Unified School Dist. No. 285 v. St. Paul Fire and Marine Ins. Co.

• Decision Date: 08 May 1981
• Docket Number: No. 51552,51552
• Citation: 627 P.2d 1147,6 Kan.App.2d 244
• Parties: UNIFIED SCHOOL DISTRICT NO. 285, Plaintiff-Appellee, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY and the Hartford Fire Insurance Company, Defendants-Appellants.
• Court: Kansas Court of Appeals

Page 1147

627 P.2d 1147

6 Kan.App.2d 244

UNIFIED SCHOOL DISTRICT NO. 285, Plaintiff-Appellee, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY and the Hartford Fire Insurance Company, Defendants-Appellants.

No. 51552.

Court of Appeals of Kansas.

May 8, 1981.

Review Denied June 18, 1981.

Syllabus by the Court

1. In an action to recover on a policy of fire and extended coverage insurance, the burden of proof is on the insured to prove the nature and extent of the loss and that the loss is covered by the policy.

2. When the functional use, or intended functional use, of an insured structure is made known to the insuror and that use is specifically described in the policy, repairs contemplated to be made from the proceeds of the policy, in the event of loss, are those necessary to restore the structure to that insured functional use.

3. The Uniform Building Code requires that repairs to school facilities conform to the Code whenever the cost of those repairs, exclusive of Code requirements, is more than 25%, but not more than 50%, of the current replacement cost of the structure; if more than 50%, the entire structure must be "brought to Code."

4. The opinion of an "expert," founded upon mere speculation and not upon essential underlying data, is not sufficient as the sole factual support for a money judgment under the rule requiring damage awards to be supported by substantial competent evidence.

5. The State Architect's approval of school repair plans, required by statute, cannot be arbitrarily, capriciously or unreasonably withheld.

6. Insurance policy limitations of liability excluding payment for added repair costs resulting from building code or other governmental requirements are unenforceable in policies which insure the functional use of a structure and are also void as against public policy.

7. The policy term "actual cash value" means cost of repair or replacement, less applicable depreciation.

8. Under the terms of the policy before the court, actual repair or replacement of the damaged structure is a condition precedent to the added coverage benefits contained in the Replacement Cost Endorsement.

9. In an action by a school district, on policies of fire and extended coverage insurance, for damages caused by a tornado to school facilities, it is held : (a) The functional use of the structures, as school facilities, is insured by the policies; (b) added repair costs incurred as a result of building code requirements pertaining to school facilities are covered by the policies, up to the limits of coverage; and (c) a new trial is ordered to determine (1) plaintiff's total damages, including any added repair costs incurred in complying with building code requirements, and (2) whether plaintiff is entitled to the additional benefits afforded by the Replacement Cost Endorsement.

Paul H. Niewald and John L. Hayob, of Niewald, Risjord & Waldeck, Kansas City, Mo., for defendants-appellants.

Nelson E. Toburen, of Wilbert, Lassman, Toburen & Wachter, Pittsburg, for defendant-appellant St. Paul Fire and Marine Ins. Co.

Jack L. Lively, of Hall, Levy & Lively, Coffeyville, for defendant-appellant Hartford Fire Ins. Co.

T. Richard Liebert, of Liebert & Liebert, Coffeyville, for plaintiff-appellee.

Before FOTH, C.J., Presiding, TERRY L. BULLOCK, District Judge, and FREDERICK WOLESLAGEL, District Judge Retired, Assigned.

TERRY L. BULLOCK, District Judge:

A tornado struck Cedar Vale, Kansas, on June 16, 1975, and damaged a high school building and a school bus garage owned by plaintiff. The extent of that damage was the subject of this action filed against defendants, the companies which insured the buildings. The total face amount of coverage provided by defendants' policies was $251,563 for the high school building and $47,576 for the garage. After a bench trial, the trial court held that plaintiff had suffered a "total loss" and entered judgment in plaintiff's favor for the entire face amount of both policies and for interest, costs and attorney fees as well. From this judgment defendants have appealed, raising several points for our consideration.

Defendants first contend that the trial court erred in its conclusion that defendants had the burden of proof to establish that plaintiff had suffered something less than a total loss, as that term is defined by the valued policy law, K.S.A. 40-905. We concur. For many years, the law has recognized that the insured has the burden of proof to establish the nature and extent of any loss and that the loss claimed was caused by one of the perils insured against ("covered") by the policy. The only exception to this rule pertains to exclusionary clauses within the policy, with respect to which the insurer has the burden of proof. See Baugher v. Hartford Fire Ins. Co., 214 Kan. 891, Syl. P 5, 522 P.2d 401 (1974) and Insurance Co. v. Heckman, 64 Kan. 388, 67 P. 879 (1902). Based upon these authorities, we conclude that the burden of proof in this cause is on the plaintiff to prove the nature and extent of its loss, whether "total" (within the meaning of K.S.A. 40-905) or not, and that the loss was "covered" by the policy.

Defendants next contend that the record does not contain substantial competent evidence to support the trial court's finding that plaintiff suffered a "total loss" and was thus entitled to the face amount of the policies pursuant to K.S.A. 40-905. Again, we concur. The term "total loss" (or "wholly destroyed," the actual language of K.S.A. 40-905) has been consistently defined by our Supreme Court. In Insurance Co. v. Heckman, 64 Kan. at 395, 67 P. 879, the court held:

"Whether the building covered by the policy, the foundation of this action, was or was not rendered by the fire a 'total loss' or 'wholly destroyed,' was, in this case, a question of fact for the jury. (Citations omitted.)

"The phrase 'total loss,' or its equivalent, 'wholly destroyed,' as used when applied to the subject of insurance, does not contemplate the entire annihilation or extinction of the property insured. Nor does it require that any portion of the property remaining after loss shall have no value for any purpose whatever, but it means only destruction of the property insured to such extent as to deprive it of the character in which it was insured. Although some portion of the building may remain after the fire, yet if such portion cannot be reasonably used to advantage in the reconstruction of the building, or will not, for some purpose, bring more money than sufficient to remove the ruins, such building is, in contemplation of the law, a 'total loss' or 'wholly destroyed.' " (Citations omitted.)

In Kinzer v. Insurance Association, 88 Kan. 93, 97, 127 P. 762 (1912), the court quoted Heckman and added the following:

"Another case cited by appellant which recognizes the same rule is Royal Ins. Co. v. McIntyre, 90 Tex. 170, 37 S.W. 1068. There the test is said to depend upon the question 'whether a reasonably prudent owner, uninsured, desiring such a structure as that in question was before the injury, would, in proceeding to restore the building to its original condition, utilize such remnant as' a basis. See also note to the same case in 59 Am.St.Rep. 811, where the author uses the following language: 'Undoubtedly, no matter how great a portion of the building may remain unconsumed, yet if it is so injured that it must be torn down or that what remains can not be utilized in reconstructing the building without incurring greater expense than if it were not so utilized, the property must be regarded as having been "wholly destroyed," ' citing O'Keefe v. Ins. Co., 140 Mo. 558, 41 S.W. 922, German Ins. Co. v. Eddy, 36 Neb. 461, 54 N.W. 856, Harriman and another v. The Queen Ins. Co. of London and Liverpool, 49 Wis. 71, 5 N.W. 12, and Seyk, and others v. The Millers' Nat. Ins. Co., 74 Wis. 67, 41 N.W. 443."

The court slightly rephrased the rule in McKenzie v. Fidelity-Phenix Fire Ins. Co., 133 Kan. 721, 724, 3 P.2d 477 (1931), stating:

"The rule is well settled that property is not 'wholly destroyed' within the meaning of the statute if an ordinarily prudent person would use any portion of the structure in the reconstruction of the building. If, however, the structure is so injured that it must be torn down or that which remains cannot be utilized in reconstructing the building, the building is 'wholly destroyed.' It matters not that portions of the material in the building can be utilized in rebuilding, for it is not the material composing the building that is insured but the building itself, and if its remnant cannot be used as a basis of repair or reconstruction the loss is total. (Insurance Co. v. Heckman, supra; Kinzer v. Insurance Association, 88 Kan. 93, 127 Pac. 762, and cases there cited.)"

In the case at bar, the trial court concluded that even though there is no "literal total loss" of a structure insured as to functional use, a "constructive total loss" occurs whenever the damaged structure cannot be restored to that insured functional use for a sum equal to or less than the face amount of the policy. In this conclusion, we agree. When the functional use, or intended functional use, of an insured structure is made known to the insurer and that use is specifically described in the policy, we conclude that the repairs contemplated to be made from the proceeds of the policy, in the event of loss, are those necessary to restore the structure to that insured functional use.

Next, the trial court observed that plaintiff's buildings were twice described in the policies as "high school buildings" and "school bus garage," respectively. From this observation the trial court found that defendants had undertaken not only to insure the structures as structures, but had undertaken to insure the functional use of those structures as school and school bus garage buildings. Again, we agree.

Finally, the trial court applied this "constructive total loss" test...