Price, Schettino and Gaulkin. The opinion of the court was delivered by Gaulkin, J.A.D.
[54 NJSuper Page 543] This case was submitted to the Superior Court, Law Division, "for determination upon a stipulation of the testimony which would have been given had the witnesses been called, exhibits, and briefs * * *." Upon these the trial court found that fire had destroyed more than 50% (in value) of the materials that made up plaintiffs' frame building, located in Pompton Lakes.
The ordinances of Pompton Lakes forbade the repair of a frame building damaged to such an extent unless the entire building was made to conform with the building code. Plaintiffs concede that had there been no such ordinance the building could have been repaired with material of like kind and quality for $12,600. The trial court found that (because of the type of construction of what was left of the building) the building, in fact, could not be "restored" in a manner which would comply with the ordinances; and "that after a hearing before the building inspector [at which the defendant insurance companies were represented] * * * he ordered plaintiff owners to remove and demolish the building * * *," which was done.
Upon these facts the trial court concluded that plaintiffs had suffered a "constructive total loss" of the entire building, which had an actual cash value at the time of the fire of more than the $18,000 insurance upon it. Hence judgment of $18,000 was entered in favor of the plaintiffs. From that judgment defendants appeal. Plaintiffs cross-appeal from the trial court's refusal to allow interest upon the $18,000 from 60 days after they filed proofs of loss.
Defendants first ground of appeal is that under the language of the policies their liability is limited to the $12,600 which plaintiffs concede would have been sufficient to repair the property in the absence of an ordinance. In the absence of a contrary provision in the policy, the general rule is that if "by reason of public regulations rebuilding is prohibited the loss is total, although some portion of the building remains which might otherwise have been available in rebuilding." 45 C.J.S. Insurance § 913, p. 1008; 6 Appleman, Insurance Law and Practice , § 3822, p. 166; 7 Couch, Cyclopedia of Insurance Law , § 1772, p. 6029; Annotation, "Insurers liability as affected by refusal of public authorities to permit reconstruction or repair after fire ," 49 A.L.R. 817 (1927); Rutherford v. Royal Insurance Co. , 12 F.2d 880, 49 A.L.R. 814 (4 Cir. 1926). Cf., City of New York Fire Ins. Co. v. Chapman , 76 F.2d 76 (7 Cir. 1935).
Defendants insist that the policies here (which are in the New Jersey standard form) do provide otherwise. They point first to the following language in the policy (emphasis ours):
"* * * this company * * * does insure * * * 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 * * * without allowance for any increased cost of repair or reconstruction by reason of any ordinance or law regulating construction or repair * * *."
We are of the opinion that this language does not exclude liability for a constructive total loss such as we have here. It must be noted that the language does not say that the companies shall not be liable for loss caused by the operation of ordinance or law, but merely that no allowance will be made for the increased cost of repairing or reconstructing that loss. In other words, this language does not relate to the definition of a total (or partial) loss, nor to the exclusions from coverage. In short, we must first determine whether the loss was total or partial. If it is partial, the amount for which the company is liable may not be more than the "cost to repair or replace * * * with material of like kind and quality * * * without allowance for any increased cost of repair * * * by reason of any ordinance * * *." When we say the loss is total we mean that reconstruction or repair is impossible, and then this provision does not apply for there is nothing to which to add "increased cost." The maximum liability of the company then is the actual cash value of the property as of the time of the fire. Rutherford v. Royal Insurance Co., supra.
It is to be noted that the language above quoted upon which defendants rely is not included in that section of the standard policy which relates to exceptions from coverage (lines 7 to 24), but appears in that section of the policy which relates to what the company will pay for what is covered. The distinction between language which excludes loss caused by such an ordinance and language which merely
relates to the amount which the assured shall recover for his damage is seen clearly when we compare the language in our policies with the language used in Hewins v. London Assurance Corp. , 184 Mass. 177, 68 N.E. 62 (Sup. Jud. Ct. 1903), relied on heavily by defendants. In the Hewins case the provision contained in the policy was that the insurer shall not be liable "beyond the actual value destroyed by fire for loss occasioned by ordinance or law regulating construction or repair of buildings * * *." (Emphasis ours.) In the case at bar the policy could well have said, as in the Hewins case, that the company was not to be liable "for loss occasioned by ordinance," just as it did in lines 11 to 24 of the standard policy when it said, "This company shall not be liable for loss * * * caused, directly or indirectly, by * * * enemy attack * * * neglect of the insured * * * theft."
It is to be noted also that language similar to that in our present standard policy appeared in policies throughout the country for many years prior to 1954, when the latest revision of our standard policy was adopted (L. 1954, c. 268, repealing L. 1944, c. 171). The great weight of authority had construed that language as not excluding liability for a constructive total loss. Yet in 1944, when the standard policy which, basically, is the one we now use was presented for adoption not only in New Jersey but in a majority of the states, no effort was made to change this language to bring it in line with the language used in the Hewins case, supra , or to avoid ...