Opinion ID: 900685
Heading Depth: 1
Heading Rank: 5

Heading: Coverage LimitFinancial Interest

Text: [¶ 18.] The Businessowners Policy provided that, in case of a covered loss, Auto-Owners will not pay you more than your financial interest in the Covered Property. The trial court determined that Hansen Housing should not be limited in its recovery to the amount it paid for the building. The court was skeptical of the idea that Auto-Owners insured the building for over $1.7 million, yet wanted to limit recovery to the auction price for the hospital building and its contents, effectively $60,000. [¶ 19.] Auto-Owners contends that the purchase price is the fair market value and is therefore the measure of Hansen Housing's financial interest in the property. Hansen Housing argues that Auto-Owners accepted premiums based on $1.7 million in coverage, and to limit recovery to the purchase price would result in a windfall to the insurer. See Robert E. Keeton and Alan I. Widiss, Insurance Law § 3.6(b), at 194-95 (1988) (discussing the `unearned' premium question). [¶ 20.] The rights and responsibilities of the parties are determined by the terms of the policy. The policy plainly provides that recovery is limited to the insured's financial interest in the property. Although SDCL 58-10-10 provides that the stated amount of coverage in the policy is the value of that property when it is wholly destroyed, the statute does not control here because the property was not completely destroyed. See Henry v. American Concept Ins. Co., 498 N.W.2d 657, 660 (S.D.1993) (Sabers, J., concurring specially). [¶ 21.] We are not persuaded, though, that Hansen Housing's financial interest in the property is limited to the amount it paid at auction. No evidence was presented that the amount paid for the building and its contents was its true fair market value. In fact, there was evidence that the purchase was a bargain. It cannot be assumed that the price paid was its fair market value, or that the property cannot be sold for more than what was paid for it. An insured's financial interest is the fair market value of the property. See Zochert v. Nat'l Farmers Union Property & Cas. Co., 1998 SD 34, ¶ 11, 576 N.W.2d 531, 534 (defining fair market value) (quoting Lampe Market Co. v. Alliance Ins. Co., 71 S.D. 120, 22 N.W.2d 427, 428 (1946)). Hansen Housing may recover its proven losses as measured against the fair market value of the property.