When one’s personal contents within their residence are either damaged or missing, it can be an extremely disheartening experience. Those of us at NOVA Injury Law recognize this, and believe it is important for homeowners and occupants, when making a claim to their insurance company, to understand the exact steps to take when doing so. Further, we hope to provide insight as to how these types of losses are typically valued.

How is the Value of Damaged Personal Contents Calculated?

Calculating the value of lost personal contents, following fire or flood damage, requires a thorough assessment which takes into account various factors. Note, however, that insurance companies do sometimes employ different methods and considerations to determine the value of the items that have been lost. Thus, policyholders should always review their policy documents and consult with their insurance provider to understand the valuation methods and any limitations or exclusions which may apply.

Generally speaking, to accurately assess the value of personal contents before they were damaged, policyholders need to provide detailed documentation that proves ownership, when possible, and establishes the items’ existence. This includes receipts, invoices, photographs, appraisals, and any other relevant records. This documentation serves as crucial evidence for the insurance company to verify the existence and value of the lost items.

The Standard “Replacement Cost Value” (RCV) Method

The “replacement cost value method” is a widely used approach for calculating the loss of ordinary personal contents following fire or flood damage. This method aims to provide policyholders with the funds necessary to replace their damaged items with brand new equivalents of similar quality and functionality. Understanding how the replacement cost method works is crucial for individuals seeking fair compensation for their lost belongings. The calculation typically involves the following steps:

Determine the Item’s Characteristics

The first task is to identify and describe the damaged or lost item accurately. This includes noting its make, model, brand, specifications, and any other relevant characteristics that contribute to its value.

Research the Current Market Prices

The insurance adjuster conducts research to determine the current market prices for items similar to the damaged or lost item. They may refer to catalogs, retail websites, supplier quotes, or other reliable sources to gather pricing information. The goal is to find the cost of a new item that closely matches the damaged one in terms of its specifications and functionality.

Consider Additional Costs

In addition to the purchase price of the replacement item, the replacement cost calculation may also account for other associated costs. This can include taxes, shipping fees, installation charges, and any necessary modifications to ensure compatibility or functionality.

Exclude Depreciation

The replacement cost method does not consider depreciation. Depreciation is the reduction in value due to factors such as age, wear and tear, or obsolescence. Under the replacement cost method, the focus is on providing policyholders with the funds to replace their items without factoring in their depreciation.

Calculate the Replacement Cost

The replacement cost is calculated by adding up the current market prices obtained from the research conducted in step 2 and considering any additional costs identified in step 3. This total represents the estimated cost of purchasing a new item that closely matches the damaged or lost item in terms of its specifications and functionality.

The Alternative “Actual Cash Value” (ACV) Method

The “actual cash value method” is another option used by some insurers. It takes into account the fair market value of the damaged items at the time of the loss and considers the item’s original cost. However, unlike the replacement market value method, ACV is calculated by also subtracting the depreciation amount from the replacement cost of the item. This method reflects the value of the damaged items in their pre-loss condition, accounting for their current condition and age.

The “Professional Appraisal” (PA) Method for High-Value Items

For markedly high-value items, insurance companies often instead choose to rely on professional appraisals to determine their worth accurately. Independent appraisers with expertise in specific categories, such as artwork, jewelry, or antiques, assess the items’ condition, provenance, rarity, and market demand. Appraisals provide an unbiased evaluation of the items’ worth and can be used as supporting evidence for the claim.

What if I want Certain Items to be Repaired Rather than Replaced?

Sometimes, an item which is damaged may be salvaged by being repaired. You may especially desire this option when the item is unique and holds sentimental value. The first thing to do in this context is to review your insurance policy. Some policies may specify that damaged items will be replaced rather than repaired. Familiarize yourself with any terms and conditions related to repair or replacement to ensure compliance with your policy.

Absent any provision mandating a particular result, you might be granted this request relatively easily if the cost of performing these repairs is less than or equal to the cost of a comparable replacement. However, sometimes the cost of repairing items can be greater than the market value of a replacement. In this context, an insurance adjuster would be reluctant to grant your request.

To persuade an adjuster in this latter situation, consider relying on the case of O’Grady v. Westminster Scaffolding, [1962] 2 Lloyd’s Rep 238. In that case, the claimant owned an antique sports car that was damaged, and sought compensation totalling the cost of repairing it; this was more expensive than replacing it with a different car. The court indicated that they will permit this recovery when it is “reasonable” to do so. Ultimately, a claimant will be more likely to succeed when the item’s true market value is very difficult to pinpoint and, even if possible, rests on a shaky foundation.

Can I Claim for Missing Items too?

Generally speaking, yes; personal contents that are missing can be claimed following fire or flood damage. Promptly report the missing items, document their characteristics, provide proof of ownership if possible, and work closely with the insurance adjuster to ensure a smooth and successful claims process.

What do I do if the Insurance Company Undervalues my Personal Contents Claim?

Discovering that a claim for the loss of personal contents has been undervalued following fire or flood damage can be frustrating for policyholders. However, it is important to remember that there are steps you can take to address the situation and ensure a fair resolution.

Review the Insurance Policy

Begin by carefully reviewing your insurance policy to understand the terms, coverage limits, and provisions related to personal contents losses. Familiarize yourself with the valuation methods specified in the policy, such as whether replacement cost or actual cash value is used. This will provide a basis for evaluating whether the insurance company’s assessment aligns with the policy terms. Ultimately, there is a chance that there are determinative details which you missed during previous reads.

Review Collected and Provided Evidence

Again, collect and reorganize all relevant documentation to support your claim for the value of the lost personal contents. This includes receipts, invoices, appraisals, photographs, and any other evidence that demonstrates the existence and value of the items. Presenting a strong case with comprehensive documentation can help substantiate your claim and strengthen your position. There may be a more effective way to have done this compared to what was presented to the insurance adjuster the first time.

Communicate with the Insurance Company

Contact your insurance company and express your concerns about the undervalued claim. Provide them with a detailed explanation of why you believe their valuation is inaccurate or insufficient. Be prepared to provide supporting evidence and documentation to justify your position. Request a review of the claim and ask for a clear explanation of how the valuation was determined.

File a Complaint or Dispute Resolution

If your discussions with the insurance company do not result in a satisfactory resolution, you can consider filing a complaint with the insurance company’s customer service department or escalating the issue to their claims department. Be sure to maintain a record of all communication and correspondence throughout the process. If necessary, seek legal advice or engage a public adjuster to assist you in navigating the dispute resolution process.

Seek Mediation or Arbitration

In certain situations, mediation or arbitration can be an effective means of resolving disputes between policyholders and insurance companies. These processes involve neutral third parties who can help facilitate negotiations and reach a mutually acceptable resolution. Check your policy or consult with legal professionals to determine if mediation or arbitration is a viable option for your situation.

Contact NOVA Injury Law for Help With a Personal Contents Policy

Consulting experienced and well-versed legal counsel at NOVA Injury Law provides you with access to expert advice, guidance, and legal representation. They have the knowledge and experience to protect your rights, interpret complex policies, negotiate with insurance companies, and pursue legal action if needed. They can help level the playing field and ensure that you receive fair compensation for the loss of your personal contents following residential fire or flood damage. Book a free consultation today!