Wednesday, March 20, 2013

Holscher v. James case brief

Holscher v. James case brief summary
124 Idaho 443, 860 P.2d 646

PROCEDURAL POSTURE: Appeals and cross-appeals from a decision of the District Court of the Seventh Judicial District of the State of Idaho, Lemhi County, which ordered that appellant insurance company and appellant purchasers were liable to respondent sellers for the value of a cabin that burned down prior to closing.

OVERVIEW: Appellant buyers signed an agreement to purchase a cabin from respondent sellers, and insured the cabin with appellant insurance company. Appellant buyers then took possession of the premises. Thereafter, but prior to closing, the cabin was destroyed by fire.

On appeal, the court construed the parties' purchase agreement as placing the pre-closing risk of loss on respondent sellers because the purchasers had the right to void the agreement once the premises were materially damaged.

-The court also held that the insurance binder unambiguously provided respondent sellers with a beneficial interest in the insurance to cover whatever insurable interest they had in the property prior to closing.
-The court held as a matter of law that respondent sellers were third-party beneficiaries under the insurance binder, and that the beneficial interest was limited only to the extent of their insurable interest in the cabin under Idaho Code § 41-1806.

When a provision in a purchase agreement allows the buyer to cancel the agreement if the premises are destroyed prior to closing, the effect of that provision is to allocate to the seller the risk of loss prior to closing.

OUTCOME: In reversing the district court's judgment, the court held that the parties' purchase agreement placed the pre-closing risk of loss on respondent sellers, but that respondent sellers were intended third-party beneficiaries of the insurance binder between appellant buyers and appellant insurance company.

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