Definition
An unvalued policy is a type of insurance contract in which the parties do not agree in advance on the value of the insured subject matter. Instead, the value is left open and must be determined at the time of loss, typically by reference to the actual market value, replacement cost, or other evidence of worth at the time the loss occurs. The insurer's liability is capped at the policy's face amount, but recovery requires the insured to prove the actual value of what was lost up to that limit.
Contrast with a valued policy, in which the parties fix an agreed value at the time the contract is made, binding both sides in the event of total loss regardless of what the property actually proves to be worth.
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Common Confusion
UNVALUED POLICY vs. VALUED POLICY: These terms are frequently confused or conflated, and the distinction is substantive. Under a valued policy, the agreed value is conclusive — neither party can later argue the property was worth more or less. Under an unvalued policy, the insured must demonstrate actual loss and cannot simply claim the policy face amount as a matter of right. The burden of proof and the measure of recovery differ significantly between the two forms.
UNVALUED POLICY vs. OPEN POLICY: These terms are used interchangeably in insurance law and refer to the same instrument. "Open policy" is the more common commercial and marine insurance usage; "unvalued policy" appears more frequently in legal treatises and court analysis. Researchers should search both terms when working through historical sources.
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Why It Matters in Research
The primary research trap is terminological inconsistency across time and jurisdiction. Older marine insurance sources — particularly English authorities predating the Marine Insurance Act 1906 — use "open policy" almost exclusively. American insurance treatises from the nineteenth and early twentieth centuries shift between "open" and "unvalued" without consistent preference. When searching the corpus for this concept, run both terms.
The distinction between valued and unvalued policies becomes legally critical in two recurring contexts: (1) disputes over the measure of indemnity following partial or total loss, and (2) overinsurance and underinsurance disputes where the absence of a fixed agreed value shifts the evidentiary burden onto the insured. Researchers examining historical casualty and fire insurance litigation should be alert to the fact that many jurisdictions enacted valued policy statutes — laws requiring insurers to pay the face amount of the policy on total loss of certain property (most commonly real property) — which effectively converted what would have been unvalued policies into valued ones by operation of law. These statutes significantly complicate the historical record: a policy that looks unvalued on its face may have functioned as a valued policy under local law.
The term also appears in marine insurance contexts with its own doctrinal texture. In marine insurance, the open or unvalued policy historically served a practical commercial function, allowing merchants to insure goods before precise valuations were possible, with value to be declared or proved later. The corpus connections between this term and marine insurance doctrine are stronger than the term's surface appearance in property insurance might suggest.
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Historical Dictionary Support
Bouvier's Law Dictionary defines the unvalued policy straightforwardly as one "in which the value of the subject insured is not specified but is left to be ascertained in case of loss," citing Richards on Insurance. This reflects the settled understanding of the term by the late nineteenth century. Bouvier's cross-reference to "cf." (presumably the valued policy entry) signals the relational character of the definition — the term is understood primarily by contrast with its opposite.
Richards's treatise, cited by Bouvier's, was a standard American insurance law reference of the period and the definition it anchors has remained stable. What historical dictionaries do not address is the statutory layer — the valued policy laws passed in numerous American states beginning in the 1870s and 1880s — which created significant practical exceptions to the unvalued policy's operation in property insurance. Researchers relying solely on dictionary sources for the doctrine will miss this legislative development entirely.
English sources align substantively with American ones on the core definition, though English marine insurance vocabulary settled earlier and more consistently on "open policy."
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Jurisdictional Note
A number of U.S. states enacted valued policy statutes applicable to fire and property insurance, requiring payment of the full face amount on total loss. These laws effectively override the unvalued policy's default rule in covered contexts. The scope, exceptions, and judicial interpretation of these statutes vary by state, making jurisdiction-specific research essential when the question involves property insurance total loss.
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Encyclopedia Cross-Reference
contracts_190: Insurance Contracts — Interpretation and Construction of Insurance Policies (The Law Mind Contracts & Commercial Law Encyclopedia)
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