I have come across a few California cases that I thought you might find interesting.
The amount listed in the declarations for “actual cash value” is a limit and does not create a “valued” property policy.
In the case of George v. Automobile Club of Southern California ((2011) 201 Cal.App.4th 431), the Court of Appeal found that pursuant to Insurance Code section 410, a property policy is either “open” or “valued.” Pursuant to Insurance Code section 411, an “open” policy is “one in which the value of the subject matter is not agreed upon, but is left to be ascertained in case of loss.” In contrast, pursuant to Insurance Code section 412, a “valued” policy is “one which expresses on its face an agreement that the thing insured shall be valued at a specified sum.” The appellate court held that the insured’s interpretation of the policy was inconsistent with the language of the policy’s loss payment cause, which provided for payment “up to” the limit. The Court further noted that the insured’s interpretation was inconsistent with the fact that the policy contained an appraisal clause, which provided a procedure for resolving disputes about value in the event of a total loss.
Domestic water backup or overflow exclusion enforced.
In Cardio Diagnostic Imaging, Inc. v. Farmers Insurance Exchange (2012) W.L. 6619029, the appellate court held that the policy exclusion for water that “backs up or overflows from a sewer, drain or sump” unambiguously applied to damage caused by water that overflowed from a toilet in a third floor suite, occupied by a third party, and leaked into the first floor suite occupied by the insured. The loss was the result of a blockage in the sewer line, approximately 20 to 40 feet below the toilet, which prevented excess water in the toilet from draining into the sewer after the intake mechanism in the toilet failed to shut off. In order for the exclusion to apply, it was not necessary for the water to have come from inside the sewer or drain because the policy expressly excluded water that “backs up or overflows” from a sewer or drain. Even though the water that overflowed came from the toilet, the toilet was attached to a drain, and the undisputed cause of the overflow was a blockage in the sewer line below.
A property insurer must promptly object to late notice of claim, and must establish substantial prejudice from failure to submit to a sworn proof of loss.
In Henderson v. Farmers Group, Inc. ((2012) 210 Cal.App.4th 459), the appellate court found that the insured had waited nine months to report a loss and noted that Insurance Code section 450 provides in part, as follows: “In case of loss upon an insurance against fire, an insurer is exonerated if notice thereof is not given to him without unnecessary delay…” The appellate court held that even though Farmers had sustained substantial prejudice because of the delay, it had waived the defense. In reaching this conclusion, the appellate court relied upon Insurance Code section 554 which provides, in part, that: “delay in the presentation… of notice… of loss is waived, if [the insurer] omits to make objection promptly and specifically upon that ground.” The appellate court also found that while the insured failed to submit a proof of loss within 60 days, the failure to submit the proof of loss had not caused substantial prejudice to Farmers. This was supported by the fact that Farmers admitted that it had based its determination of damage (or lack thereof) on the findings of the industrial hygienist that Farmers had retained.
Please note, however, that the California Supreme Court has granted review of this case which decertifies this opinion.