## Facts

- McAnarney bought real estate in 1919 for $8,000 containing seven large buildings designed for malt manufacturing.
- Malt manufacture ceased in 1918 due to Prohibition, and the buildings thereafter were not used for any useful purpose.
- In January 1920, McAnarney and the seller procured fire insurance on the buildings totaling $42,750; Newark issued a $2,500 policy.
- The Newark policy insured the buildings’ “actual cash value” at the time of loss, less depreciation, and capped recovery at repair or replacement cost.
- In April 1920, the buildings were destroyed by fire; McAnarney submitted proofs of loss valuing them at about $60,000 and sought the full insurance amounts.
- At trial, the court limited valuation to the buildings’ “intrinsic or depreciated structural value” and excluded insurer-offered evidence that McAnarney had previously reported difficulty selling the property and had indicated it had little value outside malt production.
- The jury found “intrinsic or depreciated structural value” of $55,000, and judgment was entered for McAnarney for Newark’s policy amount plus interest; the Appellate Division affirmed without opinion.

## Issues

1. How should “actual cash value” be determined under a fire policy when the insured buildings are economically obsolete and lack practical utility—may the factfinder consider obsolescence and inutility, or is valuation confined to reproduction/replacement cost less physical depreciation?
2. Whether the trial court erred by excluding evidence bearing on actual cash value (including the insured’s prior statements and sales efforts) and by instructing the jury in a manner that prevented consideration of Prohibition-related obsolescence.

## Decision

- The Court of Appeals of New York reversed and ordered a new trial.
- The trial court erred by restricting valuation to “intrinsic or depreciated structural value” tied to reproduction cost less physical depreciation, without allowing consideration of obsolescence and inutility.
- The trial court also erred by excluding evidence relevant to actual cash value, including proof of prior efforts to sell the property and prior statements indicating minimal value outside malt production.

## Legal Principles

- Fire insurance is a contract of indemnity; recovery should make the insured whole but not provide a profit.
- “Actual cash value” is not determined by a single fixed formula; the factfinder may consider every fact and circumstance that logically bears on a correct estimate of the insured’s loss at the time of the fire.
- Relevant valuation evidence may include original cost, reproduction or replacement cost, physical depreciation, obsolescence, inutility, and feasible uses of the property.
- Market value may be considered but is not controlling where a meaningful market does not exist or does not reflect the insured property’s real economic worth.
- Evidence of the insured’s prior statements and conduct concerning the property’s salability and usefulness may be admissible as bearing on actual cash value.

## Conclusion

The court held that “actual cash value” under an indemnity fire policy requires a broad evidentiary inquiry that can account for economic obsolescence and lack of utility, and it granted a new trial because the jury charge and evidentiary exclusions improperly prevented that valuation.


McAnarney v. Newark Fire Ins. Co., 247 N.Y. 176, 159 N.E. 902 (N.Y. 1928)