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Farm Bureau's efforts to avoid paying fire loss are discredited by court

Brittany Smith's home burned.  She had bought coverage with Farm Bureau.  Farm  Bureau demanded that Smith complete the copious Proof of Loss which can be required by law (and it has short time limits, by the way) and she filled it out including between $900 and $1,000 dollars of personal property in the residence destroyed by fire but not owned by her.  She explained that apparent discrepancy to Farm Bureau when it forced her to sit for an examination under oath.  Nevertheless, Farm Bureau attempted to void her policy and refused to pay her the insured value of her loss--which was in excess of $200,000.00 in real and personal property.

Smith sued and the jury found that she never intended to defraud Farm Bureau.  The Court of Appeals agreed, found the amount involved to be "negligible" in any event, when compared with the value of the claim, and upheld the jury's verdict in Smith's favor.  Farm Bureau was ordered to pay the full amount of Smith's insured loss, although it won't "make her whole", now, because of the legal costs and fees.

The Court did allow Farm Bureau to reduce its payment for the value of the home from its $147,000 replacement value to the $110,000.00 "actual cash value" under the policy provisions, because she did not re-build the home.  The actual cash value was established based on her purchase price, because Smith's value proof had been limited to the cost of restoring the property--which she could not afford to do (most likely because Farm Bureau had declined to honor its insurance policy).  So, even though its cheapness did not ultimately prevail, Farm Bureau managed to avoid paying a significant portion of its insured's claim--and the insured had to pay legal fees and costs out of that. 

Even better, Farm Bureau attempted to penalize Smith further by reducing its payment to her by the amount owed to the mortgagee bank at the time of the loss, without taking into account whether Smith had been paying on the mortgage in the meantime.  As the Court of Appeals recognized, this perverse request would penalize fire victims who continued to pay their mortgage, while allowing the insurer to take an undeserved credit against the insured value.

Consider this case if you are currently insured by Farm Bureau.  The name is Brittany Smith v. Farm Bureau Insurance Company.   It was decided March 5, 2009, LC No. 05-518126-CK.

Thompson O’Neil, P.C.
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Traverse City, Michigan 49684
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