Opinion ID: 1659494
Heading Depth: 1
Heading Rank: 1

Heading: insuring clause

Text: Subject to the terms, conditions and exclusions hereinafter contained, this policy insures all real and/or personal property (including improvements and betterments) of the Assured or property held by the Assured in trust or on commission or on consignment for which the Assured may be held legally liable against ALL RISKS OF DIRECT PHYSICAL LOSS OR DAMAGE occurring during the period of this Policy as stated in the Schedule attaching to and forming part hereof, hereinafter referred to as the `Schedule'. .... CONDITIONS 1. VALUATION In case of loss of or damage to property insured hereunder, the basis of adjustment shall be as follows: .... REPLACEMENT COST ENDORSEMENT .... It is understood that in the event of loss or damage settlement shall be based upon the cost of repairing, replacing or reinstating (whichever is the least) with material of like kind and quality without deduction for depreciation, subject to the following provisions: (a) The repairs, replacement or reinstatement (all hereinafter referred to as `replacement') must be executed with due diligence and dispatch; (b) Until replacement has been effected the amount of liability under this policy in respect of loss shall be limited to the actual cash value at the time of loss; .... The Underwriter liability for loss under this policy including this endorsement shall not exceed the smallest of the following amounts: i. the amount of the Policy applicable to the destroyed or damaged property, ii. the replacement cost of the property or any part thereof identical with such property and intended for the same occupancy and use, iii. the amount actually and necessarily expended in replacing said property or any part thereof. (Emphasis added.) On December 28, 1990, Ballard's restaurant was entirely destroyed by fire. Subsequently, estimates of the cost to replace the property were submitted, and GAB Business Services, Inc. (hereinafter GAB), was engaged to adjust the claim. Based on the lowest cost estimate, GAB calculated the actual cash value of the building to be $52,870 and the actual cash value of the contents to be $27,475.33. These computations included deductions in the amounts of $32,130 for depreciation of the building and $24,862.51 for depreciation of the contents. On March 12, 1991, Frizzell issued to Ballard checks in the amounts of $52,870 and $27,475.33 for the loss of the building and the contents, respectively. With these funds, Ballard retired a $65,000 mortgage on the property and paid off other, unrelated debts. Ballard did, however, protest the shortfall of $56,992.51 from the policy limits. The Syndicate defended its method of payment, contending that Ballard's right to recover the face amount of the policy was contingent upon his reconstruction of the building. Ballard's efforts to obtain a loan for reconstruction failed, partly because the Syndicate refused to serve as a surety on any obligation for that purpose. Ballard subsequently used the restaurant location as collateral for a $10,000 loan, the proceeds of which he also spent on nonrestaurant debts. Eventually, Ballard lost the property when he defaulted on his repayment of the $10,000 note and the mortgagee foreclosed. On February 4, 1992, Ballard sued the Syndicate and NAI. Counts One and Two of his two-count complaint alleged breach of contract and bad faith, respectively. On April 28, 1992, Ballard amended his complaint to add as defendants Sealy, Carter, and Alan Godfrey Lee, individually and as representative of those certain Underwriters at Lloyd's Signatory To Policy No. 895-NAL01-118-90 (likewise hereinafter referred to as the Syndicate). Also, the amended complaint contained a third count, basically alleging that the Syndicate had fraudulently suppressed the actual cash value method by which it limited the amount of benefits that Ballard could obtain under the policy. The same day, the Syndicate moved the trial court to dismiss the counts contained in the original complaint. Ballard did not respond to that motion, and, on February 12, 1993, the trial court granted the Syndicate's motion with prejudice. On March 16, 1993, the Syndicate moved for a summary judgment on count three, as contained in the amended complaint. The parties argued this motion before the trial judge on April 9, 1993. On April 15, 1993, the trial court entered a summary judgment in favor of the Syndicate, and certified the judgment as a final judgment, pursuant to Ala.R.Civ.P. 54(b). From that judgment, Ballard appealed. Ballard advances two theories as bases for his fraud claim. The first theory is based on allegations that Carter, as an agent of the Syndicate, misrepresented or suppressed material facts. The second theory is based on allegations that the policy, itself, fraudulently suppressed material facts.