An importer and wholesaler of clothing carried a reporting form policy on its inventory which was warehoused in its own facilities. A value reporting provision in the contract read:

"....The Assured shall keep an accurate record of all property covered under this endorsement and render monthly reports on the 15th day of each month or as soon thereafter as may be practicable of the actual cash values at risk at each location as of the last day of the previous calendar month and to pay premiums thereon when due...."

The insurer agreed to increase the amount of insurance to $1.5 million and did so just two weeks before a fire destroyed the clothing. The insured's claim for the full $1.5 million was rejected by the insurer. Instead, the business was paid approximately $647,000, the amount reported four months before the fire. There had been no other report in the interim.

The insured sued the insurer for breach of contract, contending that the quoted provision entitled it to indemnity up to the policy limits. The insurer said that the reporting provision limited coverage to the value most recently reported before the fire.

The trial court agreed with the insurer's argument and granted its motion for summary judgment. The insured appealed.

The appeal court noted the fact that the insurer took no action, such as cancellation, when the insured failed to continuously make monthly reports. Instead, the insurer increased the limit of insurance substantially just two weeks before the fire.

Of even more importance, the court found that the policy's value reporting provision, unlike that in many reporting form policies, neither limited liability to "the amounts included in the last report of values....filed prior to the loss" nor imposed a proportional liability limit.

Accordingly, the judgment of the trial court was reversed in favor of the insured and against the insurance company.

Filippo Industries, Incorporated, Plaintiff-Appellant v. Sun Insurance Company Of New York, Inc. Et Al., Defendants-Respondents. California Court of Appeal, Division Seven. No. B082604. June 26, 1995. CCH 1995 Fire and Casualty Cases, Paragraph 5342.