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The Effect of the Sale of a Commercial Property on a Pending Insurance Claim

A D J U S T I N G T O D A Y the insurer under options two, three, or four above. Option two requires actual expenditure of the RCV at another site. Option three requires only application of the RCV to “other capital expendi- tures,” as described. At a minimum, ACV would be the measure for any losses if repair or replacement does not take place and there is no application of pro- ceeds to another site or to other capital expenditures. Under some policies, ACV is defined as “cost to repair or replace insured property, on the date of loss, with material of like kind and quality, with proper deduction for obsolescence and physical depreciation.” Under oth- er policies, the definition of ACV can differ. 15 Depending on the policy language, in the absence of an assignment, code upgrade costs are a possible exception to the rule that a sale does not cut off an insurance claim by the seller for incomplete repairs. In a typical policy, the code upgrade coverage section provides that such coverage is not available unless the damaged “property is repaired or replaced,” and the coverage is lim- ited by the “actual cost incurred.” Under some policies, upon the sale of a property, the seller cannot claim recovery of what would have been the code upgrade costs if the property had not been sold and re- pairs proceeded. Such a claim can, however, be assigned and continue to be asserted. C. Assignment of Claim The general rule is that an insur- ance claim can be assigned, even if a full policy cannot. This is the rule in statutes and cases around the country, including the Gulf coast states, New York, and elsewhere. 16 Most insurance policies contain an “anti-assignment” clause stat- ing that the “policy” cannot be assigned absent insurer consent. Such an anti-assignment clause only applies to assignments of the policy made before a loss, not to claims made after a loss. The law in Florida is typical: After the occur- rence of the event insured against, 15 To the extent there is any uncertainty regarding the valuation, in determining ACV, New York, Florida, and other state courts follow the “broad evidence rule.” See NewYork Cent. Mut. Fire Ins. Co. v. Diakas , 60 So.2d 786, 788-89 (Fla. 1954); McAnarney v. Newark Fire Ins. Co. , 247 N.Y. 176 (1928); Worcester Mutual Fire Ins. Co. v. Eisenberg , 147 So.2d 575, 576 (Fla. App. 1962). Under the broad evidence rule, any evidence logically tending to establish a correct estimate of the value of the damaged or destroyed property may be considered by the trier of facts to determine the “actual cash value” at the time of the loss. 147 So.2d at 576 The rule “permits any evidence which logically tends to establish a reasonable approximation of the value of the property de- stroyed.” Id. Courts have considered “replacement value,” “wholesale value,” and the owners’ experience and testimony to determine ACV value. Id. 16 See, e.g., Fla. Stat. § 627.455 (“a policy may be assignable, or not assignable, as provided by its terms”); Globecon Group, LLC v. Hartford Fire Ins. Co. , 434 F.3d 165 (2d Cir. 2006) (policyholder could assign a claim to a successor corporation); SR International Business Ins. Co. Ltd. v. World Trade Center Proper- ties et al. , 394 F.Supp.2d 585 (S.D.N.Y. 2005) (permissible 2003 assignment of 9/11/2001 property claims from owner of World Trade Center retail leases to the Port Authority). 17 Fla. Jur. 2d (Feb. 2005) § 1562 (“Assignment After Loss”). See also, e.g., Professional Consulting Svcs., Inc. v. Hartford Life & Acc. Ins. Co. , 849 So.2d 446, 447 (Fla. 2d Dist. 2003) (allowing assignment); Better Constr. Inc. v. National Union Fire Ins. Co. , 651 So.2d 141, 142 (Fla. 3d Dist. 1995) (an insured may assign insurance proceeds to a third party after a loss); Gisela Inv. N.V. v. Liberty Mut. Ins. Co., 452 So.2d 1056, 1057 (Fla. 3d Dist. 1984) (anti-assignment clause does not prevent the assignment of a post-loss claim or interest in insurance money). There is nothing about the sale of a property that provides an insurer with the opportunity to sidestep its payment obligations.