Although a property policy listed an “actual cash value” amount in the declarations, the policy could not reasonably be construed as a “valued” policy, but rather was an “open” policy. ( George v. Automobile Club of Southern California (2011) WL 6144927)
Facts
Andrew George purchased an automobile insurance policy from Interinsurance Exchange of the Automobile Club. The policy provided various types of coverage, including “physical damage” coverage. For comprehensive loss, the declarations page stated that the policy provided “Limits of Liability” of $25,000 on an “Actual Cash Value” basis.
George’s vehicle was stolen and never recovered. He then made a claim to Interinsurance Exchange, which determined that the actual cash value of the car was $13,227. After applying the policy’s $250 deductible, Interinsurance Exchange paid George $12,997.
George then sued Interinsurance Exchange, asserting that the policy was a “valued” policy which, in the event of a total loss, required Interinsurance Exchange to pay the $25,000 limit without regard to the actual cash value of the car. George further alleged that, during the application process, Interinsurance Exchange required an inspection in which Interinsurance Exchange assessed “the physical and mechanical condition of the vehicle” in order to evaluate its actual cash value.
Among other things, the policy contained a loss payment clause, which provided: “In the event of total loss to an insured automobile described in the declarations for which a limit of liability is stated, we will pay the actual cash value up to the limit stated in the declarations for that automobile.” In addition, the policy contained an appraisal clause, which provided: “If after a total loss …, the amount of loss cannot reasonably be established, either you or we can request … that the amount of loss be determined by appraisal.”
The trial court ultimately dismissed George’s complaint, ruling that the policy was not a “valued” policy. In short, the trial court ruled that Interinsurance Exchange was only obligated to pay the actual cash value of the vehicle, up to a maximum $25,000.
Holding
The Court of Appeal affirmed, agreeing that the policy was not a “valued” policy. The Court noted that, pursuant to Insurance Code section 410, a property policy is either “open” or “valued.” Pursuant to Insurance Code section 411, an “open” policy is “one in which the value of the subject matter is not agreed upon, but is left to be ascertained in case of loss.” In contrast, pursuant to Insurance Code section 412, a “valued” policy is “one which expresses on its face an agreement that the thing insured shall be valued at a specified sum.”
The Court noted that George’s interpretation of the policy was inconsistent with the language of the policy’s loss payment clause, which provided for payment “up to” the limit. The Court further noted that George’s interpretation was inconsistent with the fact that the policy contained an appraisal clause, which provided a procedure for resolving disputes about value in the event of a total loss.
Comment
In this case, the Court of Appeal correctly ruled that it was not reasonably possible to construe the policy as a “valued” policy. The Court also noted that very few policies qualify as “valued” policies, and further noted that such policies actually can create a “moral hazard” for an insured to overvalue the property at the time the policy is written.