Valued Policy Law and Total Loss

Typically, a fire insurance policy pays a policyholder for the actual cash value or the replacement value of the property destroyed.  But in 20 states, if there is a total loss, the amount the insurer must pay is equal to the value of the property at the time the insurance policy was issued.  What happens if the policy covers a multi-building complex and one of the buildings is destroyed?  The Eighth Circuit Court of Appeals recently addressed this issue. In Norwood-Redfield Apartments Limited Partnership v. American Family Mutual Ins. Co., No. 18-2618 (8th Cir. May 16, 2019)(Unpublished), the appeals court affirmed a judgment in favour of the insurance company denying the policyholder’s claim to recover the full value listed on the policy of an entire complex of buildings when only one of the buildings was destroyed.  The policyholder sued its insurance carrier after a fire destroyed one of the buildings out of 32 in the complex.  The insurance carrier paid nearly $3 million for the loss, but the policyholder wanted the policy limits of over $31 million.