Bad-Faith Claims: Insurance Companies


in terms of the concept that the insurer is required to pay the full policy limits in a situation where the replacement cost is less than the policy limit some one sort of set their new concept as it seems sort of contradictory to the general principle that insurance is designed to indemnity insurance for the actual loss and no more is there any case law that goes the other way on this issue in a in a total loss situation not that I'm aware of the there is a fair amount of published decisions on this and they they tend to be grouped around the early 1900's and then the Depression era and then more recently because the only time that you get this real disparate value versus insured now your actual value versus insured value is when land prices and property prices are going up and down rapidly and there were and that's how the valued policy came into effect was as a consumer protection in the early 1900's when there were financial panics where the value of farms in particular would drop in in half over the course of a year if there was a loss during that period of time the insurance company would say well your property is only worth a fraction of what it was insured for and then would pay only what it was worth at that time and then the next year it would be worth vastly more and so insurance were getting whipsawed same thing happened in the depression insureds would have purchased insurance early in the depression as land prices fell their property would be worth less that they wouldn't change the policy limits in and the stated value would would come into play if there was a total loss and then more recently with my case during and similar ones like it came during the Great Recession when property prices again dropped dramatically and in each of the three eras the case law seems to be pretty clear that the issue of total loss is an underwriting issue and the company has to underwrite the property carefully inappropriately because they should be insuring it for its actual value and if they're not it's the insurance company's risk they're over valuing the property in case of a total loss not the insurance not the insurance the keys over insured and over paid premiums over over time and so it's pretty universally recognized that you do not look at the actual value of the property in determining whether it's a total loss you are you don't you don't compare the insured value to the actual value you compare the actual value to the repair cost and if it's determined to be a total loss they the value of the policy has determined the value of the property and there is no post-loss adjusting available under a stated value policy but it's it seems counterintuitive and that's why I brought it out in the context of damned fate as litigating that and and applying the wrong standard would be bad faith you

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AJ

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