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Elberon Bathing Co. v. Ambassador Ins. Co - 77 N.J. 1, 389 A.2d 439 (1978)


N.J. Stat. Ann. § 17:36-5.15 et seq. regulates the subject of fire insurance. As required by N.J. Stat. Ann. § 17:36-5.19, a policy insures to the extent of the actual cash value of the property at the time of the loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality.


Defendant Ambassador Insurance Company ("Ambassador") issued a $125,000 fire insurance policy to plaintiffs Elberon Bathing Co., Inc. and Elberon Bathing Club Corp. ("Elberon") to indemnify them against loss by fire to its club's facilities and contents. The policy represented excess coverage over a $25,000 primary policy issued to Elberon by another insurance company. While Ambassador's the policy was in effect, the club was damaged by fire in an amount exceeding $25,000. The parties were unable to adjust Elberon's covered loss under Ambassador's policy. A court-appointed umpire and Elberon's appraiser awarded replacement cost for the damaged property; Ambassador's appraiser refused to sign the award. Elberon filed a lawsuit against Ambassador in New Jersey state court seeking entry of judgment on the umpire's award. The trial court affirmed the umpire's award, finding that replacement cost was the appropriate measure of Elberon's loss. Ambassador appealed.


Did Elberon's appraiser properly determine the proper measure of damages to Elberon's property?




The state supreme court reversed the trial court's judgment and remanded the cause for further proceedings. The court found the "actual cash value" of loss was improperly measured by Elberon's who did not take into account depreciation when assigning pure replacement costs for the loss. Specifically, the court found that: (1) pure replacement cost did not consider depreciation and did not measure "actual cash value;" (2) a broad evidence rule should be used to find "actual cash value" of loss; (3) the appraiser's failure to consider certain factors justified vacating the award; and (4) the trial judge should have determined liability before granting the award.

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