Valued Policy Law

The valued policy law applies to "buildings" totally destroyed by fire.

A March 14, 1974 Attorney General opinion said that the valued policy law applies to mobile homes provided they are affixed to a permanent foundation. There was no reference as to what "affixed to a permanent foundation" means.

The law provides that after ninety (90) days the amount of coverage shown in the policy or application shall be presumed to be reasonable and settlement made on that basis. In other words, after ninety (90) days and there is a total loss by fire only, the company must pay the amount shown in the policy for the building if the insured will not settle for less.

The actual code sections are shown below.  Section 56-7-801 was amended April 8, 2014 to allow the inspection by the insurance company or it's designee, not just the agent.

56-7-801. Inspection of property insured against fire - No insurance exceeding fair value of property.

(a) Within ninety (90) days after making or writing any contract of fire insurance on any building or structure in this state, the company, its designee or agent, shall cause the building or structure to be inspected.

(b) No company, agent or insurance producer shall knowingly issue, negotiate, continue or renew, or cause the permit to be issued, negotiated, continued or renewed any fire insurance policy upon property or interests in the property within this state of an amount that, with any existing insurance on the property, exceeds the fair value of the property.

[1927 Pub.Acts, c. 72, § 1; 2014 Pub.Acts, c. 652, § 1, eff. April 8, 2014.]

56-7-802. Measure of damages for loss by fire - Insured reimbursed for excess premiums.

If buildings within the state insured against loss by fire are totally destroyed by fire, the company shall not be liable beyond the actual value of the insured property at the time of the loss or damage; and if it appears that the insured has paid premiums on an amount in excess of the actual value, the insured shall be reimbursed the proportionate excess or premiums paid on the difference between the amount named in the policy and the actual value, with interest at six percent (6%) per annum from the date of issue; and the excess of premiums, and interest thereon, shall be allowed the insured from the time any companies carrying the insurance at the time of the loss have continuously carried the insurance on the destroyed buildings, whether under policies existing at the time of the loss or under previous policies in the same companies.

[Acts 1927, ch. 72, § 2; Code 1932, § 6173; T.C.A. (orig. ed.), § 56-1138.]

56-7-803. Measure of damages in case of agent's failure to inspect property.

If the agent fails to place a reasonable value on any such insured property within the ninety (90) days, as provided in § 56-7-801, and which is agreed to by the insured, and a loss occurs, in that event the value as shown by the policy or application shall be conclusively presumed to be reasonable, and settlement shall be made on that basis.

[Acts 1927, ch. 72, § 2; mod. Code 1932, § 6174; T.C.A. (orig. ed.), § 56-1139.]