Definition
A valued policy is a type of insurance contract in which the parties agree upon and fix the value of the insured interest — whether property, cargo, a vessel, or other subject matter — at the time the policy is issued, and embed that agreed value in the policy itself. If a covered loss occurs, the insurer pays the stated amount without further inquiry into actual market value at the time of loss. The pre-fixed valuation operates as liquidated damages: the agreed figure is conclusive between the parties regardless of what the property might have been worth had the loss not occurred.
This stands in direct contrast to an open policy, in which no value is stated at inception and the amount of recovery must be proved and calculated after a loss occurs.
Common Language
Modern common usage (Wiktionary): "A policy in which the value of the goods, property, or interest insured is specified."
Historical common usage (Webster's 1913): "A policy in which the value of the goods, property, or interest insured is specified; -- opposed to open policy."
The ordinary-language definition is accurate as far as it goes, but it obscures the legal significance of the specification. In common usage, "specifying a value" might suggest an estimate or a starting point for negotiation after loss. In insurance law, the specification is binding and conclusive — it eliminates the post-loss proof burden entirely and functions as a contractual agreement on damages rather than a mere approximation of worth.
Common Confusion
VALUED POLICY vs. OPEN POLICY: These are the two fundamental categories of property insurance valuation, and distinguishing them is critical. An open policy leaves the insurable value to be determined at the time of loss, typically requiring the insured to prove actual cash value or replacement cost. A valued policy forecloses that inquiry. The practical consequence is significant: under a valued policy, an insured may recover the full stated amount even if the property's market value at the time of loss was lower — and conversely, cannot recover more even if value had appreciated beyond the stated figure.
VALUED POLICY vs. VALUED POLICY LAW (STATUTORY): In many U.S. jurisdictions, a "valued policy law" is a statute requiring insurers to pay the face amount of a policy upon total loss of real property, regardless of actual value at the time of loss. This is a legislative imposition of the valued-policy principle, not the same thing as a contractually agreed valued policy. Researchers who encounter the phrase in American legal materials after the late nineteenth century should determine whether it refers to the contractual instrument or the statutory mandate.
Why It Matters in Research
The valued policy concept is most heavily developed in marine insurance, where it was standard practice for centuries before spreading to fire and property insurance. Researchers working in admiralty, maritime commerce, or early mercantile law will encounter it constantly in cases involving cargo and hull insurance.
The statutory dimension is the most significant trap in American legal research. Beginning in the 1870s and accelerating through the early twentieth century, many states enacted valued policy laws requiring insurers to treat fire insurance policies as valued policies upon total loss. The effect was to make contractual valued-policy treatment mandatory by statute. Cases and treatises from this era often use "valued policy" to mean the statutory requirement rather than the parties' contractual choice, and the two can produce different legal outcomes. A researcher who assumes the term is purely contractual when reading late-nineteenth or early-twentieth century American case law may misread the holding.
The liquidated damages characterization, repeated consistently across the historical sources, also has procedural consequences: where the value is fixed, disputes about actual loss value at trial are generally foreclosed, and the litigation centers instead on whether coverage was triggered at all.
In corpus research, valued policy materials will cluster around marine insurance treatises, fire insurance statutory compilations, and the jurisprudence of total-loss versus partial-loss determinations. The distinction between total and partial loss matters because many valued policies pay the agreed amount only on total loss; partial loss may still require proof of proportionate damage.
Historical Dictionary Support
The historical sources present unusual agreement on core definition. Black's, Burrill's, and Rapalje & Lawrence all draw directly from Duer on Insurance for the formulation that a valued policy exists when "the parties, having agreed upon the value of the interest insured, in order to save the necessity of further proof, have inserted the valuation in the policy, in the nature of liquidated damages." The phrase "in the nature of liquidated damages" is the jurisprudentially significant element — it signals that the agreed valuation is not merely evidentiary but contractually binding.
Burrill adds Kent's Commentaries as authority alongside Duer, giving the concept grounding in both treatise traditions. Bouvier, characteristically, cross-references without elaborating, directing readers to the POLICY entry rather than developing the term independently. Rapalje & Lawrence's cross-reference to the Pennsylvania case in 3 Binney signals that American courts were engaging with the valued/open distinction in reported decisions as early as the first decades of the nineteenth century.
What the historical sources collectively do not address is the statutory valued policy law movement — an expected gap, given that the major compilation dates largely precede or coincide with the early years of that legislative development. Researchers should not treat the historical dictionaries as sufficient guides to American valued policy law after approximately 1880.
Jurisdictional Note
Valued policy laws vary significantly across U.S. states. Some states impose them only for fire insurance on real property; others extend to additional lines. Several states have repealed or substantially modified such statutes. Researchers analyzing American insurance disputes should identify the controlling statute in the relevant jurisdiction and its date of enactment, since the statutory rule and the common-law contractual rule can produce materially different results.
Encyclopedia Cross-Reference
No single Law Mind Encyclopedia entry is a direct match. The concept of agreed valuation functioning as liquidated damages has structural connections to: Negligence -- Damages -- Future Damages and Present Value (The Law Mind Torts & Personal Injury Encyclopedia) for background on how law handles pre-fixed damage amounts; Secured Transactions -- Attachment (The Law Mind Contracts & Commercial Law Encyclopedia) for the adjacent concept of how parties contractually fix the value of collateral interests.