Ohio Cas. Ins. Co. v. Ramsey
| Decision Date | 20 September 1982 |
| Docket Number | No. 2-681A207,2-681A207 |
| Citation | 439 N.E.2d 1162 |
| Parties | The OHIO CASUALTY INSURANCE COMPANY, Appellant (Defendant Below), v. Maezell RAMSEY, Appellee (Plaintiff Below), and James T. Thomas, Appellee (Defendant Below). |
| Court | Indiana Appellate Court |
Peter G. Tamulonis, Mark W. Gray, Kightlinger, Young, Gray & De Trude, Indianapolis, for appellant.
Irma Hampton Nave, Anderson, for appellee.
Defendant-appellant The Ohio Casualty Insurance Company (Ohio Casualty) appeals from a judgment of $11,900 entered in favor of plaintiff-appellee Maezell Ramsey (Ramsey), claiming that the trial court erred in using replacement cost as the standard of recovery under a fire insurance policy insuring Ramsey's destroyed home "to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss ...."
We reverse.
The record discloses that on November 7, 1979, a dwelling house owned by Ramsey was totally destroyed by fire. A detached garage was left intact. The structures, located at 629 South Gharkey Street in Muncie, were insured under a policy issued by Ohio Casualty and limiting liability
to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss ....
Record at 57 (emphasis supplied).
Ramsey sued Ohio Casualty for $12,000, the face amount of the policy. The sole witness at trial, real estate appraiser Jay E. Allardt (Allardt), testified on Ramsey's behalf as to the value of the destroyed property. He indicated that the cost of replacement would be approximately $16,000 and assessed the fair market value of the loss at Allardt explained the discrepancy between replacement cost and market value of the sixty-year-old dwelling as follows:
$3,300. The value of the undamaged ten-year-old garage was estimated at $2,800.
Q. You've mentioned that there is a difference between the replacement cost and what the property would actually appraise for.
A. Thats [sic] right.
Q. Can you justify the difference between those two figures?
A. Yes.
Q. And what is that difference?
A. Okay, its [sic], really its [sic] an age old thing, its [sic] a popular conception I think that cost is equal to value and that's not true unless there is [sic] two conditions that are present and one of them is that the property is new which this one is definately [sic] not, the second is that its [sic] the highest and best use of the land and which is arguable on this case, the subject property being located next to the railroad track there and with no visible frontage and so forth on Gharkey Street, with subject to a hugh [sic] amount of whats [sic] known as economic obsolescence and that's from factors outside the property which would be things like visibility, the noise, the vibration from the train, what it comes down to is it would be an undesirable house to buy given other alternatives. Then it is also functionally obsolete in the sence [sic] that if you were going to build a house today and you were going to spend that $18,800.00 [replacement cost of dwelling plus value of garage] we were talking about you wouldn't build a house like that.
Q. You would build it in a more modern fashion then.
A. Yes, the floor plan would be different, there would be more closet space and so forth and um ... what it amounts to is and then you got physical depreciation which is just the wear and tear on the structure of the property the roof isn't as good a [sic] new, the siding is not as good as new, the foundation is not as good as new, the wiring, the plumbing, you could go on and on, none of it is as good as new and so there's substantial amount of depreciation from physical depreciation, functional obsolescence and economic obsolescence and those are what bring the value down to what the fair market value was that we estimated at the time.
Id. at 140-41. (emphasis supplied).
In entering the following judgment for $11,900--the face value of the policy less a $100 deductible--the trial court apparently interpreted the operative term "actual cash value" as cost of replacement without a depreciation deduction:
This matter having been taken under advisement and the Court having considered the evidence herein and the Memorandum of Law submitted therewith finds that the subject property herein was destroyed by fire that the evidence herein showed that said dwelling cannot be repaired at a cost of less than face value of the insurance herein and that the replacement cost would far exceed the limits of the policy herein and that the plaintiff is entitled to replacement of said property or in the alternative the limits of the policy herein and that the plaintiff is entitled to replacement of said property or in the alternative the limits of liability by the defendant company on the policy of insurance herein therefore the Court finds that the plaintiff is entitled to have and recover from the defendants the sum of $12,000.00 being the limits of liability less $100.00 deductible for a total of $11,900.00 and coasts [sic] all as per decree.
A single issue is presented for review:
What is the measure of recovery for a total loss of real property covered by a
fire policy limiting the insurer's liability "to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss ...?"
PARTIES' CONTENTIONS--Ohio Casualty primarily relies on two cases, General Outdoor Advertising Co. v. LaSalle Realty Corp., (1966) 141 Ind.App. 247, 218 N.E.2d 141, and Atlas Construction Co. v. Indiana Insurance Co., (1974) 160 Ind.App. 33, 309 N.E.2d 810, in urging us to adopt fair market value as the true meaning of the contract term "actual cash value." The trial court's interpretation of "actual cash value" as pure replacement cost, says Ohio Casualty, violates the principle of indemnity upon which insurance contracts are based: Failure to consider depreciation in assessing damages places the insured in a better financial position than he would have been in had no loss occurred.
Ramsey's response is that the trial court's interpretation of the pivotal phrase "actual cash value" as pure replacement cost was proper in light of this court's decision in Travelers Indemnity Co. v. Armstrong, (1979) Ind.App., 384 N.E.2d 607. In Travelers, which involved a partial fire loss to real property insured under a policy whose liability-limiting language was identical to that found in Ramsey's policy, this court interpreted "actual cash value" as replacement cost without a depreciation deduction. Characterizing her loss as partial because the detached garage and land were uninjured, Ramsey argues that the measure of damages announced in Travelers is controlling. And she maintains that even if her loss be construed as total, recovery of pure replacement cost is essential to afford indemnity.
CONCLUSION--The measure of recovery for a total loss of real property covered by a fire policy limiting the insurer's liability "to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss," is the broad evidence rule, under which the fact finder may take into account any evidence tending to establish the true economic value of the insured property.
How does one interpret a slippery phrase like "actual cash value?" No Indiana court has yet construed the phrase in the context of an action for damages brought upon a contract of insurance covering real property which has been totally destroyed by fire. But courts of other states have examined the term in this context, and one Indiana court has examined it in the context of a partial fire loss: All agree that the term is ambiguous and therefore subject to interpretation. See, e.g., Travelers Indemnity Co. v. Armstrong, (1979) Ind.App., 384 N.E.2d 607. See generally Note, Valuation And Measure Of Recovery Under Fire Insurance Policies, 49 Colum.L.Rev. 818 (1949) [hereinafter cited as Valuation Under Fire Policies ]. When, as here, contractual ambiguity arises because of language used in the instrument rather than because of extrinsic evidence, construction is a pure question of law. R. R. Donnelley & Sons Co. v. Henry-Williams, Inc., (1981) Ind.App., 422 N.E.2d 353; Huntington Mutual Insurance Co. v. Walker, (1979) Ind.App., 392 N.E.2d 1182. A court on appeal will independently evaluate a pure question of law, substituting its judgment for that of the trial court if necessary. See generally 4A B. Bagni, L. Giddings & K. Stroud, Indiana Practice Sec. 103 (1979). This we proceed to do.
As a reviewing court we must ascertain and effectuate the intent of the parties. Piskorowski v. Shell Oil Co., (1980) Ind.App., 403 N.E.2d 838; Boswell v. Lyon, (1980) Ind.App., 401 N.E.2d 735. Because a fire insurance policy is a contract of indemnity, the intent of the parties to the policy is to place the insured in the same financial position he would have been in had no loss occurred. Travelers, supra; Braddock v Memphis Fire Insurance Corp., (1973) Tenn., 493 S.W.2d 453.
It has been said that in order to indemnify the insured, the term "actual cash value" will be given a meaning which takes into account the character of the insured property and the extent of the loss. Thus, real property is treated differently than personal property, and total losses are treated differently than partial losses. See...
To continue reading
Request your trial
-
Campins v. Capels
...fact and circumstance which would logically tend to a formation of a correct estimate of the loss"); Ohio Casualty Insurance Co. v. Ramsey, (1982) Ind.App., 439 N.E.2d 1162. This range of evidence gives the trier of fact sufficient latitude to intelligently determine the amount of damages. ......
-
D & S Realty, Inc. v. Markel Ins. Co.
...Parker, supra note 12. 20.Rockford Mut. Ins. Co. v. Pirtle, supra note 17, 911 N.E.2d at 65. 21.Id. 22. See, e.g., Ohio Cas. Ins. Co. v. Ramsey, 439 N.E.2d 1162 (Ind.App.1982); Patton v. Mutual of Enumclaw Ins. Co., 238 Or.App. 101, 242 P.3d 624 (2010). 23. See, Rockford Mut. Ins. Co. v. Pi......
-
Travelers Indem. Co. v. Armstrong
...Second District, subsequent to the time this opinion was prepared but prior to its filing. See The Ohio Casualty Insurance Company v. Ramsey, et al., (1982) Ind.App., 439 N.E.2d 1162, now pending on petition to transfer.2 See note 1 ...
-
State v. Bishop, 32S01-0302-CV-72.
...change hands between a willing buyer and seller, neither being under any compulsion to consummate the sale." Ohio Cas. Ins. Co. v. Ramsey, 439 N.E.2d 1162, 1167 (Ind.Ct. App.1982). "Anything affecting the sale value [on the date of the taking] ... is a proper matter for the jury's considera......