subject: Depreciation of Contents Claims: The Broad Evidence Rule [print this page] Digitory Solutions employs the Broad Evidence Rule (BER) to ascertain the actual cash value of clients' losses. According to the International Risk Management Institute Inc., this method involves examining all legitimate sources of evidence to measure a property's worth.
David Maloney's reference book, "Appraising personal property: Principles and Methodology" explains further:
"[With] the Broad Evidence Rule (a.k.a. The Mc. Anarncy Rule)there are no fixed or rigid guidelines for the determination of the amount of recovery in case of loss. The two standards normally used (fair market value or replacement cost [new] less deprecation) are merely guides, and are not the sole determination of actual cash value (emphasis added).
The rule allows for consideration of all the facts and circumstanceswhich logically tend to develop a correct estimation of value of the destroyed or damaged property for the purpose of ascertaining the actual cash value at the time of loss or damage."
Multi-Factor Method
Using the Broad Evidence approach, Digitory Solutions considers the following factors when appraising the worth of personal or professional property.
Age and condition of the item
Age and condition of the home/building
The item's specific position within the structure
Amount and frequency of use
Any protective devices used
Durability of the item
Profile of the Insured or user
Number of users in the household or business
Rarity (if the property is an antique or collectible)
Limits to the Replacement Cost Less Depreciation (RCLD) Method
Although insurance companiesprefer the RCLD valuation approach, Digitory Solutions opts for the Broad Evidence Rule (BER) instead. The former method depreciates property based mainly on age, while the latter takes other criteria, including age, into account.
RCLD would assign the same depreciation to an item no matter whom it belonged to, how often it was used, or where it was located.
For example, the method does not distinguish any difference in value between a sofa owned by a senior citizen couple used in a guest room and a sofa owned by a large family with children used in the children's playroom.
Clearly, the wear and tear of the sofa in the first case would be significantly less than in the second example. An appraiser using BER would associate two different depreciation amounts based on each unique situation. To Digitory specialists, this is the more realistic and responsible approach.
Legal Basis for the Broad Evidence Rule
Furthermore, the Digitory Solutions method adheres to established precedent in insurance case law. The BER was upheld by two notable New Jersey Supreme Court insurance claim decisions:
1978 Elberon Bathing Co. v. Ambassador Insurance Co.
1998 Ward v. Merrimack Mutual Fire Insurance Co.
In fact, in Elberon v. Ambassador, the amount originally awarded by the umpire was overturned because it was only based on replacement cost and not the Broad Evidence methodology.
Growing Trend toward the Broad Evidence Rule
New Jersey courts are not the only ones favoring the broad evidence approach. An article by Jay Barry Harris, Esquire and Barbara E. Brigham, Esquire FINEMAN & BACH, P.C., concluded that:
"Despite these criticisms, the trend is toward using the broad evidence rule.
One court summarized the advantages of using the broad evidence rule as follows:
To put the matter in other words, the courts, when faced with a choice between applying some standardized rigid rule such as replacement cost minus physical depreciation or of adopting some more flexible test which can be modified in such a way as to accord more nearly with the principle of indemnity, have generally preferred the latter alternative even though it has involved the sacrifice of administrative convenience and simplicity (emphasis added).' "
Depreciation of Contents Claims: The Broad Evidence Rule
