What is the Broad Evidence Rule?
The Broad Evidence Rule is part of insurance law. It comes into play when something gets damaged or destroyed and the owner makes a claim with their insurance company to get money for it.
Figuring out how much to pay
Under the Broad Evidence Rule, the insurance company can look at all kinds of information to figure out the actual cash value of the damaged or wrecked property. They want to determine what the fair market value was right before the damage happened.
The actual cash value is the key thing. It’s not about the original price tag or what it would cost to buy a brand new replacement. Instead, it accounts for depreciation – how the value went down over time as the item got older or more used.
Fair game evidence
With this rule, pretty much any evidence that sheds light on the value can be used. It’s all fair game. The goal is to get the truest, most accurate picture possible.
Some of the things an insurance company might consider:
- The age and condition of the property
- Wear and tear over the years
- The selling price of similar items
- Expert opinions from appraisers
- Receipts or other records showing the original cost
- How much it would cost to repair vs. replace
Why use the Broad Evidence Rule?
Getting it right
The main point of this rule is to land on a payout amount that’s fair to everyone involved. The property owner shouldn’t get a windfall but they also shouldn’t get short-changed. And the insurance company shouldn’t have to over-pay.
By casting a wide net for value evidence, there’s a better shot of getting it right. Multiple data points help zero in on the truth. It’s like pieces of a puzzle coming together to show the full picture.
Handling unique items
This approach is especially useful for property that’s rare or unique. Think about things like antiques, art, custom furniture, or collectibles. With one-of-a-kind pieces, you can’t just pull up a price list.
In cases like that, an assessor has to get creative with their evaluation methods. Having flexible evidence rules gives them the leeway to do that. They can lean on things like expert opinions, auction results for similar rarities, the buzz around a particular artist, and so on.
Broad Evidence vs. Strict Construction
The flip-side of Broad Evidence is what’s known as Strict Construction or Strict Evidence. As the name suggests, it’s a much narrower approach. Only a very limited scope of evidence is allowed.
Strict rules of valuation
Under Strict Construction, you can’t stray far from the “standard” valuation methods. The focus is on hard numbers more than subjective factors.
The usual drill is to calculate actual cash value based on replacement cost minus depreciation over time. Receipts, price lists, and the physical specifics of the item itself (make, model, age, etc.) carry the most weight.
Simplicity and predictability
Proponents of this stricter style point to benefits like:
- Simplicity – With fewer variables in the mix, the math is more straightforward.
- Consistency – Using the same core formula leads to more predictable, uniform results.
- Clarity – People know exactly what to expect policy-wise. There’s less gray area.
- Efficiency – A tighter evidence pool can mean quicker resolutions for claims.
Potential drawbacks
On the downside, Strict Construction can be seen as rigid and limiting. It doesn’t always account for an item’s true and total value. Intangible factors often get left out.
A beloved family heirloom might not have a huge price tag but the sentimental value is priceless. Strict valuation probably won’t capture that full picture. The owner may feel the payout comes up short.
There’s also not as much wiggle room for those unique or niche cases that don’t fit neatly into a preset formula. Round pegs and square holes.
The trend toward Broad Evidence
These days, Broad Evidence is the majority rule in the U.S. insurance world. Most states and companies have shifted that way. It’s increasingly seen as the most equitable approach.
Serving the greater good
At the end of the day, insurance is meant to make people whole again after a loss. The more individualized the valuation process can be, the better it serves that purpose.
No two claims are identical. Circumstances vary. Nuances matter. Having the latitude to weigh a wide range of evidence lets adjusters tailor their assessment to each unique case. The idea is that the end result will be as fair and fitting as possible.
Challenges to navigate
This doesn’t mean applying the Broad Evidence Rule is easy. Casting that wider net comes with challenges like:
- Complexity – More pieces of evidence = more variables to juggle. Assessments can get trickier.
- Inconsistency – Results may be less predictable since there’s no single set formula.
- Subjectivity – Some evidence (like sentimental value) is open to interpretation.
- Time – Expanded investigations could draw out the claims process.
Insurance pros have to be diligent to keep things reasonable. They must strike that delicate balance – gathering enough evidence to inform a fair result but not going overboard.
It takes solid judgment skills and often a lot of experience to get it right. Knowing what carries the most weight. Sorting the signal from the noise.
