Technical Land, Inc. v. Firemen's Ins. Co.

• Decision Date: 27 July 2000
• Docket Number: No. 97-CV-1518.,97-CV-1518.
• Citation: 756 A.2d 439
• Parties: TECHNICAL LAND, INC., Appellant, v. FIREMEN'S INSURANCE COMPANY OF WASHINGTON, D.C., Appellee.
• Court: D.C. Court of Appeals

756 A.2d 439

TECHNICAL LAND, INC., Appellant, v. FIREMEN'S INSURANCE COMPANY OF WASHINGTON, D.C., Appellee.

No. 97-CV-1518.

District of Columbia Court of Appeals.

Argued April 22, 1999.

Decided July 27, 2000.

Christopher Conte, with whom Stanley L. Lipshultz, Silver Spring, MD, was on the brief, for appellant.

Craig D. Roswell, Baltimore, MD, for appellee.

Before TERRY and RUIZ, Associate Judges, and KERN, Senior Judge.

RUIZ, Associate Judge:

This appeal raises a novel issue concerning the type of interest—other than one based on legal or equitable title— that is insurable. We hold that an insurable interest in property can be shown when a party stands to benefit economically from a unique property or to suffer loss from its destruction, and that Technical Land should have the opportunity to make the necessary showing.

I.

The relationships among the various entities in this appeal are somewhat involved and complicated by legal and bankruptcy procedures, so we describe them in some detail. Technical Land, Inc., the plaintiff-appellant, is a District of Columbia corporation in which William Moore and Judith Deitz Moore are the sole stockholders. Techniarts Video International, Inc. (TVII), also owned and operated by the Moores, had a Use Agreement which allowed it to occupy the property at 1631 Kalorama Road. Techniarts Engineering (Techniarts) is a partnership owned by the Moores which owned equipment that was damaged by water when pipes burst at the building on 1631 Kalorama Road. The subject of this appeal is Technical Land's insurance claim concerning damage to the building itself, not to Techniarts' equipment.¹

Techniarts had a business relationship with 1631 Kalorama Associates, the owners of the property at 1631 Kalorama Road, for the purpose of building and developing a motion picture studio on the premises.² On December 11, 1991, Techniarts filed suit against Kalorama Associates and obtained a judgment in the amount of $131,055.13. See Techniarts Video, Inc. v. 1631 Kalorama Assocs., 572 A.2d 1051 (D.C. 1990)

. The Moores, on behalf of Techniarts, executed on the judgment and received a Marshal's Deed for the property at 1631 Kalorama Road on September 30, 1992. On December 10, 1992, the Moores obtained a Superior Court order substituting Technical Land as the owner of the property.³ The revised Marshal's Deed to Technical Land was dated January 7, 1993.

On April 1, 1993, a creditor of 1631 Kalorama Road Associates filed an action in the Superior Court against, inter alia, Technical Land, questioning the validity of the January 7, 1993 Marshal's Deed. After Technical Land filed for bankruptcy, the creditor's action was transferred to the United States Bankruptcy Court for the District of Columbia.⁴ On February 25, 1994, while the litigation contesting the validity of the Marshal's Deed to Technical Land was pending, TVII negotiated a Use Agreement with the Trustee for the Bankruptcy Estate of 1631 Kalorama Associates.

The Use Agreement, approved by the Bankruptcy Court on March 16, 1994, recognized that the right to ownership and possession of the premises was in dispute, but wished "to maximize the value of the property." Until the ownership dispute was resolved, the premise was to be "operated as a motion picture and television production facility." It gave the Trustee exclusive control over the property, including authority to sell the building, but gave TVII the right to use all of the space in the building. In exchange, TVII was responsible for maintenance, payment of utilities and operating expenses. With respect to insurance, the Use Agreement provided:

The Trustee has in place liability and property and casualty insurance at this time. TVII shall in addition maintain its own liability insurance with the estate as loss payee in an amount of not less than $1,000,000 and shall be responsible for insurance of all its own equipment.

The Parties will cooperate in attempting to obtain building insurance that is less expensive in light of the occupancy status of the building.

In June 1994, the Bankruptcy Court declared the Marshal's Deed to Technical Land invalid,⁵ but Technical Land, with the permission of TVII under the Use Agreement, continued to occupy the building until August 1995, when Technical Land vacated the premises upon expiration of the Use Agreement between the Trustee and TVII.

On December 10, 1993, the same day Technical Land had obtained the Superior Court order assigning the Marshal's Deed from TVII to Technical Land, and some six months before the deed was invalidated by the Bankruptcy Court, Technical Land acquired property insurance on the property at 1631 Kalorama Road from appellee, Firemen's Insurance, pursuant to an order of the Bankruptcy Court.⁶ The policy covered property damage up to $335,000 per incident, less the amount subject to the co-insurance provision of the policy. It did not cover damage to equipment or loss of business income. Technical Land was the only insured named in the policy.

Technical Land moved into 1631 Kalorama Road on February 28, 1994,⁷ and immediately discovered significant water damage.⁸ The Moores promptly contacted Firemen's Insurance to file a claim. On March 6, 1994, William Moore met with Gerald Kaplan, the adjuster assigned to Technical Land's damage claim, at the property. Following this meeting, the Moores conducted emergency repairs to the building at a cost of $125,515.94, which they borrowed from their Techniarts partnership.⁹ A second loss occurred on June 20, 1994, when a water valve in the heating and air conditioning system burst, damaging the areas that had just been repaired. After receiving notice of the second loss, Firemen's Insurance canceled the policy on July 5, 1994, and returned the premium to Technical Land.

Technical Land's claim for the first loss was denied on June 28, 1994. The letter of denial stated that Technical Land lacked an insurable interest in the property, and that Moore had failed to mention that the prior owner and Trustee for the Bankruptcy Estate of 1631 Kalorama Associates had a policy with Aetna Insurance providing coverage for the building.

Technical Land sued Firemen's Insurance for breach of the contract of insurance and failure to timely pay its claims after Firemen's Insurance refused to indemnify Technical Land for water damage to the building located at 1631 Kalorama Road. Following a two-day bench trial, the trial court ruled in favor of Firemen's Insurance after concluding, inter alia, that Technical Land did not have an insurable interest in the property.¹⁰ Technical Land appeals from this judgment, arguing that the trial court erred in the factors it considered in deciding that Technical Land did not have an insurable interest in the property. We note that Technical Land belatedly made the precise argument upon which we rule, and, therefore, the trial court did not make the relevant findings of fact and conclusions of law. Nonetheless, Technical Land sufficiently presented to the trial court a factual basis for its claim that it had an insurable interest. Thus, we reverse and remand for trial court consideration of the applicable factors we set out in this opinion.

II.

When the trial court sits as factfinder, its factual findings are accorded considerable deference and are reviewed under a "clearly erroneous" standard. See Davis v. United States, 564 A.2d 31, 33 (D.C.1989) (en banc)

; see also D.C.Code § 17-305(a) (1997 Repl.) (a judgment may not be set aside unless it appears "plainly wrong or without evidence to support it"). Where the matter under review is a question of law, however, this court exercises de novo review. See United States v. Felder, 548 A.2d 57, 61 (D.C.1988). Whether a person has an insurable interest is a question of fact. See Anderson v. State Farm Fire & Cas. Co., 397 N.W.2d 416, 417 (Minn.Ct.App.1986). Although Firemen's Insurance contends that Technical Land is seeking review of the trial court's finding of fact that Technical Land did not have an insurable interest, Technical Land maintains that the trial court's finding that it had no insurable interest in the property is wrong as a matter of law because the trial court did not consider the appropriate factors. We agree with Technical Land and review the trial court's ruling de novo. See Felder, 548 A.2d at 61-62.

Technical Land's principal argument on appeal is that the trial court incorrectly considered that an insurable interest in the property could be based only on Technical Land's judgment lien or the Marshal's Deed that was eventually invalidated. To support this contention, appellant details case law from other jurisdictions that an insurable interest in property is determined not only by legal or equitable title, but also by an insured's economic interest in the property measured by the potential for pecuniary benefit or loss that may result from the use of or damage to that property. See, e.g., Hawkeye-Security Ins. v. Reeg, 128 Ill.App.3d 352, 83 Ill.Dec. 683, 470 N.E.2d 1103, 1105 (1984)

; Miller v. New Jersey Ins. Underwriting Ass'n, 82 N.J. 594, 414 A.2d 1322, 1325 (1980). We do not read the trial court's ruling as narrowly as appellant suggests.¹¹ Rather, the trial court reasoned that because Technical Land could show no economic interest in the property itself, the only insurable interest it might have would be through its judgment lien or Marshal's Deed.¹² However, because the Marshal's Deed was declared invalid by the Bankruptcy Court, the trial court concluded that Technical Land was left without an insurable interest. The question before this court—one of first impression—is whether Technical Land had an insurable interest in the property other than through legal or equitable title.¹³

A. Insurable interest.

Before exploring the limits of an insurable interest, we review a few basic principles. It has been noted that in most states it is "axiomatic" that a valid...