An Insurance Story
I thought I had told this story on EconLog before but a thorough search convinces me that I haven’t. It’s a story about how an insurance company treated 3 of my lost books from a devastating fire.
In February 2007, a fire destroyed the 19th-century wooden building in which I had my office in Monterey. I don’t know if I would have lost everything if I had got in soon enough, but days and weeks later, with the rain coming down (my office was on the top floor) pretty much everything was destroyed. Early on, the Monterey city manager, Fred Meurer, refused to let me go into the building. When I pointed out that someone had offered free use of his cherry picker so that I wouldn’t have to touch the floor (which easily could have fallen through), Meurer came up with another objection: asbestos. I pointed out that one couldn’t get badly sick from asbestos with the little exposure I would have. Meurer didn’t budge.
That’s the bad news.
In what also looked like bad news, I was underinsured. I had a computer, printer, 6 file cabinets full of files, a nice couch, 4 nice wooden book shelves, and about 1,500 books. The representative from Safeco, my insurer, agreed with me that I would easily hit the $14,000 limit on my policy and so he sent a check right away for $8,000 so I could quickly set up everything I needed in a new office. I told him that I had 3 autographed books from Friedrich Hayek and a few from Milton Friedman, who had died 3 months earlier. He told me that since I was already at the $14,000 loss point, I wouldn’t get any extra for those books.
Then, about a week later, he called and told me that he had found a provision in my insurance policy that he and I had both missed: I was allowed up to $10,000 for “fine art.” “And let me read you the definition of fine art,” he said. It included books autographed by famous authors.
He then told me that this wasn’t his specialty but Safeco dealt with a company that specialized in valuing autographed books. He suggested that I send him my estimate of value. I came up with a number of $200 per book, figuring that no one could say that was too high. I also told him that meanwhile I had discovered that my autographed books from Milton Friedman were at home and at my campus office.
About a week later I was flying to Baltimore Washington International Airport (BWI) from Monterey on Delta. I was on sabbatical and I was about to spend about 10 weeks of the sabbatical with the economists at George Mason University. (Thanks to Don Boudreaux, then chairman of the economics department, for letting me have an office.) The flight was from Monterey to Salt Lake City and then from SLC to BWI. As soon as I got off the flight in SLC, I turned on my flip phone and the phone rang. The woman on the other end told me that she was from the company hired by Safeco and she was calling to discuss the value of the Hayek books.
“I notice that you said you thought they were worth $200 each,” she said, “how did you come up with that?”
Oh, here we go, I said to myself. They’re going to dispute even that.
“I figured no one could argue that they weren’t worth at least $200,” I replied.
“I know something about the value of books autographed by Hayek,” she responded.
“You don’t get it,” I replied, “these weren’t just books autographed by Hayek; these were books autographed by Hayek to me.”
“Mr. Henderson, you don’t get it,” she replied, “these books aren’t worth $200 each; they’re worth $2,400 each.”
I was dumbfounded. This conversation occurred as I was walking to the gate for BWI. I thanked her and hung up.
“How much would I have to pay to upgrade to first class?” I asked the Delta employee.
“$300,” he answered. So I did. Spending 4% of my $7,200 windfall seemed about right.
Note: The picture above is of Hayek autographing my copy of his Studies in Philosophy, Politics, and Economics at the second Austrian economics conference at the University of Hartford in Hartford, Connecticut in June 1975. This was 6 months after Hayek had been presented with the Nobel Prize. Studies was one of my favorite of Hayek’s books. The photographer was Richard Ebeling. I had the picture as a book mark in my copy of another of my favorite of his books, Individualism and Economic Order. So of course it burned in the fire. I regretted that mainly because when I taught “The Use of Knowledge in Society,” I had showed the students the pic of Hayek and me. A few years later, Richard Ebeling emailed me and attached the above picture, asking if it was I. I replied that yes it was, and I love him.