted the broad evidence rule and established that in determining the ACV of a damaged or destroyed property at the time of the loss, courts should consider any evidence that logically tends to establish a correct estimate of the value of the property. Therefore, under the broad evidence rule, valuation will go beyond mere price points and recovery will not be barred because the damages are difficult to ascertain. Of course, mere speculation or conjectures will not suffice, but evidence that logically tends to establish the correct valuation of a damaged property will be admitted.

Iris Kuhn discussed how more recent property insurance statutes require the insurance company to at least pay actual cash value in, Hurricane Irma and Actual Cash Value in Florida:

Section 627.7011(3), Florida Statutes, unequivocally, requires an insurance carrier to pay the full amount of the actual cash value (‘ACV’), less any deductible. The statute does not require that the ACV estimate prepared by the insurance company be presumed as the correct ACV as a matter of law.

…the court concluded that an insurance company does not fulfill its requirement under the policy to pay ‘at least the actual cash value’ by simply paying the ‘actual cash value’ estimated by its own adjuster. The court rejected the notion that an insurance company’s estimate is presumed the true ‘actual cash value’ as a matter of law, no matter how deficient it may be. The statute imposes a clear and unambiguous obligation on the insurance carrier to initially pay the ACV and pay additional amounts up to the replacement value when work is performed and repair expenses are incurred.

The referenced federal case was sent to me by attorney Chris Schirmer, and the judge noted the primary valuation issues:

[T]he parties agree that the Church cannot recover RCV. That is available only after an insured makes repairs, and the Church has not done that. So the only possible recovery is of ACV.

Although not precisely delineated, ASIC has four arguments as to why the Church cannot recover ACV. Its primary argument is clear: it contends the Church never made a presuit demand for ACV, so ASIC’s failure to pay ACV was not a breach. Its remaining three arguments are a bit blended. ASIC contends that even if there were a breach, the complaint limited the relief sought to RCV. It also contends that—separate from the pleading issue—the Church litigated this case as if it were an RCV case and cannot change course now. And finally, it contends that the Church never had a valid ACV estimate even at the summary judgment stage, so the claim cannot survive.

The Church made a presuit insurance claim when it submitted an estimate calculating the loss at approximately $157,000. The estimate included the cost to repair the damage to the church (the RCV), but it calculated depreciation at zero percent…. So although the estimate had a separate ACV column, the RCV and the ACV were the same.

Similar to the blog post regarding the broad evidence rule, the court found that there was sufficient evidence for the matter to go to a jury:

The case law makes clear that Florida’s ‘broad evidence rule’ controls the types of evidence the jury can consider in determining ACV. See Barrett v. Prudential Prop. & Cas. Ins. Co., 790 F.2d 842, 844 (11th Cir. 1986). ‘Under this rule, any evidence logically tending to establish a correct estimate of the value of the damaged or destroyed property may be considered by the trier of facts to determine [ACV] at the time of loss.’… (quoting Worcester Mut. Fire Ins. Co. v. Eisenberg, 147 So. 2d 575, 576 (Fla. 3d DCA 1962)); see also J & H Auto Trim Co. v. Bellefonte Ins. Co., 677 F.2d 1365, 1369 (11th Cir. 1982).

Accordingly, at this stage, it is irrelevant whether the Church’s updated estimate with depreciation ultimately can be considered because other evidence (including the initial estimate without depreciation) could provide a sufficient basis from which a jury could determine ACV. In other words, putting aside all the other issues about the adequacy of the pleadings, how the case was litigated, whether there was a presuit demand, and so forth, the original expert estimate would have been enough to defeat summary judgment….

The court also discussed a condominium case I posted about a decade ago in, QBE Insurance Case Rewrites Replacement Cost Adjustment. The federal court noted:

The Eleventh Circuit considered a similar situation in Buckley Towers Condominium, Inc. v. QBE Ins. Corp., 395 F. App’x at 666. The insurer in that case maintained that because the plaintiff had not accounted for depreciation in its estimate, it had submitted an RCV claim, not an ACV claim….The court affirmed the denial of the insurer’s motion for judgment as a matter of law:

[E]ven though depreciation is necessarily part of actual cash value damages, the insurance contract does not affirmatively obligate the insured to include depreciation in its initial proof of loss. . . . Imposing on [Plaintiff] the affirmative obligation to set forth depreciation . . . would add a new term to the insurance contract, which we are not free to do.

My suggestion is that when making property insurance claims in Florida where replacement costs are not paid until repairs are made, policyholders should make two estimates that can avoid all these disputes. Estimates always include replacement cost, but also make an actual cash value estimate at the same time when submitting the claim to the insurer. Demand in writing that the insurer pay the actual cash value right away even though the claim is being made on a replacement cost basis.

Thought For The Day

Think twice before you speak, because your words and influence will plant the seed of either success or failure in the mind of another.
—Napoleon Hill
1 Dupont-Butler v. American States Ins. Co., No. 1:20-cv-35 (N.D. Fla. Feb. 25, 2021).