COMPANY v. CHARITY, ET AL.
January 9, 1998
Record No. 970671
ALLSTATE INSURANCE COMPANY
PATRICIA A. CHARITY, ET AL.
OPINION BY JUSTICE ELIZABETH B. LACY
FROM THE CIRCUIT COURT OF THE CITY OF ALEXANDRIA
Alfred D. Swersky, Judge
Present: All the Justices
In this appeal, we consider whether a proof of loss submitted
by an insured substantially complied with the terms and
conditions of a fire insurance policy.
Allstate Insurance Company (Allstate) issued a fire insurance
policy covering property owned by Patricia A. Charity. The
property was totally destroyed by a fire. The policy required
Charity to submit a proof of loss and required that, if Allstate
chose to rebuild the property, it had to inform Charity of such
decision within 30 days of receiving the proof of loss.
Charity notified Allstate of the loss and submitted a proof of
loss on June 23, 1995. In completing the form, Charity
wrote "To be determined" in the blanks designated as
"Actual Cash Value of said property" and "The
Amount Claimed under the . . . policy." On
November 22, 1995, Charity submitted a second proof of loss
containing a dollar amount for the cash value of the dwelling. On
December 6, 1995, Allstate notified Charity that it intended to
rebuild the property. When Charity refused to allow Allstate to
rebuild the premises, Allstate filed a motion for declaratory
judgment seeking a determination that it was entitled to rebuild
the premises pursuant to the terms of the policy.
The parties stipulated the evidence and exhibits and submitted
the case to the trial court on cross-motions for summary
judgment. The trial court held that the June 23 proof of loss
substantially complied with the policy conditions, and,
therefore, under the policy, Allstate was required to notify
Charity that it intended to exercise its option to rebuild within
30 days of June 23. The trial court entered judgment in favor of
Allstate appeals the judgment of the trial court, asserting
that substantial compliance requires that the proof of loss
submitted by an insured contain the dollar amount of the loss
and, therefore, Allstate’s December 6, 1995 notification to
Charity of its intent to rebuild was timely. Because we conclude
that neither the conditions of the policy nor the purpose of a
proof of loss require that the form contain the actual dollar
amount of the loss, we will affirm the judgment of the trial
We have held that the terms and conditions of a fire insurance
policy are satisfied by a showing of reasonable and substantial
compliance, in the absence of bad faith. Aetna Cas. Co. v.
Harris, 218 Va. 571, 578, 239 S.E.2d 84, 88 (1977). In
addition, we have determined that providing the insurer with only
the fact of loss does not constitute substantial or reasonable
compliance. Id. at 578-80, 239 S.E.2d at 88-89. Whether
substantial and reasonable compliance requires the insured to
furnish the dollar amount of the actual cash value of the loss in
this case depends on the requirements of the policy and the
purpose of the proof of loss.
The policy conditions relevant to the proof of loss are found
in Part 4, Section 1, Paragraph 3 of the policy. That paragraph
provides that, in the event of a loss, the insured
"must" do a number of things, one of which is to
provide the company with a sworn proof of loss. The paragraph
also lists a number of items that "should" be included
in the proof of loss, including the actual cash value and the
amount of the loss of the items damaged or destroyed. Allstate’s
deliberate use of the words "must" and
"should" in separate parts of the same paragraph
compels the conclusion that the words have different
connotations. In this context, "should" is permissive,
and therefore, the dollar amount of the loss is not a required
part of the proof of loss. Even if the insurer’s choice of words
created some doubt as to whether the listed items were required
to be included in the proof of loss form, such doubt must be
resolved against the party drafting the policy. Fidelity &
Cas. Co. of New York v. Fratarcangelo, 201 Va. 672, 677, 112
S.E.2d 892, 895 (1960). Based on the language used, we conclude
that the policy conditions do not require that the actual dollar
amount of the loss be stated on the proof of loss form.
Even though the policy does not require the actual dollar
amount in the proof of loss, the insured retains the burden to
show that the information actually provided constitutes
reasonable and substantial compliance with the requirement that a
proof of loss be submitted to the insurer. Harris, 218 Va.
at 578, 239 S.E.2d at 88. The parties do not dispute that the
purpose of a proof of loss is to enable the insurer to
investigate the insured’s losses, to estimate its rights and
liabilities, and to prevent assertion of fraudulent or unjust
claims. Walker v. American Bankers Ins. Group, 836 P.2d
59, 62 (Nev. 1992); Sutton v. Fire Ins. Exch., 509 P.2d
418, 419 (Or. 1973). If the information Charity provided was
sufficient to allow the proof of loss to be used for these
purposes, Charity has met her burden of substantial compliance.
Allstate admits that the proof of loss submitted by Charity in
June was sufficient to allow it to investigate the claim.
Allstate asserts, however, that because the dollar amount of the
loss was not on the form, it could not "determine the nature
and extent of the loss or its liability." As explained in
oral argument, what Allstate means is that without Charity’s
statement of the actual dollar value of the loss, Allstate could
not determine whether it should exercise its option to rebuild.
In essence, Allstate asserts that it needs to know the amount an
insured is claiming so that it can compare that amount to what
its investigation shows its liability may be.
Having an insured’s estimate of its loss undoubtedly would
assist the insurer in structuring its position in settlement of
But the extent of Allstate’s liability is determined by the loss
itself, the policy’s coverage restrictions, and the limits of the
policy, not by the dollar amount the insured places on the proof
of loss form. Not knowing the dollar amount of the insured’s
claim does not affect the ability of the insurance company to
determine the amount of its liability. As stated by the trial
court, "[t]here was nothing once [Allstate] got the proof of
loss statement from Ms. Charity to prevent [it] from going out
and conducting [its] own investigation
. . . ."
The information provided on the June 23 proof of loss allowed
Allstate to investigate the loss, to determine its liability, and
to prevent a fraudulent claim. Therefore, the June 23 proof of
loss substantially and reasonably complied with the terms of the
policy and the purposes of a proof of loss.
Part 4, Section 1, Paragraph 4 of the policy states that in
order to exercise the option to rebuild the property, Allstate
"must give you notice of our intention within
30 days after we receive your signed, sworn proof
of loss." When Allstate received a proof of loss which
reasonably and substantially complied with the conditions of the
policy, the thirty-day period began to run. In this case, the
thirty-day period began to run with the submission of the June 23
proof of loss. Allstate did not notify Charity of its intention
to rebuild the destroyed property within the time required by the
policy conditions and, therefore, waived its option to rebuild.
For these reasons, we will affirm the judgment of the trial
JUSTICE KOONTZ, with whom JUSTICE COMPTON and JUSTICE KEENAN
I cannot join in the result reached by the majority and,
accordingly, I respectfully dissent.
On brief, the insured stated that the "To be
determined" answers she provided on June 23, 1995 in the
blanks on the proof of loss form designated for the "Actual
Cash Value" of the damaged property and the amount of her
claim were "the equivalent of, ‘I don’t know now, but I’m
working on it.’" Undoubtedly that is true, and it makes
sense when considered in light of the provisions of the policy,
noted by the majority, that specifically provide procedures for
resolving disparities between the amount claimed by the insured
and the amount offered by the insurer.
This is not a situation involving a denial of a claim by the
insurer. The sole issue is when, under the express terms of the
insurance contract, the completion of the proof of loss form
triggers the thirty-day option of the insurer to pay the claim or
to rebuild the property.
In Aetna Cas. Co. v. Harris, 218 Va. 571, 578-80, 239
S.E.2d 84, 88?89 (1977), as noted by the majority, we have
determined that providing the insurer with the mere fact of loss
does not constitute substantial and reasonable compliance with
the requirements of the insurance policy to provide a proof of
loss. In my view, for purposes of determining whether sufficient
information was provided to trigger the thirty-day option period,
the proof of loss here which provided no more information to the
insurer regarding the amount of the claim than "I don’t know
now, but I’m working on it," is really no more than a notice
of loss. Clearly it falls short of a proof of loss that permits
the insurer to determine intelligently how to exercise its
contractual options in response.
For these reasons, I would hold that the thirty-day period
within which the insurer had the right to exercise the option to
rebuild or to pay the claim commenced on November 22, 1995, when
the insured provided the second proof of loss statement
containing the dollar amount for the value of the damaged
dwelling, and I would reverse the judgment of the trial court.
 Charity hired The
Goodman-Gable-Gould Company, a public adjustment company, to
assist her in the settlement of her claim.
 Code ? 38.2-2105’s
requirement that a fire insurance policy "shall"
contain certain provisions, including one calling for
notification to the insurer of the "amount of loss
claimed," does not require a different result. Section
38.2-2107 provides that a company may use simplified alternative
language which is no less favorable to the insured than that
contained in ? 38.2-2105.
Other provisions of the policy specifically provide procedures
for resolving disparities between the amount claimed by the
insured and the amount offered by the insurer.