HomeMy WebLinkAboutMMIA - Valuation on propertyMMIA
Montana Municipal Insurar FAuthoritv
POBox6669 j;j ~:, I-b~ 7 2005
Helena, MT 59604-666~ L_
DATE: January 20, 2005
R.M. Bulletin #5-05
TO:
All Members of MMIA Property Insurance Program
FROM:
John D. Craig, Property Program Manager
Montana Municipal Insurance Authority
RE:
Navigating through your decision to manage risk with
Agreed Valuation on your property
Agreed valuation can save you premium dollars, but nothing comes free. By selecting
agreed valuation you give up some level of coverage to share the risk of loss. This dsk
management bulletin is directed at highlighting the additional exposure that comes with
agreed valuation, but we must first discuss coverage in general. ..
MMIA's Primary coverage form is 'replacement'. You report your property inventory
(schedule) with values assigned at replacement cost for new, like & kind, items at
current market prices; you pay premiums based on that value; and you receive
replacement coverage (the item will be repaired or replaced with new based on the
extent of the damage). The exception here is for property not listed (declared) on your
schedule. This unscheduled Real & Personal property does carry 'automatic'
replacement coverage if you elect to replace it, If you choose not to replace a lost item
and want cash, you will receive a check for the much lower Actual Cash Value (ACV) or
market value of the item. Insurance law says you can not profit from a loss.
Unscheduled vehicles & equipment are treated differently. Losses may be automatically
adjusted (paid out) ACV as defined in the policy rules, if you do not declare the vehicle
or equipment you own on your schedule, and it is lost, you may only receive payment for
the current market value of the vehicle regardless of your replacement valuation intent.
Here is an example:
We recently had a community with replacement coverage on their vehicles. They
owned two older fire trucks with a 'replacement as new' value of over $ 500,000
each. Because they were older, they had been overlooked in their schedule reporting
and were not listed (i,e. unscheduled vehicles). Had they been damaged or totally
lost, the most MMIA adjusters could pay out would be fair market value for similar fire
trucks of that age (roughly $100,000); even though there was a presumption of full
replacement coverage. Imagine explaining this $900,000 oversight to your
constituency.
This newsletter is published as a service to our members. The a~cles are no/a substitute for the Memorandum of Liability Coverage or other coverage
documents. All coverage determinations are made on a case-by-case basis, and can only be viewed on the unique facts of the claim presented.