Is an Insured Limited to the Amount in a Rejected Proof of Loss?

In an insurance dispute, there sometimes comes the question: Am I (the policyholder) limited to the amount submitted in my proof of loss, after it is rejected by the carrier?

While there is no abundance of case law on the matter, there are some older cases and secondary sources that support the idea that an insured might not be limited to the claim amount in their proof of loss upon rejection by the carrier. As a general rule, Couch on Insurance states:

[Proof of losses] are not conclusive against the claimant, however, and can be explained, varied, or contradicted in the case of an honest mistake unless the proof of loss furnished by one person is adopted by another, the insurer was prejudiced thereby, or the scope of the proofs of loss has become the law of the case by virtue of a judicial determination.¹

While this provision does not quite hit the mark exactly, it does indicate that statements (and thus valuation estimates) in a proof of loss are not fully conclusive, meaning that upon an insurer’s rejection, all bets should be off the table, and the insured should not be limited to the original estimated number within (absent a showing of fraud or bad faith).

An article found in the American Law Reports discusses the admissibility and conclusiveness, as against an insured, of statements and valuations in a proof of loss.² Within this source, several cases are examined, pertaining to whether an insured is limited to the amount in their proof of loss, after it has been rejected by a carrier. One source in particular, the Griswold case, became one of the main sources of this discussion.

In American Ins. Co. v. Griswold, an insured submitted a proof of loss on a claim under a marine insurance policy. The proof represented the settlement figure with three insurers and was shortly thereafter rejected. It was held by the court that in his recovery against the insurer declining the settlement, the insured was not limited to the figure stated in the proof of loss, even if the insured had assented to the correctness of this figure under a mistaken apprehension of its legal rights.³

Outside of New York’s Griswold case, other jurisdictions have faced the topic and discussed the issue of whether the policyholder is limited to the amount contained in the proof of losses after a rejection by the carrier.

KANSAS – In J. F. Laderer Clothing Co. v Northern Assur. Co., an insurer rejected the amount demanded by the insured’s proof of loss under a fire policy, and the court held that the insured’s recovery was not limited to the amount originally stated in the proof of loss.⁴

TEXAS – In Penn Liberty Ins. Co. v. Tannery, an insurer denied all liability for storm damage under the insured’s policy, in which it rejected the insured’s proof of loss damage valuation. The court held that the amount of the insured’s recovery was not limited to the damage claimed in the proof of loss.⁵

Both the J.F. Laderer Clothing Co. and Tannery holdings seem to reinforce the older rule out of the Griswold case. All three cases (Griswold, J.F. Laderer Clothing Co. and Tannery) follow and uphold the idea that an insured is not limited to the to the claim amount in their proof of loss, once it is rejected by the carrier.

One last case that is relevant to the issue is Van Tassel v. Greenwich Ins. Co., a fire policy dispute out of New York.⁶ After the insured received a renewal of a fire policy (in the “binding slip” form), the insurer sent a letter to the insured’s broker stating that the insured’s policy for the amount carried in the renewal application was declined, but that it would be carried for half that amount. No answer was made to this communication.⁷

Of course, shortly thereafter a large fire occurred. In all the preliminary steps, including submission of the proof of loss, the claim of the insured was stated as no greater than the amount the insurer had stated it would be willing to accept, but it was held that the “binding slip” was still effective to keep the old amount of the policy enforced. The court held that despite the figure stated in the proof of loss, the insured could recover for a greater amount up to the limits of the old policy.⁸

While the Van Tassel case, on its face, is different from the other three previously discussed cases, it still holds that the insured was not limited to the figure stated in their previously submitted proof of loss.

So, what does this all mean? Sometimes there are mistakes made in the proof of loss when originally submitted. There may be inspections and estimates which come after submission of the proof of loss that will show that the figures in the earlier submitted proof of loss are either lower or higher. If a proof of loss is rejected and the insured later wishes to submit a new proof of loss with different figures, these cases provide support for the argument that the insured should not be limited to the original numbers in the proof of loss.
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¹ § 186:25 Evidentiary effect of statements in proof, 13 Couch on Ins. § 186:25.
² 58 A.L.R.2d 429 (Originally published in 1958).
³ American Ins. Co. v Griswold, 14 Wend 399 (N.Y. Sup 1835); 58 A.L.R.2d 429.
⁴ J. F. Laderer Clothing Co. v Northern Assur. Co. 116 Kan. 377, 226 P. 712 (1924).
⁵ Penn Liberty Ins. Co. v Tannery 280 S.W.2d 295 (Tex. App. 1955).
⁶ Van Tassel v Greenwich Ins. Co., 151 NY 130, 45 N.E. 365, 367 (NY 1896).
⁷ Id.
⁸ Id.