While travelling to Phoenix this week to meet with clients, I dug through the seat back pocket in front of me to create more room for my knees. In doing so, I happened upon the monthly magazine provided by the airline which had an article about New York City inspiring me to turn this week’s exploration of the total loss standards across the nation to New York.
While I was unable to turn up any case law stemming from the great fire of 1776 in New York City, I was not surprised to find that New York finds its total loss roots in fire losses. Interestingly though, those roots are intertwined with marine insurance. In 1898 a New York appellate court held that,
A total loss does not mean an absolute extinction. It is not necessary that all the parts and material composing the building are absolutely and physically destroyed, but the inquiry always is whether, after the fire, the thing insured still exists as a building.1
The Court, used marine insurance law to support its conclusion that the building owner did not suffer a total loss, stating,
it is not unreasonable to apply the doctrine which prevails in marine insurance with respect to the total loss of the ship or vessel insured. There it is held that the ship is a total loss when she has sustained such extensive damage that it would not be reasonably practicable to repair her. The ordinary measure of prudence which the courts have adopted is this: If the ship, when repaired, will not be worth the sum which it would be necessary to expend upon her, the repairs are, practically speaking, impossible, and it is a case of total loss. This is said to be the English rule….The American rule recognizes the same principle, but fixes upon a different amount of expense as giving the right to abandon. If the expense of repair will exceed half the value of the ship when repaired, she is considered a total loss, and may be abandoned. A total loss or a total destruction takes place when the subject insured wholly perishes, or its recovery is rendered irretrievably hopeless. A constructive total loss, which enables the owner to abandon the ship, takes place when the subject insured is not wholly destroyed, but its destruction is rendered, highly probable, and its recovery, though not hopeless, yet exceedingly doubtful.
In this case, the court determined that because the building owner only paid a third of the policy limits to repair the building, he did not suffer a total loss. Ultimately, it appears that New York uses somewhat of a hybrid test, allowing for the influence of marine insurance in the determination of total loss.
1 Corbett v. Spring Garden Ins. Co., 155 N.Y. 389, 50 N.E. 282, 41 L.R.A. 318 (1898).