Fixing What’s Broken and Breaking What’s Fixed: Significant Changes to Statutes Governing Total and Partial Losses Could Impact Missouri Claims Moving Forward

On August 28, 2021, changes to Missouri’s Valued Policy (“Total Loss”) Statute (§379.140 RSM0) and Partial Loss Statute (§379.150 RSMo) went into effect. The new version of the Partial Loss Statute arguable governs all partial fire losses losses after August 28, 2021. The new version of the Total Loss statute expressly states that it applies to any fire insurance policy issued or renewed on or after August 28, 2021. The changes to the statutes eliminate many ongoing issues but also create new problems.

As far as the partial loss statute, the old version of the statute allowed the insured to elect a cash payment or to have the insurer repair the property. There have been significant disputes over the years as to what constitutes an insured’s and it was often used a negotiating tool by insureds and public adjusters. Under the case law interpreting the old statute, the repair option also had the effect of making the insurance company the insured’s general contractor.

Under the new statute, the election on whether to repair or replace is left with the insurance company.  Additionally, the statute specifically states that the insurance company does not become the insured’s general contractor. The practical effect of this is that insurance company is no longer have to worry about partial loss election forms or certain public adjusters using repair the threat of repair as a negotiating tool. We also note that the statute continues to be limited to fire losses so the application of the statute will be limited
The language of the new Total Loss statute eliminates some of the issues with the previous language. Specifically, the old language led to courts to hold that the statue applied to a myriad of situations beyond the statute’s original intent.

The new language narrows the applicability of the statute in some respects. Specifically, it eliminates the possibility of an insured recovering the policy limit under two separate policies taken out on the same risk. Additionally, the statute makes it clear that when  building is written on a blanket basis, The insurance company will only be liable up to the particular value on that building, not under the entire blanket limit.

Furthermore, the language of the new law specifically states  the following are not covered the total loss statute:

• 1. any personal property that is not scheduled;
  2. any detached or appurtenant structure;
  3. any builder’s risk policy;
  4. any policy of mortgage insurance;
  5. any replacement cost coverage provided for in the policy or by endorsement;
  6. any loss that is covered by two or more policies
  7. Any loss to property if the insured increased the risk of loss insured against within sixty days of the date of the loss without the consent of the insurer and the increase in the risk of loss was a cause of the loss

These changes will make the adjustment of potential total losses much clearer moving forward. However, there is a potential downside to the statute as well.  It now applies to all losses, not just fire losses. Given this, we expect claims for “total losses” will increase significantly.

As a reminder, Missouri has recognized three total loss scenarios: 1). A building has lost its identity and character as a building; 2). The local authorities will not allow the building to be repaired due to a condemnation order or 3).  no significant part of the building can be used to rebuild. We expect there to be significant litigation on whether the application the inclusion of additional types of losses expands definition of what is a total loss.

In the end, the changes to the statutes could have a significant impact on how losses are handled in Missouri. Make sure that you familiar with that rise yourself with the language of the new statutes for loss is moving forward.

If you have any questions about the new law, please contact Jon Morrow at 314-630-6112.