• "Total Loss" in Missouri Valued Policy Statute is Unambiguous
  • September 19, 2006 | Author: Mindy M. Medley
  • Law Firm: Clausen Miller PC - Chicago Office
  • The United States District Court for the Eastern District of Missouri has held that the phrase “total loss” as used in Missouri’s valued policy statute is unambiguous.  Schaffer v. Safeco Insurance Company of America, 2006 WL 1313992 (E.D. Mo. 2006).

    Facts

    In 2004, Scott Schaffer and Jennifer Faulkner’s (“plaintiffs”) home and its contents sustained damage.  Plaintiffs submitted a claim to their insurance carrier, defendant Safeco Insurance Co. of America (“Safeco”), in which they claimed that the damage to their home constituted a “total loss” under Missouri’s valued policy statute (Mo. Rev. Stat. §379.140).  Pursuant to Missouri’s valued policy statute, when an insured suffers a “total loss” to its real property, the insured is entitled to the value ascribed to the property as stated in the policy.  Because neither plaintiffs’ policy nor Missouri’s valued policy statute defines “total loss,” plaintiffs asserted that the term was ambiguous and that they were thus entitled to the discovery of “materials, manuals, documents, bulletins, or other directives, in which Defendant defines what a ‘total loss’ means in the policy.”

    Analysis

    The district court denied plaintiffs’ motion to compel defendant’s production of these materials on the ground that the term “total loss” as used in the valued policy statute is unambiguous.  The court reached this conclusion by first looking to the definition and purpose of a valued policy, such as plaintiffs’ homeowners’ policy:

    In a valued policy, the value of the property insured is agreed upon by the parties.  If a total loss of the insured property occurs, then the insurance company pays the stipulated value; the actual value is irrelevant.  Valued policies are said to precisely fix the risks and are analogous to liquidated damages provisions in other contracts.

    The court then noted that Missouri courts since at least 1932 have defined “total loss” within the valued policy statute as a loss in which “the building has lost its identity and specific character as a building, and become so far disintegrated that it cannot be properly designated as a building although some part of it may remain standing.”  The district court then concluded that

    while “total loss” is not defined in the valued policy statute, Missouri courts have consistently construed the term for more than one hundred years.  In that sense, the phrase “total loss” is not ambiguous.  Any idiosyncratic meanings the parties might have had for the phrase is essentially irrelevant, because the meaning of the term is determined by the judicial interpretations of the statute in which it appears.  Furthermore, unless a contract provides otherwise, the law applicable thereto at the time and place of its making, including statutory provisions and judicial precedents, is as much a part of the contract as though it were expressly referred to and incorporated in its terms.

    Learning Point:

    The Schaffer court also noted that the meaning of “total loss” has been judicially expanded by the Missouri courts to encompass situations involving a “constructive total loss,” and cited as an example the situation where “repair or construction of a building damaged by fire is prohibited by municipal authorities[,] … it is a total fire loss by operation of law.”  The Schaffer court was thus careful to note that “[u]nder Missouri law ..., more than one factual situation may fit the definition of total loss.”