Newspaper article THE JOURNAL RECORD

Supreme Court Suppresses Replacement Cost Debate

Newspaper article THE JOURNAL RECORD

Supreme Court Suppresses Replacement Cost Debate

Article excerpt

It's an issue that went before the insurance commissioner, the Oklahoma County District Court, two courts of appeals and finally to the Supreme Court, which has quelled the debate.

The question was whether policyholders should pay for property losses up front in order to receive replacement costs. If policyholders don't replace property before getting reimbursed, many policies only cover the property's actual cash value.

The upshot: insureds only get $20 for their favorite cashmere sweater -- the actual value before the loss -- instead of the $200 to replace it.

Policyholders in two separate cases took on their insurance companies about the requirement. The first case was brought by local attorney Blanton Brown, who argued that the provision in his insurance policy was unconscionable. After Brown lost his Nichols Hills home to a fire in 1995, his Farm Bureau homeowners policy required him to pay a hefty portion of his losses up front before he received replacement costs. Brown took his pleas to the Oklahoma Insurance Department, which found in favor of insurance companies.

The second case, which made it to the Oklahoma Supreme Court, was filed in Oklahoma County District Court by Kelly Bratcher, also an attorney in Oklahoma City.

Part of Bratcher's argument was that his insurance company, State Farm, was inconsistent in that it required some policyholders to pay first while others received replacement cost checks without dipping into their own pockets. Bratcher's case stemmed from losses he incurred when items were stolen out of his car.

Both attorneys relied on a Oklahoma Court of Civil Appeals case -- the Coblentz case -- which granted summary judgment to a policyholder who argued the industry practice was unconscionable.

After Bratcher lost at the appeals court level, the Supreme Court, in overruling Coblentz, found the provision was not unconscionable because the insurance company did not commit fraud or deceit. The high court determined that the language in Bratcher's policy was unambiguous and that he was aware of the policy's requirement. …

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