Owner not entitled to more cash for building destroyed by fire

The Indiana Court of Appeals affirmed that the owner of a building leased to a Bloomington pet shop that was destroyed by a fire in 2008 is only entitled to the actual cash value of the building and not the replacement cost.

Tom Seeber owned the building which Harry and Karen Kidwell leased to operate Delilah’s Pet Shop. The building was deemed a total loss after a fire six years ago. Seeber’s insurance policy was issued by General Fire and Casualty Co.; the Kidwells’ insurers were Indiana Insurance Co. and Peerless Indemnity Insurance Co.

The insurers agreed that the cash value of the building was $512,418.12 and the replacement cost was $650,812.70. The insurance companies then collectively paid Seeber the full cash value for the building. But he believed he was entitled to receive the full replacement cost of the building, so Seeber filed a complaint for declaratory judgment in 2010. Both Seeber and the insurers sought summary judgment; the trial court ruled in favor of the insurers in April 2014.

Before he filed his lawsuit, Seeber had purchased 25 percent interest in a mix-used building he planned to use as replacement property. While the lawsuit was pending, he bought four condominiums in a single-story residential building.
 
Seeber appealed, claiming he was entitled under the policy language to the replacement cost of the building. He also argued that the first proposed replacement building, the mixed-use building, qualified as a replacement property under both insurance policies, so he should receive replacement costs.

But the insurance policy language states that with respect to a claim for replacement cost coverage, the insurers will pay the least of the cost to replace the property with other property of comparable material and quality that is used for the same purpose or the amount one actually spends to replace the lost or damaged property. Because the insurers paid Seeber more than the $420,000 Seeber spent to replace the building, they don’t owe him any additional funds, Judge Cale Bradford wrote.

The trial court did not err in concluding the condominiums did not qualify as a replacement property because their use is residential and the building destroyed by the fire was used as commercial. The COA cited Fizhugh 25 Partners LP v. KILN Syndicate KLN 501, 260 S.W.3d 861 (Tex. App. 2008), to support its decision in Tom Seeber v. General Fire and Casualty Company, Indiana Insurance Company, and Peerless Indemnity Insurance Company, 53A01-1405-PL-208.