Nobody can remember all the stuff they have accumulated and discarded during their lifetime. When a total fire loss happens, and there is nothing left other than charred remains and memories, many insurance companies add to the emotional trauma by not paying one penny towards the personal property loss until claims forms asking for a myriad of information about the lost personal property are provided.     

One West Virginia court noted in the bad faith context:

One example of ‘actual malice’ would be a company-wide policy of delaying the payment of just claims through barraging the policyholder with mindless paperwork. For example, in a claim for household contents in a burned-out house, the company should pay the Policy’s face amount. Since the companies themselves often require a certain level of insurance on contents, it shows actual malice to require the policyholder to fill out form after form and argue for months over what, in nearly every case is a foregone conclusion.1

However, that is not the requirement under the insurance contract, as discussed in a more recent West Virginia case also involving a home completely burnt.2 The facts recited by the recent case were as follows:

On 2014, the Plaintiffs purchased a residence in… West Virginia. They used this residence recreationally as a second home. Over time, the Plaintiffs furnished and supplied the residence so that they did not have to pack clothing or other necessities when visiting. On November 29, 2021, the Plaintiffs’ Bug Ridge residence and its contents were destroyed in a fire.

The Plaintiffs immediately notified State Farm of the fire and State Farm assigned a claims specialist, Thomas Reneau (‘Reneau’), to investigate their claim.

On December 3, 2021, Reneau inspected the Bug Ridge property and declared it to be a total loss. He instructed the Plaintiffs to inventory every item of personal property lost in the fire using State Farm’s Contents Collaboration portal and provided them a digital link to do so. After the inspection, Mrs. Idleman accessed the digital link and started the personal property inventory.

Reneau and Mrs. Idleman met on December 15, 2021, and together entered additional items into the Contents Collaboration portal. The Plaintiffs’ personal property inventory was not completed at the end of this meeting, and Mrs. Idleman understood that she needed to continue tracking lost contents in the portal. But Mrs. Idleman did not complete the personal property inventory and Mr. Idleman did not add any items to the inventory. They did not complete the inventory because they were overwhelmed by their loss and believed the requirement to be unfair.

At the conclusion of Reneau’s investigation, State Farm paid the policy limits for Dwelling…for a total value of $215,094.25 State Farm did not pay the policy limit of $128,100 for Personal Property Protection…instead, it held this claim open and notified the Plaintiffs on several occasions that their claim was pending completion of their personal property inventory.

In June 2022, based on the partial inventory Mrs. Idleman had created, State Farm ‘offer[ed] payment of $5,634.64 as the current documented Personal Property claim submitted by the [Plaintiffs]’ It informed the Plaintiffs that the offered payment was ‘not in any way a final settlement, but simply an Actual Cash Value payment of the contents claimed thus far’ Reneau also followed up with the Plaintiffs about completing the personal property inventory, offering to assist them with the inventory on several occasions and sending them a copy of their partial inventory for review. The Plaintiffs refused State Farm’s partial payment and did not submit a complete personal property inventory.

The court noted the policy language:

The Policy also outlines the Plaintiffs’ duties in the event of a loss.  For example, they must immediately notify State Farm of any loss, protect the property from further damage, allow State Farm to access the property, and cooperate in any investigation. Id. at 30. The Plaintiffs must also:

c. prepare an inventory of damaged or stolen personal property:

(1) showing in detail the quantity, description, age, replacement cost, and amount of loss; and

(2) attaching all bills, receipts, and related documents that substantiate the figures in the inventory.

The court framed the issue as follows:

[I]t is undisputed that the Bug Ridge fire resulted in a total loss, and that the Policy covers the Plaintiffs’ lost personal property. The remaining issue is whether the Plaintiffs are entitled to the full limit of their personal property coverage as a matter of law. In other words, can the Plaintiffs recover the full policy limits regardless of the actual value of the contents lost?

West Virginia’s Valued Policy Law does not apply to a contents loss, as noted by the judge:

Prior to initiating this lawsuit, the Plaintiffs sent a letter to State Farm demanding payment of the full limit of their personal property coverage. Relying on West Virginia’s valued policy law, they contended that State Farm was required to pay the coverage’s face value regardless of the actual value of the personal property lost. Id. State Farm refused their demand because the Plaintiffs had not identified contents worth the policy limits. State Farm now moves for partial summary judgment on the question of whether the valued policy law applies to the Plaintiffs’ personal property claims.

West Virginia’s valued policy law, W. Va. Code § 33-17-9, provides that, in the event of a total loss fire, an insurer must pay the full amount of the insurance on real property. In Shinn v. West Virginia Insurance Company, the West Virginia Supreme Court of Appeals held that this statute does not extend to personal property claims. 104 W.Va. 353, 140 S.E. 61, 66 (1927) (superseded by statute on other grounds).

The court held that the policy requires providing information that results in the insurance company being able to investigate and determine the value of the lost contents:

The Policy in this case is unambiguous. It requires State Farm to pay for personal property loss caused by malicious destruction of property. But such payment is contingent upon the Plaintiffs’ preparation of ‘an inventory of damaged or stolen personal property: (1) showing in detail the quantity, description, age, replacement cost, and amount of loss; and (2) attaching all bills, receipts, and related documents that substantiate the figures in the inventory.’ Thus, while the Plaintiffs are entitled to recover the actual value of their loss up to the policy limit under West Virginia law, the Policy requires them first to provide an inventory demonstrating the actual value of their lost personal property so that State Farm can adequately assess their claim.

The court also explained why the policyholder’s arguments against having to submit the information were not valid:

First, the Plaintiffs assert that they are entitled to recover the full policy limit because ‘an insured is entitled to the protection which he buys and for which he pays’ and they have paid regularly paid the premiums associated with the $128,100 policy limit. The cite Wade v. Mut. Ben. Health & Accident Ass’n, 115 W.Va. 694, 177 S.E. 611 (1934), in support of their argument but this reliance is misplaced. Wade addressed disability insurance coverage not personal property insurance coverage and so it does not govern this case. Even so, requiring the Plaintiffs to demonstrate the actual value of their personal property loss by submitting an inventory does not deprive them of the insurance for which they paid where the Policy clearly stated this precondition.

Second, the Plaintiffs contend that a formal proof of loss is not required where, as here, the loss is total, and the insurer is given an opportunity to inspect the premises. See ECF No. 37 at 12 (citing Maynard v. Nat’l Fire Ins. Co. of Hartford, 147 W.Va. 539, 129 S.E. 2d 443, 453 (1963); Petrice v. Fed. Kemper Ins. Co., 163 W.Va. 737, 260 S.E.2d 276, 278 (1979); Colonial Ins. Co. v. Barrett, 208 W.Va. 706, 542 S.E.2d 869 (2000)). These cases again do not address personal property claims and are inapplicable to the issues in this case. Furthermore, the inventory provision in the disputed Policy is not a formal proof of loss provision as used in the real property context. There, a proof of loss provision, commonly referred to as a notice provision, requires the insured to inform the insurer of a claim as soon as practical. So long as the insured provides notice that ‘result[s] in the insurer being able to adequately investigate the claim and estimate its liabilities,’ the insured has satisfied their duty. Maynard, 129 S.E. 2d at 453. Here, according to State Farm, it has not yet been able to evaluate the Plaintiffs’ personal property claim and estimate its liability due to the lack of information about the contents lost in the Bug Ridge Fire.

Third, the Plaintiffs assert State Farm is estopped from insisting upon compliance with the inventory provision because it valued the contents of the Bug Ridge residence at $128,100 when it issued the Policy. The Plaintiffs are correct that under West Virginia law an insurer may be estopped from insisting upon compliance with a particular policy provision where the insured reasonably and detrimentally relies on the insurer’s representation that it will not enforce the provision. See Potesta v. U.S. Fid. & Guar. Co., 202 W.Va. 308, 504 S.E.2d 135, 143 (1998). But this case does not present such a scenario. As discussed, the Plaintiffs’ contents are not valued at the Policy limit simply because State Farm issued the Policy. The Policy notified the Plaintiffs that they would be required to submit a personal property inventory and that the coverage limit would act as a ceiling, not a floor. State Farm’s actions in this case have been consistent with this provision and in no way indicated that State Farm did not intend to enforce the inventory provision. From the date of the site visit, State Farm has repeatedly informed the Plaintiffs that they would need to complete and submit an inventory of their lost personal property before it would issue a payment under their personal property coverage. Thus, State Farm is not estopped from enforcing this provision.

I can appreciate and empathize with the policyholders’ views. Many insurance companies simply rely on adjustment techniques, which result in “insurance breakage.” “Breakage” is a term used to describe revenue gained by retailers through unredeemed gift cards or other prepaid services that are never claimed. In these cases, the company pockets the money paid for these items without actually providing the service or item for which the customer initially paid. “Insurance breakage” is a term used to describe a decrease in first-party claims payments through various wrongful claims methods, including onerous requirements for claims documentation. I will discuss the topic of “insurance breakage” in the claims context in greater detail tomorrow.

The bottom line lesson from this post is practical—try to comply with the policy requirements as much as possible. Public adjusters with sophisticated personal property experience can often provide tremendous help and emotional relief to policyholders in these dire situations where the insurance company adjusters do nothing other than demand a vast inventory list.         

Thought For The Day

It’s the little details that are vital. Little things make big things happen.

—John Wooden


1 Hayseeds. v. State Farm Fire & Cas., 352 S.E.2d 73, 81 at fn 2 (W. Va. 1986).

2 Idleman v. State Farm Fire & Cas. Co., No. 1:22-CV-59, — F.Supp. —, 2023 WL 4606959 (N.D. W.V. July 18, 2023).