The Insurance Industry Gets What It Deserves—Pay For the Costs at the “Time of Loss”

Insurance nerds like me will spend days and months debating crazy insurance issues and offer all kinds of arguments and hypotheticals. Most of the time, we just let things go. But the one issue that my insurance company friends have really been afraid of is when the loss value is determined. Why?

Here is a recent court ruling:1 

The cost to repair Plaintiff’s damaged property must be calculated by using the price of labor and construction materials as of the time of loss.

Chip Merlin is thinking: “Happy days are here again,” and “God keep giving me stupid insurance defense attorneys who know less than their clients.” 

Hypothetically, here is the loss determination based on this rule:

“Joe, a fire is going on in my garage and spreading to my bedroom. What is the cost to repair everything during this ‘time of loss?’ ”  

The rule is not before the loss—the loss never happened. It is not at a reasonable time after the event when the insurer agrees to pay “the loss” and thus provide the financing for “the loss.” 

Instead, these insurance company attorneys convinced the judge that the valuation rule is “at the time of the loss!” Yahoo! 

That time is the highest priced time of all—and the insurance industry makes the argument that this is when the valuation should occur. Maybe this is the rare case where the amount is less for the insurance company to pay—but this is the rule! 

I have begged for this to be the rule. I have double-dared the insurance counsel to argue it. It is stupid and an argument I would never have made as a neophyte insurance defense attorney because my mentors understood insurance policy language and intent. 

I would have been fired for making this argument because my senior attorneys understood the ramifications. But that was 40 years ago. Now, we have an insurance defense bar that wants to win every single case and make every single argument to do so. 

You cannot make this up! A federal judge agreed with supposedly learned insurance company counsel that this is the rule of valuation. A great win for policyholders! 

Measure the value at “the time of the loss.”  

Thought For Day  

Timing in life is everything.

—John Sculley

1 West 32nd/33rd Place Warehouse Condo. Assn., v. Western World Ins. Co., No. 22-cv-21408 (S.D. Fla. May 5, 2023).