Valuation of Losses Involving Baseball Cards

Issue:

The insured had a large and valuable collection of baseball cards. Some were given to him, and the rest were purchased or traded for over the years.  The entire collection was stolen from his home. The insured has an ISO HO 00 03 04 91 and an ISO HO-290 (Ed. 5-88) Personal Property Replacement Cost endorsement which states that "memorabilia, souvenirs, collectors items and similar articles whose age or history contribute to their value" are not eligible for replacement cost settlement and are settled at "actual cash value at the time of loss but not more than the amount required to repair or replace."

How should the insurer value the baseball card collection?

Analysis:

The value of the baseball card collection is determined by finding the market value of the cards in the collection.

Under the HO-290, the insured has replacement cost coverage for personal property, but "memorabilia" are excepted and settled at actual cash value.  Baseball cards fit within the category of "memorabilia" because their age and history contribute to their value.

A baseball card is valued within the market where it can be traded among collectors or through dealers.  The condition of a card is an inherent part of its value.  Beckett Baseball Card Monthly is a reliable and widely-used guide for determining the market value of a card.  This source lists a card’s selling range as a starting point; the high figure is the full retail price and the low figure reflects variables such as player unpopularity and quantity lots. An older card in mint condition is valued at a premium above these figures.  The premium varies, depending upon the card’s issue year and grade (e.g., pre-1968 cards in mint condition at 150-200% of the guide).  Cards graded in lesser condition are valued at under 100% of the guide, with older cards valued at a higher percentage.  The figures are based upon the cost to purchase the card, not how much a dealer would pay a collector for it.

The value of a baseball card can fluctuate.  Factors affecting value are the player’s performance, career milestones, whether the card is autographed, its age and physical condition, and the overall climate of the sport over a period of time.  Generally, the market will respond gradually as a player nears setting a record or another career milestone, peak, and then either slightly decline or rise at a slower rate.  Also, if the insured acquired an expensive card with a high grade, but failed to properly store it and it became bent, then the card lost value during the insured’s ownership.

Consequently, some of the insured’s cards could have decreased in value during his ownership, or depreciated.  Actual cash value is usually thought of as replacement cost minus depreciation.  However, it does not make sense to distinguish between replacement cost and actual cash value for baseball cards.  The purpose of replacement cost coverage is to pay the insured enough money to obtain a new item in order to replace an old one which sustained a loss.  For example, an actual cash value payment for a 15-year-old couch would not nearly reimburse the insured for the cost of replacing it with a new couch which would serve the same function as the damaged couch.  This rationale does not apply to baseball cards.  The closest thing to a "new for old" replacement cost payment would be payment for the value of the same card in mint condition.  This would be nothing more than a windfall to the insured.  Paying the insured whatever the market value of the card was, in its condition, does not prevent the insured from replacing the card he had.  In this respect, excluding "memorabilia" from replacement cost recovery in the HO-290 avoids the difficulties of valuing such items in terms of replacement cost while fully indemnifying the insured by basing recovery on market value.

After checking a source such as Beckett Baseball Card Monthly for a range of value, a dealer can be consulted regarding the affect a particular  card’s condition has on its value.  Unless the insured kept records of his collection separate from it, the identity and pre-loss condition of each of the cards at a given moment will be difficult to establish.  The insured probably does not have bills of sale for cards he acquired as gifts or through trading.  Cards which the insured kept properly stored in plastic were probably the most valuable in his collection.  The insured may remember the players, years and conditions of such cards.  Testimony of friends and relatives familiar with the collection may help.  Other cards, which may account for the bulk of his collection, may have been stored in bundles in boxes.  The more the insured had of such cards, the harder it will be for him to remember details regarding specific cards.  The best that can be done for such cards is to negotiate a settlement based upon approximations of quantity and date range. Valuation would be much easier if at least the most valuable cards in the collection had been scheduled for all-risk coverage, with the insurance conditional upon a professional appraisal of their value prior to the loss.