Savarese v. Ohio Farmers Insurance Co.

Ohio Farmers Insurance Co. (Ohio Insurance) (defendant) insured Loretta Realty & Finance Corporation’s property from fire damage up to a pro rata amount of the damage equal to the proportion of the insured amount compared to 80 percent of the total value of the house at the time of damage. The property’s ownership was transferred to Leopold Kirven, and this change was made in the insurance policy. Pasquale and Giacomo Savarese (the mortgagees) (plaintiffs) owned a bond secured by a mortgage on Kirven’s property for $7,500. The mortgage required Kirven to insure the house against fire damage for the benefit of the mortgagees. The insurance policy contained a standard mortgagee clause stating that policy proceeds were payable to the mortgagees. A fire then created $4,230 in damage to the house. The value of the property at the time of the fire damage was $22,500. Kirven hired a contractor to fix the house and transferred his interest in the fire-insurance policy to the contractor as payment for restoring the property to its original condition. Ohio Insurance was willing to pay $1,178.64 to the contractors, which represented five-twelfths of the amount of damage to the home. The mortgagees refused this offer and sued Ohio Insurance to recover the full amount of the fire damage. The lower court held that the mortgagees sustained no damage and could not recover from Ohio Insurance, because the house was restored to its previous condition. The mortgagees appealed.