Court Opinion

ID: 6763519
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:34:06.562957+00
Date Added: 2024-06-11T16:02:39.379793
License: Public Domain

Wright, J.,
dissenting. I am satisfied that the majority has misread R.C. 3929.25 and in so doing has overlooked the legislative intent behind the 1980 amendment to that statute.
The majority reads the third sentence of R.C. 3929.25 contrary to its natural meaning. The second sentence of R.C. 3929.25 requires insurers to pay the face amount of fire insurance policies upon total destruction of the insured structure. The third sentence, beginning “If, however,” provides an exception to the provisions of the second sentence through an if-then construction. Contrary to the majority’s interpretation of this clause, the “if” clause contains only one condition that triggers the “then” clause (which is not introduced by “then” but rather only set off by a comma). The sole condition in the “if” clause is the existence of a particular type of insurance policy that provides for a full recovery of the face amount of the insurance policy when the insured building is actually replaced. Although not introduced by either a coordinating conjunction or appropriate punctuation, the clause that reads “in the event that the building or structure is in fact repaired or replaced” is interpreted by the majority not as a further description of the policy but as an additional condition to trigger the “then” clause. In effect, the majority has added a new condition to the third sentence that, if properly written, would look like this:
“If, however, the policy of insurance, by its express terms, permits the policyholder to recover the full cost of repair, or replacement, of the building or structure, without deduction for depreciation or obsolescence, up to the limits of the policy in the event that the building or structure is in fact repaired or replaced, and the building or structure is in fact repaired or replaced, the amount of recovery for any loss under such a policy of insurance shall be as prescribed by the policy.”
Of course, this result is contrary to the letter and spirit of the law. In my view, the majority’s interpretation of what the legislature did enact does a disservice to its plain meaning.
*120Nevertheless, the majority reasons that interpreting the third sentence of R.C. 3929.25 to except replacement cost policies from the second sentence emasculates the import of the second sentence. According to the majority, today’s holding interprets the third sentence to give meaning to both sentences. Specifically, the majority states that “an equally plausible explanation for the added statutory language is that it limits the liability of the insurer to the replacement cost of the structure where replacement occurs and the cost is less than the insurable value of the destroyed property as set by the policy.”
Although the majority’s rationale is facially attractive, a review of the legislation that enacted the third sentence of R.C. 3929.25 and the circumstances precipitating the amendment reveal that the third sentence was intended as an exception to the second sentence for replacement cost policies in order to encourage replacement and not as an exception for replacement cost policies only where replacement occurs.
The insurance industry created replacement cost policies in response to the threat of arson arising from the difference between actual cash value and replacement cost. Replacement cost policies provide for coverage up to the face amount of the policy only upon replacement, limiting recovery to cash value if the structure is not replaced. The goal of these policies is to remove the incentive for arson. (An older structure purchased for $100,000 that would cost $200,000 to replace and is insured for $200,000 presents a grand incentive for arson if the full $200,000 is recoverable whether or not the structure is replaced.)
Prior to 1980, these policies were ineffective in Ohio under former R.C. 3929.25 and Insurance Co. v. Leslie (1890), 47 Ohio St. 409, 24 N.E. 1072 (interpreting the predecessor to R.C. 3929.25), which always required the full amount paid upon total destruction. R.C. 3929.25 and Leslie were intended to prevent an insurer from overinsuring a property, then limiting recovery to actual cash value.
When an insured requires insurance that will provide for replacement of a structure, such insurance will usually provide for coverage in excess of the actual cash value of the structure. The gap between actual cash value and replacement cost is an inevitable consequence of depreciation. Thus, a side effect of Leslie is that it encourages arson where the actual cash value of a structure is less than the amount for which the structure is insured, which is invariably the case with replacement cost insurance.
In an effort to combat arson, the General Assembly enacted Am.Sub.S.B. No. 198 in 1980. 138 Ohio Laws, Part I, 683-693. This Act, directed entirely toward attacking arson, amended R.C. 3929.25 by adding its third sentence. *121The majority’s reading of the third sentence offers nothing toward fighting arson, however, in spite of the legislative mandate. Unmistakably, the preamble to Am.Sub.S.B. No. 198 announces that replacement cost policies are now to be an exception to Leslie:
“An Act to amend section * * * 3929.25 * * * of the Revised Code * * * to condition payment of replacement value of a building under a fire insurance policy upon actual use of the proceeds for its replacement.” 138 Ohio Laws, Part I, at 683.
In light of the natural meaning of the third sentence of R.C. 3929.25 and the legislative history behind its enactment, I cannot join the result reached by the majority today.
Moyer, C.J., and Holmes, J., concur in the foregoing dissenting opinion.