44 Trial Lawyer • Spring 2023 around. However, there are several variations on this theme. Some are what we call “all peril” policies because they cover any physical damage. Others are “named peril” policies because they are focusing on only specific types of events leading to coverage. In some cases, you can have a combination. A policy could be an “all peril” policy for the structure but only cover “named perils” for the contents. In a case we had a few years ago, the kitchen was damaged by a water pipe break (a covered loss under the named peril policy). The remediation contractors removed the cabinets from the kitchen to repair the plumbing break and dry out the structure. The cabinets were moved around various rooms of the house before being placed in a storage container. The policy had “all peril” coverage for damages to salvageable components (such as the cabinets) during the period of repair. The cabinets, having been scratched up and damaged in the course of the multiple moves, were therefore covered for replacement, even though the “accidental scratching of cabinets in a move” wasn’t a named peril for the structure. Actual cash value Assuming you have an insured and a covered loss, then what? The insurance company has an obligation to evaluate the loss and promptly pay the amounts owed. ORS 746.230; See also, Moody v. Federal Insurance Co., No. A172844 (Jan. 26, 2022)1. At the outset of the claim, the insurance company pays out the Actual Cash Value. In many policies, there may also be the ability to recover the full Replacement Cost Value of the loss. Actual Cash Value (ACV) is the depreciated value of the damaged property, taking into consideration age and condition. In practice, this value is determined by finding the full replacement cost value of the item today — not what it was when the item was bought — and then depreciate that value based upon the age of the item. This money is paid to the insured to stand in the place of what they lost. What they do with this money is entirely up to them. They can spend that money to repair their stuff, or they can elect to keep the money for other purposes. However, if they want that depreciation, the full Replacement Cost Value (RCV), the insured has to actually replace or repair the damaged property. In this situation, they only get up to the amount they actually spent or what the damaged property was valued at — whichever is less (up to policy limits). As an example, let’s presume that the insured has a total loss resulting from a house fire. The loss not only destroys the house, but it also destroys all content items, e.g., furniture, appliances, clothing, jewelry, electronics, etc. The cost to replace the content items is $500,000. At the time of the loss, the items were 10 years old (making for an easy illustration). The insurer is obligated to pay within 60 days of the loss, the depreciated amount (ACV) of the loss. It is not unheard of for insurers to depreciate items that are 10 years in age by 50%. That being the case, the insurer should issue payment for $250,000 within 60 days of the loss. Upon replacement of the items with like-kind pieces, the insurer will pay the depreciation, commonly referred to as “holdback.” Upon payment of the holdback, the insurer will have paid the RCV of the loss. It is not uncommon for the insured and the insurance company to disagree on the value of the loss. This disagreement can come from any number of places. For instance, an insurance adjuster once justified paying for “lowgrade” molding because one “had to think about the policy holders paying the premiums!” Depending upon the size of the claim and the presence of other issues, one option is for the insured to consider appraisal. Homeowner Policies Continued from p 43 Value of loss Appraisal is a method that is often used by insurers and insureds to resolve value disputes. This is not the same thing as arbitration. Appraisal is not a legal process. Rather, it’s a process whereby the insured and insurer resolve disputes concerning solely the value of a loss. In Oregon, all fire polices are required to include an appraisal provision, see ORS 742.232. There are those that might argue that homeowner policies are not controlled by ORS 742.232 because the loss was not due to fire, but perhaps another peril, e.g., water intrusion, windstorm, collapse, etc. Notwithstanding if an insurance policy covers losses resulting from fire, then Oregon deems such a policy to be a fire policy thereby requiring the appraisal provision set forth in ORS 742.232. Bragg, Douglas M., “Chapter 10: Property Insurance; Statutory Fire Insurance Policy.” 1 Insurance Law in Oregon (OSB Legal Pubs 2020). The insured or insurer, may invoke the appraisal process. Upon being invoked, the other is obligated to participate in the process. Only the invoking party, however, is bound by the outcome. The non-moving party is not obligated to accept the award. Rather, the nonmoving party is free to reject the award and resolve the dispute via a jury trial. Insurance Law in Oregon, §15.4-2. Keep in mind that while appraisal can be a streamlined approach to resolving valuation issues, it may not fully resolve disputes with the insurer. Appraisal will not resolve coverage questions. Let’s say the insurer is rejecting payment of the claim because it believes that the insured misrepresented material facts, or the insured is demanding payment for asbestos abatement where there is no coverage for asbestos abatement. Appraisal will not resolve the dispute because the dispute is over something other than value. Several years ago, I had a case that started off as a dispute to coverage, and it eventually turned into a dispute only as to value. I represented a husband and
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