Opinion ID: 1657531
Heading Depth: 1
Heading Rank: 5

Heading: Actual Cash Value

Text: [6] As used in a property insurance policy, the phrase actual cash value is a limitation on the amount of recovery for the protection of the insurer and not a substantive measure of damages. Borden v. General Insurance Co., 157 Neb. 98, 59 N.W.2d 141 (1953); Clouse v. St. Paul Fire and Marine Ins. Co., 152 Neb. 230, 40 N.W.2d 820 (1950); 12 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 175:26 (1998). Where, as here, the policy does not include a specific definition, it has been noted that there is a priority of rules to determine actual cash value as follows, (1) where market value is easily determined, actual cash value is market value, (2) if there is no market value, replacement or reproduction cost may be used, (3) failing the other two tests, any evidence tending to formulate a correct estimate of value may be used. 12 Russ & Segalla, supra, § 175:24 at 175-32, citing Sullivan v. Liberty Mutual Fire Ins. Co., 174 Conn. 229, 384 A.2d 384 (1978). [7] We have directly addressed the meaning of actual cash value in the context of property insurance in two cases. In Borden v. General Insurance Co., supra , we held that the actual cash value of property means the market value of it; that market value is the amount for which property may be sold by a willing seller who is not compelled to sell it to a buyer who is willing but not compelled to buy it. 157 Neb. at 113, 59 N.W.2d at 149-50. We further stated that in determining such value, the finder of fact should consider the situation and condition of the property as it was at the time [of loss] and all other facts and circumstances shown by the evidence that affected or had a tendency to establish its value. Id. at 114, 59 N.W.2d at 150. We applied the same definition to actual cash value, as used in a coinsurance clause, in Erin Rancho Motels v. United States F. & G. Co., 218 Neb. 9, 352 N.W.2d 561 (1984). We were urged by the insurer in that case, as we are in this case by Le Mars, to adopt the broad evidence rule, which permits a finder of fact to consider every fact and circumstance which would logically tend to the formation of a correct estimate of the building's value, including the original cost, the economic value of the building, the income derived from the building's use, the age and condition of the building, its obsolescence, both structural and functional, its market value, and the depreciation and deterioration to which it has been subjected. Id. at 14, 352 N.W.2d at 564-65, quoting Messing v. Reliance Ins. Co., 77 N.J. Super. 531, 187 A.2d 49 (1962). While indicating that we had no particular quarrel with that definition, we stated that actual cash value must still be measured as an economic unit, i.e., related to what, in terms of value, one could receive for his or her property. Fair market value is a term which has been used and is generally understood by experts and lay people alike, and which may be found by employing, if you will, the broad evidence rule. . . . We continue to approve that definition for actual cash value wherever it is used in a policy of property damage insurance. (Emphasis supplied.) Erin Rancho Motels v. United States F. & G. Co., 218 Neb. at 14, 352 N.W.2d at 565. Applying either a market value test or the broad evidence rule, there is undisputed evidence in this case that the value of the insured building as an economic unit, and therefore its actual cash value, was $200,000 immediately prior to the occurrence of the hail damage.