Affirming the District Court, the Seventh Circuit agreed that the broad evidence rule was used under Indiana law to determine actual cash value. Thorne v. Member Select Ins. Co., 2018 U.S. App. LEXIS 3265 (7th Cir. Feb. 12, 2018).
Thorne's home burned to the ground in February 2008. Member Select refused to cover the loss because it determined that Thorne intentionally set the fire. After the jury's verdict in Thorn's favor, Member Select moved for judgment as a matter of law. Member Select argued that there was insufficient evidence for the jury to determine damages. The District Court entered a post-trial decision in Thorne's favor. Member Select appealed. Member Select also argued on appeal that the District Court misinterpreted the policy's loss coverage provision in evaluating whether the evidence was sufficient to support the jury's damages award.
The policy promised to pay "actual cash value" at the time of loss, but never defined the term "actual cash value." Courts around the country used four methods to define the term when it was not expressly defined in the policy. The methods were: (1) replacement cost, without deduction for depreciation; (2) market value; (3) replacement cost with deduction for depreciation; and (4) the broad evidence rule. The last three all took depreciation (or decrease in value due to use and age) into account.
The District Court used the broad evidence rule, which meant the parties could introduce evidence of every fact and circumstance which would logically tend to the formation of a correct estimate of the loss. Member Select argued, however, that the policy implicitly defined "actual cash value" as "replacement cost less depreciation," which was a narrower formula than the broad evidence rule. But the policy never mentioned "replacement cost' in conjunction with "actual cash value." Because the policy failed to expressly define "actual cash value" to mean "replacement cost less depreciation," the district court correctly looked to Indiana's broad evidence rule in interpreting the policy, despite the policy's requirement that "actual cash value" include depreciation. If Member Select wanted to define "actual cash value" as replacement cost less depreciation," it easily could have done so. The term "depreciation" was therefore ambiguous and construed against Member Select. The District Court correctly used the broad evidence rule to interpret the policy.
Member Select further contended that even if the broad evidence rule was the proper standard, there was insufficient evidence for the jury to determine damages. The jury was informed that Thorne's brother bought the house for $86,000 in 1998; Thorne bought the house for $75,000 in 2002. In 2004, Thorne had paid down the mortgage to $67,000 and opened a line of credit for $20,000 secured by the house. Thorne also testified about the general condition of the house and its contents before and after the fire. Therefore, Thorne argued that the jury's award of $87,000 was reasonable based on adding the $20,000 line of credit to the $67,000 remaining on the mortgage in 2004, plus an estimate of the value of his lost personal possessions.
Member Select argued that the jury could not reach a reasonable verdict without "opinion" evidence regarding the house's value at the time of the fire - whether from Thorne or another witness. But the Indian Supreme Court had held that under the broad evidence rule, any fact reasonably tending to throw light upon the subject was relevant, including original cost.
The evidence presented to the jury was reasonably precise evidence of what Thorne's house and its contents were worth, even if it was somewhat outdated. To the extent Member Select contested the evidence presented, it could have put forth its own evidence, but chose not to do so.
Therefore, the denial of Member Select's motion for judgment as a matter of law was affirmed.
