Subject Property, Perils, and Special Provisions
December 5, 2016
Summary: This discussion provides a summary of the provisions of the valued policy laws of those states that currently have such laws. The section number of the state statute (usually the insurance code) containing the valued policy provisions is referenced directly below the state name. Each state's treatment includes the kind of property specified in the law as subject to the valued policy law; the perils to which the valued policy law applies; and other comments concerning special or noteworthy provisions or interpretations of that state's valued policy law. See Valued Policy Laws for a further discussion.
Topics covered:
Arkansas (Ark. Code Ann. §23-88-101)
Property subject to valued policy law: All real property except detached or appurtenant structures, total loss by fire or a natural disaster except flood or earthquake if it is caused by a criminal act of insured or someone acting on insured's behalf, builders risk insurance policy, or if insured under a blanket insurance policy.
Perils subject to valued policy law: Fire and natural disaster, but not flood or earthquake.
Property subject to valued policy law: Buildings or structures.
Perils subject to valued policy law: All perils covered by the policy.
Other comments/special provisions: Insured may elect to have valued policy and pay the cost of the insurer's examination of the property.
Property subject to valued policy law: Scheduled personal property.
Perils subject to valued policy law: All perils covered by the policy.
Other comments/special provisions: Applies to any item separately listed and described with a separate amount of insurance (except business property, motor vehicles, and property insured by two or more policies) unless policy and application show alternative valuation method in prominent type.
|Florida (627.702)
Property subject to valued policy law: Any building, structure, mobile home, or manufactured building.
Perils subject to valued policy law: All perils covered by the policy.
Other comments/special provisions: Insured may waive valued coverage on mobile home by signing disclosure form accepting ACV or replacement coverage instead. Law applies to multiple policies only if disclosed to insurer; does not apply to completed value builders risk, blanket insurance, or insurance on appurtenant structures with no dollar amount specifically applicable. Insurer may replace property in lieu of payment (except on valued policies on mobile homes) but must return premium on the insurance in excess of the amount paid to replace.
|Georgia (33-32-5)
Property subject to valued policy law: One or two family residential building or structure.
Perils subject to valued policy law: Fire.
Other comments/special provisions: Law applies only to "natural persons" insuring the property; does not apply to completed value builders risk, to blanket insurance, or to loss within first thirty days of coverage. On total loss, depreciation between date of coverage and date of loss may be deducted from amount of insurance. Insurer may repair or replace property in lieu of payment.
|Kansas (40-905)
Property subject to valued policy law: Improvements upon real property.
Perils subject to valued policy law: Fire, tornado, windstorm, or lightning.
Other comments/special provisions: Not applicable to fire loss (excluding fire caused by lightning) on new policies until coverage, or 25 percent more increase in coverage on existing policies, is in effect at least sixty days (for total fire loss before then, insurer must refund excess premium). Also not applicable to builders risks.
|Louisiana (22:1318)
Property subject to valued policy law: Inanimate property, immovable.
Perils subject to valued policy law: Fire.
Other comments/special provisions: Liability of insurer shall not exceed insurable interest of insured in the property. Law does not apply to blanket insurance or builders risk. Applies unless the policy and any application stipulate a different method for computing loss in equal size type.
(22:1270)
Property subject to valued policy law: Personal property.
Perils subject to valued policy law: All perils covered by the policy.
Other comments/special provisions: Applies unless the policy and any application for the policy stipulate a different method for computing loss in a type of prominent size. Does not apply to land vehicles or property used primarily for business purposes.
|Minnesota (65A.08)
Property subject to valued policy law: All property.
Perils subject to valued policy law: All perils insured by the policy.
Other comments/special provisions: Coverage may be limited to repair or replacement value for farm buildings or other structures. If property is insured under the Minnesota FAIR plan, if the plan takes the position that the value was less than that set forth in the policy, the plan must prove with clear and convincing evidence that the value was less than that of the policy. At such time the difference in premium will be returned to the insured.
|Mississippi (83-13-5)
Property subject to valued policy law: Buildings and structures.
Perils subject to valued policy law: Fire.
Other comments/special provisions: Applies to partial loss when a law or ordinance prevents rebuilding.
Only applies to fire insurance. In the even the building is totally destroyed by the fire, the insurer will pay the amount stated in the policy. The insurer is not allowed to attach a three-quarter clause to fire insurance policy.
|Missouri (379.140; 145)
Property subject to valued policy law: All property. Stahlberg v. Travelers Indem. Co., 568 S.W.2d 79 (Mo. Ct. App. 1978).
Perils subject to valued policy law: Fire.
Other comments/special provisions: Depreciation in value from effective date of coverage to date of loss may be deducted from face amount; burden to prove deduction lies with insurer.
In the event of a total loss, the insurer must pay the total amount of the policy less the depreciation of the property between the time of the issuance of the policy and the loss. In a partial loss, the insurer must pay the comparable percentage of the total value as the damaged part bears to the whole property.
|Montana (33-24-102, 33-24-103)
Property subject to valued policy law: Improvements upon real property.
Perils subject to valued policy law: All perils.
Other comments/special provisions: Also applies to specifically listed items of personal property (except motor vehicles).
If the loss happens within 90 days of an increase in policy limits of 25%, the loss payable is either the full value of the policy or the actual cash value or the replacement cost, whichever is lower. It does not apply to appurtenant or separate structures, which must be settled for actual replacement cost or actual cash value.
|Nebraska (44-501.02)
Property subject to valued policy law: Real property.
Perils subject to valued policy law: Fire and lightning.
Perils subject to valued policy law: Any covered cause of loss.
Other comments/special provisions: The law does not apply if the loss occurs in the first ninety days of a new policy or within ninety days of an increase in insurance of 25 percent or more or to builders risk policies.
|Ohio (3929.25)
Property subject to valued policy law: Any building or structure.
Perils subject to valued policy law: Fire and lightning.
Other comments/special provisions: Law requires insurer's agent to inspect, provide full description, and fix its insurable value. Law does not apply if risk increased without consent of insurer, to replacement cost insurance, or if there is additional insurance prohibited by policy. Cellar and foundation walls are not considered part of the building in settling claims.
|South Carolina (38-75-20)
Property subject to valued policy law: All property except chattels or personal property.
Perils subject to valued policy law: Fire.
Other comments/special provisions: Insurer and insured must fix value at or before time insurance is written. If total amount of two or more policies exceeds agreed value, policies pro rate actual loss.
(38-75-220)
Property subject to valued policy law: Mobile homes.
Perils subject to valued policy law: All insured perils.
Perils subject to valued policy law: Fire, lightning, or tornado.
Other comments/special provisions: The law does not apply if the loss occurs in the first ninety days of a new policy or within ninety days of an increase in insurance of 25 percent or more in an existing policy. Builders risk policies are actual cash value.
|Tennessee (56-7-801, 802, -803)
Property subject to valued policy law: Any building or structure.
Perils subject to valued policy law: Fire.
Other comments/special provisions: Agent must inspect and establish value within ninety days. Otherwise, policy is open and insured is entitled to return of difference in premium with 6 percent interest for overinsurance.
T.C.A. § 56-7-801 – Provides that there is a period of 90 days after which a "fire insurance policy" is issued for an inspection to occur, and prohibits any "fire insurance policy" being issued for an amount in excess of the fair market value of any building or structure; T.C.A. § 56-7-802 – Provides for a return of premium where buildings "totally destroyed by fire" were over-valued and too high a premium was charged. The statute applies to "buildings within the state insured against loss by fire" which "are totally destroyed by fire"; and T.C.A. § 56-7-803 – With respect to losses occurring more than ninety (90) days after policy inception, the statute provides that the value as shown on the application or policy shall be "conclusively presumed to be reasonable, and settlement shall be made on that basis."
|Texas (Ins. Code 862.053)
Property subject to valued policy law: All except personal property.
Perils subject to valued policy law: Fire.
Perils subject to valued policy law: All policy perils.
Perils subject to valued policy law: All policy perils.
Other comments/special provisions: The law applies to seasonal dwellings not rented to a nonowner for any period of time. Khonen v. Wisconsin Mut. Ins. Co., 111 Wis. 2d 584 (Wis. App. 1983). The law does not apply to residences used for commercial (nondwelling) purposes other than on an incidental basis. Seider v. O'Connell, 236 Wis.2d 211 ( Wis. 2000).
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