Eighteen states presently have "valued policy" laws which require insurance companies to pay the amount stated in the policy in the event of a total loss.1 In our state by state "Total Loss" series, we have covered each state with a "valued policy" law except New Hampshire and North Dakota. So, this week I will focus on New Hampshire.
The "valued policy" law in New Hampshire is set forth in its Revised Statutes, specifically in "Chapter 407. The Fire Insurance Contract and Suits Thereon." New Hampshire’s "valued policy" law2 states in pertinent part:
"If a building insured for a specific amount, whether under a separate policy or under a policy also covering other buildings, is totally destroyed by fire or lightning without criminal fault on the part of the insured or his assignee, the sum for which such building is insured shall be taken to be the value of the insured’s interest therein unless overinsurance thereon was fraudulently obtained."
In my research of New Hampshire law, I found a New Hampshire Supreme Court case that discussed what constitutes a "total loss."3 The Court distinguished "actual" versus "constructive" total loss, both of which can trigger the "valued policy" law. As for "actual" total loss, the Court in reviewing the lower court’s findings, found that a building is not physically a total loss if it did not lose its identity as a building and that a "reasonably prudent man" would use the remnants to restore the building to the condition prior to the fire. When it comes to "constructive" total loss, the issue is whether the building code (considering safety and cost) would allow for the repair of the building. If it is determined that by the building officials that the building cannot be rebuilt or repaired, then it is a total "constructive" loss.
So, in New Hampshire, when it comes to "total loss" either actual or constructive total loss can be considered. When determining if a damaged building is an "actual" total loss, both the "identity test" and "prudent person" test are applied.
1 The eighteen states are: Arkansas, California, Florida, Georgia, Kansas, Louisiana, Mississippi, Missouri, Montana, North Dakota, New Hampshire, Ohio, South Carolina, South Dakota, Tennessee, Texas, Wisconsin and West Virginia.
2 N.H. Rev. Stat. 407:11.
3 Firemen’s Ins. v. Houle, 96 N.H. 30, 69 A.2d 696 (1949).