The Court of Appeals recently confirmed that when determining whether a building cannot be repaired and is therefore wholly destroyed, application of the statutory formula in Wis. Stat. 66.0413 is conclusive. See Haynes v. American Family Mutual Insurance Company, 2014AP000395. Tracy Haynes home burned down on May 29, 2012. The City of Milwaukee issued a Raze Order on July 10, 2012 stating that the home was “now unfit for human habitation, further occupancy or use, and is unreasonable to repair.”
American Family insured the home for $244,800. As a result of the fire, the home was assessed at $23,300 per the Raze Order. The Order stated that it was unreasonable to repair the home pursuant to Wis. Stat. 66.0413(1)(c). When a property is “wholly destroyed,” the insurance company must pay the “full value” of the policy. See Wis. Stat. 632.05(2). Accordingly, Haynes argued that her home was wholly destroyed because the Raze Order said it could not be repaired and was unfit for human habitation. But American Family disagreed.
American Family obtained a repair estimate for $146,906 and sent Haynes a Total Actual Cash Value Settlement offer listing the Replacement Cost Value as $130,947.62. Days later, American Family increased the amount slightly and then paid Haynes $131,578 on October 9, 2012. American Family had the contractor from whom it obtained an estimate to pull a repair permit, but Haynes objected and the City revoked the permit. Haynes’ home was ultimately razed.
Haynes sued, arguing that American Family owed her the full value of the home. American Family argued that a City inspector told both Haynes and American Family that she had the option of repairing or razing the property and that if she chose to repair it, the Raze Order would be withdrawn. The inspector also allegedly told American Family that the cost of repairs “was in the range of at least $75,000 to $1000,000.” But the Raze Order never mentioned the option of repair, and neither Haynes nor anyone else ever appealed the Raze Order. Further, the informal estimate offered by the inspector still exceeded the statutory formula in section 66.0413 used to determine whether repair is reasonable.
The court of appeals reversed the trial court and held that Haynes was entitled to the full value of her home: $244,800.
Of course, [Wis. Stat. 66.0413’s] command trumps any contrary analysis or post-hoc assessment by [the inspector] that he sets out in his affidavit. Simply put, the focus is on whether repairs are reasonable under the statutory formula, not whether elements of the structure survived the fire. The unappealed Raze Order, which, as we have seen, applied the mandated statutory formula, is conclusive.