McAnarney v. Newark Fire Insurance Co.

Lembeck & Betz Eagle Brewing Company (Lembeck) (defendant) owned seven malt-manufacturing buildings. Owing to forthcoming alcohol prohibition, malt production stopped in March 1919, and the National Prohibition Act passed in October. Thomas McAnarney (plaintiff), a Lembeck director, reported difficulty finding a purchaser for the property. Lembeck directed McAnarney to advertise the property for $12,000. In an affidavit to local assessors, McAnarney stated that the property had no value except for the production of malt and the owners would accept $15,000 for the property, but $6,000 was the best offer received. In 1919, McAnarney purchased the buildings for $8,000. In January 1920, McAnarney took out fire-insurance policies. In April 1920, fire destroyed the buildings. McAnarney filed proofs of loss for $60,000 and made a claim for $42,750, the maximum amount of insurance he had. McAnarney had a $2,500 policy with Newark Fire Insurance Company (Newark) (defendant) that insured for “actual cash value,” less depreciation, of the property at the time of damage, but not an amount exceeding the repair or replacement cost. Newark refused to pay, and McAnarney sued. The jury, which was not permitted to hear evidence about McAnarney’s own statements about the value of the property, returned a verdict specifying a value of $55,000. Based on the jury’s charge, the verdict was based on what the buildings cost to build less depreciation and did not consider market value or obsolescence. The court ordered Newark to pay McAnarney $2,500 plus interest. Newark appealed.