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Danzeisen v. Selective Ins. Co. of America

March 7, 1997

DENISE DANZEISEN, PLAINTIFF-RESPONDENT/CROSS-APPELLANT,
v.
SELECTIVE INSURANCE COMPANY OF AMERICA, DEFENDANT-APPELLANT/CROSS-RESPONDENT, AND SUYDAM INSURANCE AGENCY, DEFENDANT.



On appeal from the Superior Court of New Jersey, Law Division, Civil Part, Middlesex County.

Approved for Publication March 11, 1997.

Before Judges Brochin and Kestin. The opinion of the court was delivered by Kestin, J.A.D.

The opinion of the court was delivered by: Kestin

The opinion of the court was delivered by

KESTIN, J.A.D.

The trial court granted plaintiff's motion for summary judgment in this action on a commercial insurance policy issued by Selective Insurance Company of America (defendant) covering fire loss. The trial court concluded that plaintiff was entitled to compensation for a total loss on a replacement cost basis. Having determined that the cost of replacing the structure exceeded the $525,000 policy limit, the trial court, inter alia, entered an order for judgment in that amount, while denying plaintiff's application for pre-judgment interest. Both parties appeal, respectively, from these determinations.

The loss occurred on September 24, 1993, from a roof collapse as the result of a fire. The structure was a non-conforming use. In April 1994, after determining that the building had been damaged to an extent greater than fifty percent of its assessed valuation, New Brunswick's Administrative Officer invoked subsection 22-15.1(b)4 of the City's zoning ordinance which provided that "any non-conforming structure destroyed to an extent greater than fifty percent of its assessed valuation shall not be reconstructed." Accordingly, he denied plaintiff permission to reconstruct and ordered that the remainder of the structure be demolished.

It is clear from the terms of the insurance policy at issue that the carrier has undertaken, inter alia, to "pay the value of lost or damaged property[,]" but is not responsible to "pay on a replacement cost basis for any loss or damage: (1) Until the lost or damaged property is actually repaired or replaced; and (2) Unless the repairs or replacement are made as soon as reasonably possible after the loss or damage." Consequently, because the structure was razed rather than replaced either in situ or by other property, the trial court was in error to base its determination on replacement cost. See Ruter v. Northwestern Fire and Marine Ins. Co., 72 N.J. Super. 467, 472, 178 A.2d 640 (App. Div.), certif. denied, 37 N.J. 229 (1962); cf. Elberon Bathing Co. v. Ambassador Ins. Co., 77 N.J. 1, 7-9, 389 A.2d 439 (1978). See generally Randy R. Koenders, Annotation, Construction and Effect of Property Insurance Provision Permitting Recovery of Replacement Cost of Property, 1 A.L.R. 5th 817, 848-54 (1992 & Supp. 1996); Dag E. Ytreberg, Annotation, Construction and Effect of Provision of Property Insurance Policy Permitting Recovery of Replacement Cost of Property, In Excess of Actual Cash Value, 66 A.L.R. 3d 885, 887-92 (1975).

The remaining substantive question is whether defendant is liable for the actual cash value of only the damaged portion of the premises or whether, by reason of the application of the municipal ordinance, plaintiff is entitled to recover for a "constructive total loss" of the entire building. We have been given no reason to depart from the "general rule" that governs such situations, as applied in Feinbloom v. Camden Fire Ins. Ass'n, 54 N.J. Super. 541, 149 A.2d 616 (App. Div.), certif. denied, 30 N.J. 154 (1959), widely considered to be a leading case in the field:

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).

[ 54 N.J. Super. at 544.]

We conclude, as we did in Feinbloom, that no language of the insurance policy at issue excludes liability for the constructive total loss which plaintiff experienced. See generally D.E. Evins, Annotation, Insurer's Liability as Affected by Refusal of Public Authorities to Permit Reconstruction or Repair After Fire, 90 A.L.R. 2d 790 (1963).

To the extent standard fire insurance policy language in this regard was modified subsequent to our decision in Feinbloom, as defendant stresses, no contrary result is indicated. The stated exclusion in the policy at issue is:

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that ...


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