The Cincinnati Insurance Co. has prevailed in litigation with a policyholder over the value of a claim in connection with a building destroyed by a tornado.

On Dec. 31, 2010, a tornado destroyed a building leased as a medical imaging facility in Sunset Hills, Missouri, owned by the St. Louis-based Olga Despotis Trust, according to Wednesday’s ruling by the 8th U.S. circuit Court of Appeals in St. Louis in Olga Despotis Trust v. The Cincinnati Insurance Co.

In February 2011, trustee Dr. George Despotis presented a proof-of-loss form to the building’s insurer, Cincinnati Insurance, a unit of Fairfield, Ohio-based Cincinnati Financial Corp., claiming a loss in excess of the policy limits and alleging the actual cash value of the building at the time of loss was $1.4 million, according to the ruling.

Cincinnati responded by determining the actual cash value of the building was $800,000, and within 15 days of the trust’s submission of its proof of loss presented a check for $813,9031, which included the undisputed $800,00 actual cash value amount. The trust insisted, however, that additional funds were due and disputed Cincinnati’s loss value determinations.

In April 2011, Cincinnati sent the trust’s attorney a letter invoking the policy’s appraisal provision, which allowed either party to request an appraisal in the event of a dispute regarding the amount of covered damages.

The trust responded that it considered an appraisal “unproductive,” and the dispute eventually led to it filing suit in U.S. District Court in St. Louis on claims of breach of contract, “vexatious” refusal and declaratory judgment.

The insurer asked the court to order appraisal. It did so, and an appraisal panel declared an actual cash value loss of $1,056,000. The panel also determined the total replacement cost to be $1.5 million and lost rent to be $94,000.

As result of the appraisal, Cincinnati paid the trust the remaining actual cash value of $256,000 and an additional $22,658 for lost rental income. The trust, though, insisted it was entitled to the building’s replacement cost.

The District Court granted Cincinnati summary judgment in the case, which on appeal was unanimously affirmed by a three-judge appeals court panel.

“The District Court properly afforded the appraisal provision its plain meaning in determining it was unambiguous, enforceable and did not abridge the trust’s rights under Missouri’s vexatious refusal statue,” said the ruling.

In addition, under Missouri law, the insurer has no obligation to pay replacement costs until replacement occurs, and the “replacement process was neither complete nor underway within two years of the date of loss as required under the policy,” said the ruling, in affirming summary judgment in Cincinnati’s favor.