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Insurance Company must include Sales Tax in Valuation of Damaged Property


The case of Holden vs. Farmers Insurance is an  important case for those who have suffered damage to personal property. In this case, the insureds made a claim for damage from a fire, under a Renter's Policy (similar to a homeowner's policy). Farmers Insurance was obligated to pay the "actual cash value" of the property, in this case a sofa, which was destroyed in the fire. Farmers agreed to pay only the purchase cost, but not the sales tax, unless the insured actually replaced the sofa. The insured could not afford to replace the sofa, so Farmers would not include the sales tax. The Supreme Court ruled that the sales tax should be included in the "actual cash value" regardless of whether the sofa was replaced. It seems like a small issue to take to the Supreme Court, but the ruling will have long term consequences for Farmers Insurance, and other policyholders in similar circumstances. Read the case by clicking the link below.