Auto Owners Insurance Company (“Auto Owners”) appeals the order granting summary judgment in favor of Carolyn Schubert and awarding her $124,500, the face value of the insurance policy sold to her by Auto Owners. Because Schubert owned a one-half interest in the dwelling covered by the policy, which was completely destroyed by fire, Auto Owners offered to pay her half of the policy value. Auto Owners cited a provision within the policy which limited recovery to “[no] more than the insurable interest the insured has in the covered property at the time of loss.” The district court 1 declared this provision void as contrary to the public policy expressed in the Missouri valued policy statute, see Mo.Rev.Stat. § 379.140 (2000), and alternatively found its language ambiguous so as to allow Schubert to recover the face value of the insurance policy. Because we agree with the district court’s conclusions *820 as to both points, we affirm. We are also convinced, after initially questioning our jurisdiction over the matter, that the case satisfies the $75,000 amount-in-controversy requirement and jurisdiction is proper.
I. Underlying Dispute
The house covered by the Auto Owners policy at issue was located at 1100 Eastwood in Harrisonville, Missouri, and originally belonged to the first wife of Carolyn Schubert’s late husband, Thomas Schubert. Thomas purchased the policy in 2004, after his first wife had died, and maintained it until his own death in 2006. Because Thomas died intestate, Carolyn Schubert, who had married him the previous year, was uncertain as to whether she would inherit the house. She told as much to an Auto Owners agent during a phone conversation in October 2006, when she notified the company of Thomas’s death and transferred the policy into her own name. If she turned out not to inherit the property, Schubert predicted, she would stop paying the premiums. Since that conversation, she never updated Auto Owners on the status of the ownership dispute, but continued to make regular premium payments on the policy and renewed the policy at least twice after Thomas’s death.
At the time of Thomas’s death, the house was occupied by his stepdaughter from his first marriage, Deborah Lee Weiss. During the probate proceedings to determine the heirship of the house, Schubert stipulated with Weiss as to each owning fifty percent (50%) of the property. But the rapprochement was short-lived. Three months after entering into the stipulation, in March 2008, Weiss intentionally set the insured property on fire, which resulted in its complete destruction.
When Schubert made a claim on the policy shortly thereafter, Auto Owners refused to pay the policy face value of $124,500. It justified the refusal by reference to the clause within the policy which limited recovery to the insured’s “insurable interest” in the property:
PROPERTY PROTECTION CONDITIONS
INSURABLE INTEREST
Subject to the applicable limit of insurance, we will not pay more than the insurable interest the insured has in the covered property at the time of loss.
JA at 121.
Since the company determined Schubert’s insurable interest to be fifty percent of the value of the property, it sent her a check for half of the policy amount, or $62,250. Through her lawyer, Schubert rejected the tender and demanded the payment of the face value of the policy within seven days. Although she did not cash the check, she did not return it either, holding on to it purportedly until she got paid in full. With no payment forthcoming, Schubert filed the present lawsuit asserting a breach of contract and seeking damages for vexatious refusal to pay pursuant to Mo.Rev.Stat. § 375.296 in a Missouri state court. After Auto Owners removed the case to federal court, the district court granted summary judgment in favor of Schubert on her breach of contract claim and in favor of Auto Owners on Schubert’s vexatious refusal to pay claim. In the district court’s view, the contractual limitation on recovery based on the degree of the insured’s insurable interest in the property was void as contrary to the Missouri valued policy statute and, even assuming the limitation was valid, the policy was ambiguous in its definition of “insurable interest” and could not be used to deny Schubert full recovery. Auto Owners appeals.
II. Subject-Matter Jurisdiction
Although neither party challenges the court’s jurisdiction to hear the case, we
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have an independent obligation to evaluate it.
Arbaugh v. Y & H Corp.,
A.
We first address the amount in controversy in Schubert’s breach-of-contract claim. In this circuit, the amount in controversy is measured by “the value to the plaintiff of the right sought to be enforced.”
Advance Am. Servicing of Ark. v. McGinnis,
Yet, the insurer’s pre-suit concession of liability is not entirely inconsequential. For example, in a declaratory judgment action brought by an insurance company, the Sixth Circuit found the claim to be for $75,000 even, falling a penny short of the statutory threshold, where the insurer conceded the policy required a payment of $25,000 but disagreed with the insured who insisted he was entitled to $100,000 in coverage.
Freeland v. Liberty Mut. Fire Ins. Co.,
Returning to the facts of this case, Auto Owners not only conceded liability as to the first $62,250 of the policy amount, but also sent Schubert a check for that amount.
2
These events had occurred be
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fore the commencement of the action, so the rule that the settlement
during
the pendency of the suit cannot reduce the amount in controversy does not apply.
McCollum v. State Farm Ins. Co.,
B.
In assessing the amount in controversy on the vexatious refusal to pay count, we start with the basics. As a party invoking the court’s jurisdiction, Auto Owners has an obligation to show, by a preponderance of the evidence, facts supporting jurisdiction.
McNutt v. Gen. Motors Acceptance Corp.,
Paul Mercury Indem. Co. v. Red Cab Co.,
It is axiomatic the court’s jurisdiction is measured either at the time the action is commenced or, more pertinent to this case, at the time of removal.
McLain v. Andersen Corp.,
This is not to say subsequent events are entirely irrelevant. “Subsequent events may ... be relevant to prove the existence or nonexistence of diversity jurisdiction at the time of filing,”
Scottsdale Ins. Co. v. Universal Crop Prot. Alliance, Inc.,
There is admittedly certain tension between the principle that post-removal events do not affect jurisdiction and that pre-trial proofs can be used to assess the amount in controversy as it existed at the time of removal. It is resolved, however, by deferring to the plaintiffs estimate with respect to the amount in controversy whenever the impossibility of recovery is not apparent from the face of the pleadings but emerges from adjudication of the merits.
See McDonald v. Patton,
In this case, Schubert’s complaint requests damages for Auto Owners’ alleged vexatious refusal to pay pursuant to Mo.Rev.Stat. § 375.420. To recover damages for vexatious refusal to pay, Schubert had to establish that: (1) she had an insurance policy with Auto Owners; (2) Auto Owners refused to pay; and (3) its refusal was “without reasonable cause or excuse.”
Dhyne v. State Farm Fire & Cas. Co.,
This standard puts squarely at issue the merits of Schubert’s argument that the Missouri valued policy statute, Mo.Rev. Stat. § 379.140, prohibits the kinds of restrictions on recovery that Auto Owners invoked in reducing her payout.
3
As we explain later in the opinion, Schubert reasonably argued that the highest- court of
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the state had settled this issue favorably to Schubert long before Auto Owners’ refusal to pay. Although we do not necessarily suggest the district court erred in dismissing Schubert’s vexatious refusal to pay claim (Schubert did not appeal dismissal of that claim), we find her allegations in connection with that claim to have been made in good faith in the complaint, as required to sustain jurisdiction. The district court’s subsequent finding of “complex issues of law” and grant of summary judgment in favor of Auto Owners did not “negative [Schubert’s] good faith in asserting the claim.”
JTH Tax, Inc.,
In so concluding, we are mindful of this court’s 1995 decision in
Pemiscot County,
In Pemiscot County, a county in Missouri sued the insurance company of one of its officials, the County Sheriff, to recover the $50,000 surety bond posted by the sheriff to guarantee the faithful execution of his duties. The county alleged the sheriff improperly retained some of the fees he received from the United States Marshals Service for housing and transporting federal prisoners to and from the county jail. Because the diversity statute at the time set a $50,000 threshold, the county’s vexatious refusal to pay claim, brought under the same Missouri statute, was critical to the court’s jurisdiction. In defending against that claim, the surety company argued that, its liability being only derivative of its principal’s, it was entitled to rely on his reasonable defense, even if unsuccessful in the end. This court agreed, finding the determination of the sheriffs liability presented a host of complex issues bearing on the legality of his underlying actions; the court also found the sheriffs initial refusal to pay was not indefensible so as to make the surety’s refusal to pay vexatious. Id. at 175. On that record, the court equated the “district court’s well-justified finding of an open issue of law” with the showing, to a legal certainty, that the surety “could never be liable for a statutory vexatious refusal.” Id.
The factual setup in Crenshaw is rather similar. After the insurer refused coverage under the uninsured motorist policy on the grounds recovery was barred by the Missouri statute of limitations for wrongful death actions, the plaintiffs, parents of an individual killed by an uninsured driver, sued. They maintained that the longer, breach-of-contract statute of limitations governed and their cause of action was therefore still viable. The law required plaintiffs to establish their right to recover from the uninsured driver as a prerequisite to recovering under the policy. Because the court found an “open question of law” as to which statute of limitations— contract or wrongful death — applies to the case, it concluded “the refusal to pay in the instant case could not, to a legal certainty, be considered vexatious.” Id. at 1258.
At some level, these decisions are inconsistent with the venerable principles of diversity jurisdiction outlined above. While damages for vexatious refusal to pay are indeed inappropriate where the
*825
insurer has reasonable cause to believe it has a meritorious defense to the plaintiffs claims,
Watters v. Travel Guard Int’l,
On another level, however,
Pemiscot County
and
Crenshaw
are reconcilable with the commonly accepted standards of jurisdiction and distinguishable from the case at hand. The decision in
Pemiscot County,
for example, hinged on several legal and factual disputes regarding the alleged wrongfulness of the sheriffs actions and the limited avenue for finding the surety company liable was for the sheriff to lack defenses altogether. Because the sheriff put forward several defenses and even secured the backing of an independent state official (State Auditor), the county’s vexatious refusal to pay claim had a frivolous quality from the start. By contrast, Auto Owners’ liability to Schubert was not derivative of anyone else’s, and the merits of the insurance claim required the resolution of a single issue which had been squarely addressed by the Missouri Supreme Court. Looking at the complaint and other materials “amplify[ing] the meaning of the complaint allegations,”
Zacharia,
Issues of the underlying coverage in
Crenshaw
appear even more complex than in
Pemiscot County.
In order to be entitled to the uninsured motorist coverage, the
Crenshaw
plaintiffs had to establish their right to recover from the uninsured motorists themselves.
Because we find Schubert’s case does not fall within the St. Paul Mercury category of cases in which jurisdictional prerequisites are, to a legal certainty, not satisfied, we credit the good-faith allegations of her complaint and conclude jurisdiction is proper.
III. Breach of Contract Claim
Now on to the merits of Schubert’s substantive argument that a Missouri valued policy statute voids the policy limitation on Schubert’s recovery to her “insurable interest” in the property. Under the valued policy statute, in effect in Missouri since 1879, the property valuation listed on the policy is conclusive, absent fraud, misrepresentation, or collusion. Mo.Rev.Stat. § 379.140;
see DeWitt,
In all suits brought upon policies of insurance against loss or damage by fire hereafter issued or renewed, the defendant shall not be permitted to deny that the property insured thereby was worth at the time of the issuing of the policy the full amount insured therein on said property; and in case of total loss of the property insured, the measure of damage shall be the amount for which the same was insured, less whatever depreciation in value, below the amount for which the property is insured, the property may have sustained between the time of issuing the policy and the time of the loss, and the burden of proving such depreciation shall be upon the defendant; and in case of partial loss, the measure of damage shall be that portion of the value of the whole property insured, ascertained in the manner prescribed in this chapter, which the part injured or destroyed bears to the whole property insured.
Mo.Rev.Stat. § 379.140 (emphasis added).
Thus, unlike open policies, which leave the payout amount uncertain, valued policies fix the risks by agreeing on the value of the property at the time a policy is issued, similar to a liquidated damages provision in other contracts.
Polytech, Inc. v. Affiliated FM Ins. Co.,
But before the insured can gain the benefit of the valued policy statute, he must have “an insurable interest in property both at the time of making the contract and at the time of loss” — a requirement intended to prevent wagering.
DeWitt,
In general, a person has an insurable interest in the subject matter insured where he has such a relation or concern in such subject matter that he will derive pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss or damage from its destruction, termination, or injury by happening of the event insured against.
G.M. Battery & Boat Co. v. L.K.N. Corp.,
“Under Missouri law, the lack of title is immaterial to determining whether a party has an insurable interest.”
Beckon, Inc. v. AMCO Ins. Co.,
Is the insured with only a partial ownership interest in the covered property entitled to payment of the face value of the policy in the event of total loss? States with valued policy statutes resolved this question differently. See Michael J. Skeary, Valued Policy Laws: A Comparative Analysis, 44 Tort Trial & Ins. Practice L.J. 1067, 1091-94 (2009) (describing the three general approaches to the issue). The Missouri courts, like courts of Arkansas, Minnesota, and Mississippi, have allowed the insureds to recover the full amount of the policy. Id. at 1093 & n. 178 (dubbing the Missouri approach as the “Minnesota Rule” and collecting the relevant cases from the four jurisdictions following that rule).
The seminal case representing the Missouri courts’ position is
DeWitt v. American Family Mutual Insurance Co.,
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Nevertheless, the Missouri Supreme Court left the door open for insurance companies to avoid the burden of potential overinsurance “by strictly defining the interest covered by its policy, or by obtaining representations or warranties about the state of the title, if it deems this information important.”
G.M. Battery & Boat Co.,
A.
Auto Owners does not dispute that Schubert has an insurable interest in the house at 1100 Eastwood. Nor does it argue Schubert’s interest in the house changed materially throughout her relationship with Auto Owners. Rather, Auto Owners relies on the Missouri Court of Appeals decision in
Gorman v. Farm Bureau Town & Country Insurance Co. of Missouri,
First, Gorman does not stand for the proposition Auto Owners cites it for. In Gorman, the court considered a policy which limited recovery to the “smaller of ... the insurable interest the insured has in the property [or, among other things,] the amount of coverage shown on the Information Page.” Id. at 523. At the time the policy was purchased, the covered property was owned by a business partnership consisting of the two insureds and a third partner. By the time the loss occurred, however, the insureds had sold their entire interest to the third partner and retained only a $7,400 mortgage against it. During litigation, the insureds argued the clause limiting their recovery to the “insurable interest” was contrary to the valued policy statute and therefore void.
The Missouri Court of Appeals rejected this argument, finding “the valued policy statute would not apply where, as here, without notice to the insurer, the insureds materially altered their insurable interest that existed at the time the policy was purchased.”
Id.
at 525. The material change in the insurable interest of the insured was therefore a pivotal point in the court’s decision. The
Gorman
court believed it was not bound by the supreme court’s opinion in
DeWitt
because that opinion “did not answer our question as to whether the valued policy statute applies where the insured’s insurable interest is materially altered from the time of making the insurance contract and the time of loss.”
Gorman,
Second, as a subsequent court of appeals panel recognized, Gorman, an opinion of the intermediary appellate court of the state, is in tension with the opinions of the supreme court of the state in DeWitt and G.M. Battery:
[W]hile Gorman implies that the insurer can use a restrictive definition of the insured’s interest to limit coverage after a policy is issued, G.M. Battery appears to hold that the insurer should use a restrictive definition of the in *829 sured’s interest to underwrite coverage but, once the policy is issued, the insurer cannot dispute the value of the insured’s insurable interest.
JAM Inc.,
In a diversity case such as this, “we must apply Missouri law as declared by the State’s highest court, the Supreme Court of Missouri.”
Council Tower Ass’n v. Axis Specialty Ins. Co.,
Third, Auto Owners cannot distinguish Gorman from DeWitt and G.M. Battery by relying on the provision within its policy which restricts recovery to Schubert’s insurable interest at the time of loss. Although Auto Owners could limit available coverage by “strictly defining the interest covered by its policy” under dicta in G.M. Battery, it has not done so in this case. If Auto Owners wanted to take advantage of the G.M. Battery shelter from the application of the valued policy statute, it needed to define the particular ownership interest it intended to cover by its issuance of this policy at the outset. For example, it could condition recovery on the insured’s absolute, fee simple ownership of the property. Alternatively, G.M. Battery permits the insurer to obtain representations or warranties on the state of the insured’s title and limit its coverage that way. However, Auto Owners did not do that either.
Instead, it limited recovery to the extent of Schubert’s insurable interest at the time of loss — something which can be extremely difficult if not impossible to quantify.
See, e.g., Gorman,
Fourth and finally,
the coverage limitation attempted by Auto Owners is akin to a contractual clause limiting the insurer’s liability on the policy to a pro rata share of the loss based on multiple policies insuring the property. In
Marti v. Economy Fire & Casualty Co.,
In sum, we find the policy provision limiting Schubert’s recovery to her insurable interest in the covered property is incompatible with the Missouri valued policy statute and is therefore void.
B.
Alternatively, the district court found that, even if the provision limiting Schubert’s recovery to her insurable interest in the property were valid, it is inherently ambiguous and therefore cannot be used to reduce her recovery. We agree.
In relevant part, the Auto Owners’ policy states: “Subject to the applicable limit of insurance, we will not pay more than the insurable interest the insured has in the covered property at the time of loss.” The policy fails to define the term “insurable interest,” however. As explained above, case law defines the term “insurable interest” broadly and orthogonally to the concept of legal ownership.
See G.M. Battery,
In deciding whether Schubert’s recovery can be limited and to what extent, we are guided by two presumptions — that a court must “interpret the policy ‘so as to afford rather than defeat coverage,’ ”
id.
at 893 (quoting
Farm Bureau Town & Country Ins. of Mo. v. Hilderbrand,
So too here, as well. The policy at issue does not define “insurable interest,” and
*831
while Schubert has a fifty-percent
ownership
interest in the property, the extent of her insurable interest is considerably less clear. Construing the ambiguity against the drafter, who forewent “the opportunity to clearly word exclusions and limits of liability,”
S. Gen. Ins. Co. v. WEB
As
socs./Electronics, Inc.,
IV.
Based upon the reasons stated above, we affirm the judgment of the district court.
Notes
. The Honorable Dean Whipple, United States District Judge for the Western District of Missouri.
. In truth, Auto Owners’ check was not entirely without any strings attached. On its face, it was inscribed, "In payment of 50% of insurable interest,” and in a letter accompanying the check, Auto Owners "offer[ed] the 50% of the policy limit, $62,250.00 for the above fire per the above policy language.” Schubert was further requested to fill out a
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different Proof of Loss form, where she was presumably expected to put $62,250 as the new "amount claimed.” Although these restrictions might not amount to accord and satisfaction, which usually requires the express conditioning of the payment on full satisfaction of the claim,
see Henderson v. Eagle Express Co.,
. As the district court pointed out, Schubert does not allege the insurer’s recalcitrance or delay in handling the claim as the basis for her vexatious refusal to pay claim. On appeal, Schubert does not contest that portion of the district court’s reasoning.