Baker v. Aetna Ins. Co., 21133
| Decision Date | 22 January 1980 |
| Docket Number | No. 21133,21133 |
| Court | South Carolina Supreme Court |
| Parties | Louis H. BAKER, d/b/a Baker Builders, Appellant, v. AETNA INSURANCE COMPANY, Respondent. |
John B. Grimball of Grimball, Draffin & Pearson, Columbia, for appellant.
R. Davis Howser of Richardson, Plowden, Grier & Howser, Columbia, for respondent.
Appellant Baker, a residential contractor, appeals from an order denying him recovery under a builder's risk insurance policy issued by respondent Aetna. The lower court ruled that Baker had sustained no loss by reason of a fire which partially destroyed a house Baker constructed for a third party, Hammond. We affirm.
In addition to Baker's policy with Aetna, Hammond had taken out a separate policy of insurance with State Farm Fire and Casualty Company to protect his interest as owner. State Farm accepted liability for the loss and paid Hammond approximately $23,000.00 for the damage to his dwelling. Using the State Farm proceeds, Hammond then employed another contractor rather than Baker to restore the house to its prefire condition.
Baker made a claim under his policy with Aetna for a loss in the amount of $8,200.00, being the balance Hammond owed Baker under the construction contract. 1 Aetna denied the claim and this action ensued.
The issue of whether Baker sustained any loss by reason of the fire was submitted to the lower court by agreement of the parties based on the pleadings and certain stipulated facts. See Brown v. United Insurance Company of America, 268 S.C. 254, 233 S.E.2d 298 (1977).
Baker first argues that the $8,200.00 Hammond owed him represents his equity in the house and that he had an insurable interest to that extent. We conclude Baker had no risk of loss at the time of the fire, and therefore suffered no loss as a direct result of its occurrence.
One who agrees to construct a building for another under a contract for a stipulated price and calling for the completed structure must bear the loss occasioned by accidental destruction during construction and prior to completion. Upon completion, the risk of loss shifts to the owner. 13 Am.Jur.2d, Building and Construction Contracts, § 64; 17A C.J.S. Contracts § 466(2)a; annot., 53 A.L.R. 103. South Carolina is in accord with this general rule. Ulmer v. Phoenix Fire Ins. Co. of Brooklyn, 61 S.C. 459, 39 S.E. 712 (1901); Sammons v. American Home Fire Ins. Co., 94 S.C. 366, 77 S.E. 1108 (1913).
It follows that a contractor's insurable interest is not measured by the amount due him under the building contract at the time of the loss, but rather by the value of the building at the time of the fire. This interest, however, only exists for the period when the contractor has the risk of loss, i. e., during the construction and prior to completion. Ulmer, supra; Sammons, supra.
We hold that during construction and prior to completion, the risk of loss was on Baker and Aetna. Upon completion, the burden then shifted to Hammond and State Farm to accept the risk of loss. The record before us and the arguments of counsel for both parties disclose that construction of the house by appellant Baker was essentially complete at the time of the fire. This being the case, the risk of loss for which Baker was insured had shifted from him to Hammond, the owner. Accordingly, Baker sustained no loss as a proximate result of the fire. 45 C.J.S. Insurance § 811. Baker's loss if any was the result of Hammond's refusal to honor the contract.
Moreover, the issue of who bears the risk of loss Baker or Hammond was rendered moot when Hammond's insurer, State Farm, accepted the loss and paid for the damage.
Baker's next contention is that his claims against Hammond under the construction contract and to recover for materials and labor he furnished during construction no longer exist by reason of the fire, since Hammond received a house worth less due to the fire damage than what he had already paid Baker. Accordingly, Baker argues he has sustained a loss as a result. We disagree.
It is true that partial...
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