Midwest Office Technology, Inc. v. American Alliance Insurance Co.

Midwest Office Technology, Inc. (Midwest) (plaintiff) was a business that maintained an inventory of products. The amount of Midwest’s inventory varied over time. Midwest bought a policy from American Alliance Insurance Co. (American) (defendant) to cover inventory loss. The insurance contract required Midwest to report the average value of Midwest’s inventory to American each month, and the insurance premium amount varied according to the monthly value of the inventory. Correspondingly, the insurance coverage amount for inventory loss varied according to the most recent inventory report submitted by Midwest, with a maximum coverage of $600,000. The reporting requirement in the insurance contract included the following provision: “At the time of any loss, if the insured has failed to file with the Company reports of values . . . this policy . . . shall cover . . . not more than the amounts included in the last report of values prior to the loss[.]” After the policy became effective, Midwest did not always comply with the monthly reporting requirement. Midwest’s last report identified the inventory value as $478,619. Subsequently, fire destroyed the inventory. At the time of the fire, the inventory had a value of more than $600,000. Midwest submitted an insurance claim for the $600,000 policy limit. American paid $478,619 on the claim, which was the dollar value reported in Midwest’s most recent inventory report. Midwest sued American for the $600,000 policy-limit coverage. The trial court entered judgment in favor of Midwest. American appealed.