What is the Broad Evidence Rule?
The Broad Evidence Rule is part of insurance law. It applies when something is damaged or destroyed, and the owner files a claim with their insurance company to collect money.
Figuring out how much to pay
Under the Broad Evidence Rule, the insurance company can examine all kinds of information to determine the actual cash value of the damaged or wrecked property. They want to determine the fair market value before the damage occurs.
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 decreased over time as the item got older or used.
Fair game evidence
This rule can use evidence to illuminate the value. It’s all fair game. The goal is to get the most genuine, 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 shouldn’t get short-changed. And the insurance company shouldn’t have to overpay.
Casting a wide net for value evidence increases the chances of getting it right. Multiple data points help zero in on the truth, like puzzle pieces coming together to show the whole picture.
Handling unique items
This approach is beneficial for rare or unique properties. Consider 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, assessors must be creative with their evaluation methods. Flexible evidence rules give them that leeway. They can rely on expert opinions, auction results for similar rarities, the buzz around a particular artist, etc.
Broad Evidence vs. Strict Construction
The flip side of Broad Evidence is Strict Construction or Strict Evidence. As the name suggests, this approach is much narrower. Only a minimal 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 complex numbers more than subjective factors.
The usual procedure calculates actual cash value based on replacement cost minus depreciation over time. Most weight is given to receipts, price lists, and the physical specifics of the item (make, model, age, etc.).
Simplicity and predictability
Proponents of this stricter style point to benefits like:
- Simplicity – The math is more straightforward, with fewer variables.
- Consistency – 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 rigid and limiting. It doesn’t always account for an item’s actual and total value, and intangible factors are often overlooked.
A beloved family heirloom might not have a considerable price tag, but its sentimental value is priceless. Strict valuation probably won’t capture that whole picture. The owner may feel the payout comes up short.
There is also less wiggle room for unique or niche cases that don’t fit neatly into a preset formula: round pegs and square holes.
The trend toward Broad EvidenceNowadays
These days, broad evidence is the majority rule in the U.S. insurance industry. Most states and companies have shifted to this approach, which is increasingly seen as the most equitable.
Serving the greater good
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, and nuance matters. Adjusters can weigh various pieces of evidence to tailor their assessment to each unique case. The goal is that the 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 no single set formula exists.
- Subjectivity – Some evidence (like sentimental value) is open to interpretation.
- Time – Expanded investigations could draw out the claims process.
Insurance pros must be diligent while remaining reasonable. They must strike a delicate balance between gathering enough evidence to inform a fair result and not going overboard.
It often takes a lot of experience and solid judgment skills to get it right. Knowing what matters most is sorting the signal from the noise.
