Building Losses Before Demolition

Originally published by Chip Merlin.

A public adjuster asked me for a copy of Cigna Property & Casualty Insurance Company v. Verzi1. It involves a fairly uncommon situation where a building is damaged or destroyed before a contemplated demolition. Insurers usually try to avoid paying these losses because they argue the policyholder is obtaining a windfall. From their view, the intentional destruction of the property was contemplated by the insured at the time of the fortuitous loss. So, can the insured collect?
Here is the holding:

Virtually all of the cases from other jurisdictions…hold… that an insured may recover from his insurer if demolition has not begun, the building had not been completely abandoned, and the contract is neither irrevocable nor specifically enforceable. Consequently, we conclude that Cigna may not escape its obligation as demolition of the building remained contingent at the time of the loss. ‘The insurable interest of the parties to an insurance contract must be determined by the facts…

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