Often, litigants attempt to use the Valued Policy Law to establish that losses are total for purposes of maximizing policy recovery. In many instances, unless the home or structure is totally destroyed and “on the ground,” so to speak, expert proof can be adduced to establish that much of the building could be re-used, and that the house could in fact be rebuilt. I have had great success using experienced restoration contractors to come to trial, and show “before and after” pictures of their work. Trial Judges have submitted the question of whether a particular property experienced a “total loss” to juries, and these experts have won the case for me.
And the fact is that the statutes have not been applied unless the damage makes the building unrecognizable, or witnesses for the insurance company agree that the home was a “total loss.” Guidance in making the determination of whether this home sustained a “total loss” comes from two Tennessee cases. First, the general rule is stated in Laurenzi v. Atlas Insurance, 131 Tenn. 644, 663, 176 S.W. 1022 (1915), where the court noted:
Was there a total loss? The roof of the building, a wooden structure, was wholly destroyed; likewise all of the walls except on one side, and part of the front porch; but these were so badly burned in places that the lumber in them was not worth the labor of rescuing and removing. However, the walls standing were considered so dangerous by the city authorities that they were required to be taken down. The floor remained uninjured, except that a large hole was burned through it in one place. The brick foundation on which the structure stood was unimpaired. Since, under these facts, the identity and specific character of this structure as a building were obliterated, we think the loss was total, although the parts last referred to remained unconsumed.
Implicitly, the Laurenzi decision follows the general rule that a structure will be deemed a total loss when it has lost its identity and specific character as a building. Our courts have specifically refused to impose a “prudent man test” in place of the Laurenzi decision. In the case of Hollingsworth v. Safeco Ins. Companies 782 S.W.2d 477, 478 (Tenn.App.,1988), the trial could had commented that, under a “prudent man” test, the house in question should be declared a total loss because a prudent man would not repair the house for $31,000.00 or $32,000.00 when a comparable new structure could be built for $35,000.00. That is very close to the constructive total loss doctrines that have been adopted in other states. On appeal, however, the Court of Appeals refused to adopt the “prudent man test,” noting:
We are not prepared to make such an adoption. There is a marked difference between the Supreme Court, the highest court in the state, and the Court of Appeals, an intermediate appellate court. It is the duty of the Court of Appeals to apply the law as promulgated by the legislature or as announced by the Supreme Court. This Court is bound by the Supreme Court’s decisions under the doctrine of stare decisis and in no way is it the function of this court to intentionally reverse the holding of the Supreme Court. Although the Supreme Court may wish to adopt the prudent man test for making a determination as involved in this case, we feel constrained to follow the test established in Laurenzi.
Hollingsworth, 782 S.W.2d at 479 -480.
But, what about those counties or cities in Tennessee where code requirements provide that a home should be razed and requires rebuilding if the cost to repair exceeds 70% of the value of the home. There are no Tennessee cases which have held that the local code requirements (be it 50% or 70%) are applicable and trump the insurance policy, but that has occurred in other jurisdictions. However, if the Courts will not apply a “prudent man test,” they should not impose any requirement other than the criteria originally noted by Laurenzi – has the building lost its specific identity and character? If not, there should be no total loss.