Settlement for Loss of Cell Phone

June 13, 2016

A cell phone is part of a covered loss in a homeowners policy. The insured obtained the cell phone at a subsidized cost of $99 by agreeing to a two-year service contract with his carrier. When the loss occurred, the insured was midway through the two-year service contract.

To replace the cell phone, the insured will have to pay the unsubsidized price of the replacement phone of $849.

The insurer has offered settlement based on the subsidized, contract price, which is not available to the insured. We and the insured believe that the loss should be valued at the unsubsidized price of $849.

Who is correct?

Guam Subscriber

Personal property is valued at actual cash value. The original cost of the property is immaterial; settlement is at actual cash value at the time of loss, and not more than the cost to repair or replace. The subsidized cost of the phone is not the actual cost of the cellphone—it is a special arrangement as part of the contract. If the phone is not repairable, then the cost of a phone of the same age is what is paid; with actual cash value depreciation is taken into account. A brief internet search shows that phones depreciate rapidly at first: 30-50 percent immediately, then an additional 4-5 percent a month, depending on the type of phone.

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