Opinion ID: 223062
Heading Depth: 1
Heading Rank: 1

Heading: Underlying Dispute

Text: The house covered by the Auto Owners policy at issue was located at 1100 Eastwood in Harrisonville, Missouri, and originally belonged to the first wife of Carolyn Schubert's late husband, Thomas Schubert. Thomas purchased the policy in 2004, after his first wife had died, and maintained it until his own death in 2006. Because Thomas died intestate, Carolyn Schubert, who had married him the previous year, was uncertain as to whether she would inherit the house. She told as much to an Auto Owners agent during a phone conversation in October 2006, when she notified the company of Thomas's death and transferred the policy into her own name. If she turned out not to inherit the property, Schubert predicted, she would stop paying the premiums. Since that conversation, she never updated Auto Owners on the status of the ownership dispute, but continued to make regular premium payments on the policy and renewed the policy at least twice after Thomas's death. At the time of Thomas's death, the house was occupied by his stepdaughter from his first marriage, Deborah Lee Weiss. During the probate proceedings to determine the heirship of the house, Schubert stipulated with Weiss as to each owning fifty percent (50%) of the property. But the rapprochement was short-lived. Three months after entering into the stipulation, in March 2008, Weiss intentionally set the insured property on fire, which resulted in its complete destruction. When Schubert made a claim on the policy shortly thereafter, Auto Owners refused to pay the policy face value of $124,500. It justified the refusal by reference to the clause within the policy which limited recovery to the insured's insurable interest in the property: PROPERTY PROTECTION CONDITIONS INSURABLE INTEREST Subject to the applicable limit of insurance, we will not pay more than the insurable interest the insured has in the covered property at the time of loss. JA at 121. Since the company determined Schubert's insurable interest to be fifty percent of the value of the property, it sent her a check for half of the policy amount, or $62,250. Through her lawyer, Schubert rejected the tender and demanded the payment of the face value of the policy within seven days. Although she did not cash the check, she did not return it either, holding on to it purportedly until she got paid in full. With no payment forthcoming, Schubert filed the present lawsuit asserting a breach of contract and seeking damages for vexatious refusal to pay pursuant to Mo.Rev.Stat. § 375.296 in a Missouri state court. After Auto Owners removed the case to federal court, the district court granted summary judgment in favor of Schubert on her breach of contract claim and in favor of Auto Owners on Schubert's vexatious refusal to pay claim. In the district court's view, the contractual limitation on recovery based on the degree of the insured's insurable interest in the property was void as contrary to the Missouri valued policy statute and, even assuming the limitation was valid, the policy was ambiguous in its definition of insurable interest and could not be used to deny Schubert full recovery. Auto Owners appeals.