A public adjuster asked me for a copy of Cigna Property & Casualty Insurance Company v. Verzi1. It involves a fairly uncommon situation where a building is damaged or destroyed before a contemplated demolition. Insurers usually try to avoid paying these losses because they argue the policyholder is obtaining a windfall. From their view, the intentional destruction of the property was contemplated by the insured at the time of the fortuitous loss. So, can the insured collect?

Here is the holding:

Virtually all of the cases from other jurisdictions…hold… that an insured may recover from his insurer if demolition has not begun, the building had not been completely abandoned, and the contract is neither irrevocable nor specifically enforceable. Consequently, we conclude that Cigna may not escape its obligation as demolition of the building remained contingent at the time of the loss. ‘The insurable interest of the parties to an insurance contract must be determined by the facts existing at the time of the loss, and such interest is not defeated by unascertained and speculative future events.’ 4 Appleman, Insurance Law & Practice § 2245, at 167 (1969 & Supp.1995 by Stephen L. Liebo), quoted in Miller v. New Jersey Ins. Underwriting Ass’n, 188 N.J.Super. 175, 457 A.2d 23, 31, cert. denied, 94 N.J. 508, 468 A.2d 169 (1983); Caputo v. Blackstone Mut. Ins. Co., 323 F.Supp. 1252, 1257 (W.D.Pa.1971); cited in Morgan v. American Sec. Ins. Co., 522 So.2d 454, 455 (Fla.Dist.Ct.App.1988).

The case also mandated that Cigna pay the full replacement cost value and not actual cash value:

The policy was in effect at the time of the loss, Verzi retained an insurable interest, and the building’s value was not affected by its possibly being demolished. Permitting “speculative, collateral questions, including the intended destruction, to enter into the ascertainment of actual value … would multiply litigation and unnecessarily complicate insurance adjustments.

Just wanted to start the New Year off with a policyholder friendly decision.

Happy New Year!

1 Cigna Prop. & Cas. Ins. Co. v. Verzi, 684 A.2d 486 (Md. App. 1996).