An old, wood-framed building at an airport owned by the City of Hollister was damaged by a fire on November 23, 2002. The building was insured against fire under a commercial lines policy issued by Monterey Insurance Company (MIC). MIC’s adjuster called it a total loss.

The policy included a functional-building-valuation endorsement, which obligated MIC to pay the cost to repair or replace the building if the city contracted to restore the building within 180 days of the loss.