by Thomas J. Moses
All of us have seen stories about the destruction caused by natural catastrophes (hurricanes, tornados, and such) or tragic accidents (pipeline explosions, cars driving through windows) to homes and personal property. What if something like that happened to you? Sadly, without insurance, there is little hope of ever receiving compensation for your losses. You will have fond memories to treasure, but little else. But, even if an insurance company provides coverage for your loss, it does not mean that you have hit the Mother Lode. This article focuses on situations where your personal property is destroyed and how such losses should be evaluated and reimbursed under Texas law.
When your personal property has been destroyed, and insurance covers the loss, the Texas Supreme Court has stated that you should receive “fair, reasonable, and proper compensation” for your loss. You should not be surprised to find out, however, that different rules apply in different circumstances to different types of property when calculating what that compensation should be under an insurance policy.
Generally, where an item of personal property has been destroyed, the measure of damages is the “market value” of the property immediately before the injury at the place where the injury occurred. This is important to remember, as it means that the values attributed to your property must be viewed in a local context.
“Market value” is defined as “the price property would bring when it is offered for sale by one who desires, but is not obligated to sell, and is bought by one who is under no necessity of buying it.” This means “thrift shop” or “garage sale” prices, likely a significant discount from what you paid for it. Indeed, the purchase price of the item cannot be relied upon to calculate its “market value” at the time of the loss. An item’s value, in most cases, begins to decrease immediately and will continue to “depreciate” over time.
A different approach is taken with household goods, wearing apparel, or other sorts of personal effects. In such cases, the measure of damages is the difference between their actual value before and after the loss. Values for such items will be calculated by taking into consideration “the cost of the articles new, the extent of their use, whether worn or out of date, their condition at the time, etc.,” but will not be influenced by any “fanciful or sentimental considerations.” Thus, an item’s value will be determined objectively, not subjectively.
Some insurers offer—at an additional cost—“stated value” coverage with regard to specific items of personal property. Should the item subsequently be damaged or destroyed, the insurer would, upon adequate and satisfactory proof of loss, guarantee payment to the insured of a sum certain. Be advised that the premiums for such coverages are going to be high, as insurers prefer not to enable an insured’s “moral hazard”—i.e., the likelihood of an insured acting recklessly because they had insurance.
Finally, most insurance policies will offer “loss-of-use” damages in situations where personal property is destroyed. Loss of use damages compensate a property owner for damages that result from a reasonable period of lost use of the personal property and, therefore, the amount of damages is measured according to the particular loss experienced.
In conclusion, remember that each case presents different issues, and the coverages afforded by insurance policies, and the exclusions or limitations on recovery under those policies, can differ. Should a loss happen, you should first thoroughly read your insurance policy before making a claim. And, consult with a lawyer with expertise in insurance law if you ever have any questions or concerns. They are there to help.
Thomas J. Moses is an associate at Campbell & Associates, P.C. He can be reached at firstname.lastname@example.org.