Subro Sense Podcast | Holiday Havoc “Fireplace & Chimney Fire Losses”
December 23, 2020
This article was originally published in the Subrogator, a publication by the National Association of Subrogation Professionals, Winter, 2016. © Copyright 2016 by NASP. All rights reserved. Republished by Butler with permission from NASP.
Have your personal property or business personal property subrogation damages ever been excluded under a Daubert challenge? They could be if the damages are not sufficiently supported by evidence. If any of the steps are not followed in calculating the actual cash value of the personal property damages, the entire claim may get excluded. How many times have you received a fire loss and everything in the building was completely destroyed. It happens more than one would think. Hopefully, you are working with experts and adjusters who fully calculate the actual cash value for personal property or business personal property items when there is no evidence to support the damages caused by the loss.
In the recent case of Worldwide Equipment Enterprises, Inc. v. Broan-Nutone, LLC, et al, 2016 WL 3212163 (E.Dist. Kentucky 2016), Worldwide’s business personal property damages were excluded because their equipment consultant did not properly calculate the actual cash value of the equipment that was consumed in the fire. This case is significant because it clarifies the essential steps and calculations that must be performed to render a complete actual cash value damages claim for admission at trial.
Worldwide brought a products liability action against Broan for a defective bathroom ceiling exhaust fan that caused a fire. An equipment consultant was hired by Worldwide to testify about the actual cash value of the business personal property that was completely destroyed in the fire. The consultant was unable to examine the property to determine its condition or useful life. The consultant obtained the purchase price information for the business personal property, inflated it to costs, and then depreciated the value based on its age at the time of the fire. Broan moved for a motion for summary judgment arguing that the consultant failed to present sufficient evidence of the fair market value of the business personal property at the time of the fire.
In Kentucky, the measure of damages to personal property is the difference in the fair market value of the property before and after the accident. McCarty v. Hall, 697 S.W.2d 955, 956 (Ky. Ct. App. 1985). When the personal property is destroyed, as in Worldwide, the proper measure of damage is the reasonable market value at the time of loss. S.Ry. in Ky. V. Ky. Grocery Co., 178 S.W. 1162, 1163 (Ky. 1915). The Kentucky courts define “actual cash value” as the “sum of money the insured goods would have brought for cash, at the market price, at the time when, and place where, they were destroyed.” State Auto Mut. Inc. v. Cox, 218 S.W.2d at 46, 47 (Ky. 1949).
Broan argued that the consultant did not calculate the fair market value. At the Daubert hearing, the consultant testified that normally she calculates the actual cash value by looking at the replacement cost of the item, and applies the age, condition, use and life expectancy. In the calculation in the Wolrdwide claim, the consultant did not know any details about the claimed items other than their age. The consultant did not include in the calculations the condition, use or life expectancy. The consultant also did not perform any spot-checking items, i.e., going online to see what a willing buyer would pay a willing seller.
The court noted that the plaintiffs cited no case law to substitute a different measure of actual cash value, in lieu of the fair market value. The court also pointed out that the consultant could have been provided with statements from the plaintiffs’ employees about the specific personal property and its condition at the time of the fire. Since the plaintiffs failed to provide any support for their actual cash value other than the age of the item, the court held that the defendant’s motion for summary judgment excluding plaintiffs’ business personal property damage claims was granted.
Many times personal property and business personal property claims have sufficient evidence to be paid under a policy of insurance, but are not supported enough for an actual cash value claim to be presented into evidence to support a claim. It is important that the subrogation professional and experts/consultants verify that sufficient evidence is provided to meet the burden of proof for litigation purposes. If there is insufficient proof, then steps can be taken to obtain the information needed.