68 A.D.2d 946 | N.Y. App. Div. | 1979
Appeal from-an order of the Supreme Court at Special Term, entered September 8, 1977 in Greene County, which denied plaintiffs’ motion to dismiss defendant’s second affirmative defense. The issue to be resolved on this appeal is the extent of the insurable interest on improvements to real property made by a lessee in possession with an option to purchase. Plaintiffs operated a motel and restaurant under a lease running from September 3, 1975 to September 30, 1976, with an option to buy if they so exercised that option in writing prior to the expiration date of the lease. During the term they had made improvements in the sum of approximately $15,000 and had obtained from defendant a policy of fire insurance which, among other things, covered "betterments and improvements” made by the insured. However, this coverage contained a clause providing that in the event the betterments and the improvements were not repaired or replaced within a reasonable time after a loss, the insured could collect only that portion of the original cost of the damaged or destroyed items which the unexpired term of the lease at the time of the loss bears to the period from the date of the betterments and improvements to the termination date of the lease. On September 7, 1976 a fire substantially destroyed the leased premises. Neither the plaintiffs nor the lessor repaired or replaced any of the betterments or improvements after the fire. Accordingly, defendant applied the formula contained in the policy and contended that any recovery for the betterments and improvements must be limited to 23/365 of their original cost, and so
