The U.S. Court of Appeals for the Eighth Circuit, reversing a district court's decision in favor of an insurer, has ruled that calculation of an insurance policy's coinsurance provision depended on the type of claim filed and that where the insured filed a claim for the actual cash value of stolen property, the coinsurance provision should be calculated using actual cash values.

The Case

After thieves stole electrical wiring from the saw and planing mills in Buddy Bean Lumber Company's lumberyard, the company filed a claim with its insurer, Axis Surplus Insurance Company, seeking to recover the actual cash value of the stolen wire. Axis determined that the loss was covered under the policy and tendered Buddy Bean an interim payment of $100,000 while it investigated the matter. After some negotiation the two parties agreed that the stolen wire had an actual cash value of $725,000, but Axis declined to pay that amount because it considered the claim to be subject to the policy's coinsurance provision, which provided that the saw and planing mills were insured on a 90 percent coinsurance basis.