Georgia Supreme Court Requires Policyholders
. . . be Paid for Diminished Value
Tempe, AZ 11/29/2001 - Following is the actual decision handed down by the Georgia Supreme Court provided as a courtesy of the Insurance Consumer Advocate Network.
___________________________________
In the Supreme Court of Georgia
Decided: November 28, 2001
S01A0982. STATE FARM MUTUAL AUTOMOBILE INSURANCE
COMPANY v. MABRY et al.
BENHAM, Justice.
Two policyholders(superscript: 1) (hereinafter collectively,
"Plaintiffs") brought an action for damages and injunctive relief against
State Farm Mutual Automobile Insurance Co. (hereinafter "State Farm").
Plaintiffs asserted in the "Breach of Contract" sections of their complaint
that they had made first-party physical damage claims and that State Farm
had failed to pay them part of the covered losses they sustained. The
element of loss they alleged was covered by their policies, and that State
Farm did not tell them about or pay, was the diminution in value of their
vehicles caused by the fact of the physical damage. In the "Equitable
Relief" section of the complaint, Plaintiffs asserted that State Farm, with
knowledge of its contractual obligations, and pursuant to a scheme to avoid
those obligations, had failed to establish a procedure for handling the
diminution in value element of claims, had failed to inform its
policyholders of that coverage, and had failed to pay Plaintiffs' claims.
The plaintiffs sought an order requiring State Farm to notify insureds of
the coverage or to implement a procedure for handling diminution in value
claims, and to honor its contractual obligation to pay diminution in value
in first-party physical damage claims presented by its policy holders.
Finally, the complaint sought certification of at least two classes of
plaintiffs, one consisting of all former or current insureds of State Farm
who presented first-party physical damage claims in the past six years, the
"Breach of Contract Class," and one consisting of present insureds, the
"Equitable Relief Class." After State Farm filed an answer and the parties
engaged in discovery, the trial court issued an order certifying a class
for declaratory and injunctive relief consisting of all current insureds
under State Farm policies issued in Georgia. Following another hearing and
further discovery, the trial court entered an order in December 2000
declaring that the law of Georgia requires that State Farm pay its
first-party physical damage claimants for any diminution in value their
cars sustain; that State Farm, once an insured reports a loss, evaluate the
claim to determine whether the vehicle has sustained diminution in value;
and that State Farm, at the conclusion of the adjustment and repair
process, either affirm the presence of diminution in value and pay it, or
deny the presence of diminution in value. That order also included an
injunction by which State Farm was ordered to evaluate first-party physical
damage claims for diminution in value "by an appropriate methodology and
procedure," and either offer to pay it or deny it; to collect, catalog, and
maintain any information necessary to make a determination of diminution in
value; and to report to the trial court the manner in which it complies
with the order. This appeal is from the order certifying the class and the
order granting declaratory and injunctive relief to Plaintiffs.
1. We turn first to State Farm's contention that the certification of
a class of plaintiffs for declaratory and injunctive relief was improper.
Specifically, State Farm asserts that bifurcation of the class into a
declaratory and injunctive relief class and a damages class was improper,
that there are no common issues for trial, and that individual issues
predominate.
While Georgia's class action statute, OCGA § 9-11-23, does not by its
terms provide for bifurcation of classes in a class action as does Federal
Rule 23 (c) (4), the appellate courts of Georgia have relied on the federal
rules when construing our statute. See Ford Motor Credit Co. v. London,
175 Ga. App. 33, 35 (332 SE2d 345) (1985) (noting adoption from federal
rules of requirement of certification of class action). Although this
Court found it unnecessary in Tanner v. Brasher, 254 Ga. 41 (fn5) (326 SE2d
218) (1985), to decide whether to follow federal precedent permitting the
splitting of issues in certifying class action, the Court of Appeals
suggested in Trend Star Continental, Ltd. v. Branham, 220 Ga. App. 781
(fn2) (469 SE2d 750) (1996), that a trial court could certify a class with
respect to some counts of a complaint and not as to others. We agree with
that suggestion for reasons which answer State Farm's other complaints
about the certification of a class in this case: commonality of rights and
issues. The issues for the declaratory and injunctive relief class in this
case are whether Georgia law, as applied to the contract at issue, requires
insurers to assess vehicles presented with first-party physical damages
claims for diminution in value and, if found, pay it; and, if so, whether
State Farm has sought to avoid that obligation. Those issues are common to
all members of the class certified by the trial court, all of whom are
policyholders. "Common questions of law and fact predominate, as in the
instant case, when action is brought on behalf of purchasers of agreements
from a common source, the character of the right sought to be enforced is
common, and common relief is sought. [Cit]" Sta-Power Industries, Inc. v.
Avant, 134 Ga. App. 952, 954 (216 SE2d 897) (1975). Thus, contrary to State
Farm's assertion on appeal, there are issues for trial common to the
members of the class, and those issues predominate over any individual
issues. By certifying a class of plaintiffs only for declaratory and
injunctive relief, the trial court ensured that the class would possess the
qualifications of a proper plaintiff class.
"On appellate review of a trial court's decision on a motion to
certify a class, 'the discretion of the trial judge in certifying or
refusing to certify a class action is to be respected in all cases where
not abused.' [ Cit.]" Jones v. Douglas County, 262 Ga. 317 (2) (418 SE2d
19) (1992). No abuse of discretion appears in the trial court's decision
to certify a plaintiff class in this case.
2. We consider next State Farm's contentions that the trial court's
rulings in this case infringe on the expertise of the Georgia Insurance
Commissioner; that the Insurance Commissioner has exclusive jurisdiction
over the issues here and the courts should defer to the Insurance
Commissioner; and that Plaintiffs were required to exhaust administrative
remedies before filing suit. State Farm argues that the imposition of
specific claims handling procedures was improper because the Insurance
Commissioner is charged with regulating claims handling procedures. That
argument is factually faulty since the trial court's order did not impose
specific claims handling procedures. The trial court's order required
State Farm to include an evaluation of diminution in value in its standard
assessment of damages, just as it evaluates other elements of damage, and
to adopt a suitable methodology for doing so. Thus, the trial court's
order did not mandate any certain claims handling procedure, only that
State Farm start actually handling its claims in accord with its contract,
without refusing to consider some elements of loss. Since Plaintiffs'
claims do not require proof that State Farm has violated the Insurance
Code, there is no exclusive jurisdiction in the Insurance Commissioner and
no requirement that the courts defer to the Insurance Commissioner in this
case. Griffeth v. Principal Mut. Life Ins. Co., 243 Ga. App. 618 (533 SE2d
126) (2000); Provident Indem. Life Ins. Co. v. James, 234 Ga. App. 403 (506
SE2d 892) (1998). Where, as here, no administrative procedure has been
invoked, exhaustion of administrative remedies is not required. See
Griffeth, supra. Compare Cerulean Cos. v. Tiller, 271 Ga. 65 (2) (516 SE2d
522) (1999). Accordingly, there was no error in the trial court's
rejection of State Farm's arguments regarding the jurisdiction or expertise
of the Insurance Commissioner.
3. State Farm contends the trial court's declaratory judgment is
infected with two errors. First, it argues that declaratory judgment is
inappropriate because there are no circumstances necessitating the trial
court's guidance with respect to Plaintiffs' future acts. The trial court
relied on the provision in OCGA § 9-4-2 (b) permitting a declaration of
rights when required by the ends of justice.
[T]he respective superior courts of this State, under [OCGA § 9-4-2
(b)], have power to determine and settle by declaration any
justiciable controversy of a civil nature where it appears to the
court that the ends of justice require that such should be made for
the guidance and protection of the petitioner, and when such a
declaration will relieve the petitioner from uncertainty and
insecurity with respect to his rights, status, and legal relations.
Calvary Independent Baptist Church v. City of Rome, 208 Ga. 312 (3) (66
SE2d 726) (1951). This Court has held that use of a declaratory judgment
action by insureds to determine the scope of policy provisions is in
keeping with the purpose of the Declaratory Judgment Act (OCGA § 9-4-1, et
seq.), i.e., to settle and afford relief from uncertainty and insecurity
with respect to rights, status, and other legal relations. Atlantic Wood
Industries, Inc. v. Argonaut Ins. Co., 258 Ga. 800 (2) (375 SE2d 221)
(1989). The holding in Allstate Ins. Co. v. Shuman, 163 Ga. App. 313 (4,
6) (293 SE2d 868) (1982), cited by the trial court in the declaratory
judgment portion of the order on appeal, is pertinent to the present case:
The issue is certainly unsettled at the present time and resolution of
the issue is certainly of manifest importance to the parties (as well
as the insurance industry in general, as amici curiae so vigorously
point out). ... The issue at bar is a question of law and therefore
can only be decided by a court of law. A trial would serve no useful
purpose because the issue is purely legal. Moreover, it is an
important issue, one that needs to be decided. Therefore, we hold
that the ends of justice require that the court below render the
declaratory judgment prayed for.
Second, State Farm contends that the trial court erred in entering
declaratory judgment without affording State Farm the jury trial it
demanded. A jury trial is proper in a declaratory judgment action "[w]hen
a declaration of right or the granting of further relief based thereon
involves the determination of issues of fact triable by a jury and jury
trial is not waived ...." OCGA § 9-4-6. Where, however, a party sets
forth no disputed facts, either at trial or on appeal, which required
submission to a jury, there is no error in proceeding without a jury.
Aponte v. City of Columbus, 246 Ga. App. 646 (4) (540 SE2d 617) (2000). In
its request for jury trial, State Farm identified only two areas as to
which it contended there was a factual dispute: State Farm's motivation in
the manner in which it does business, and whether State Farm has breached
its obligation to pay diminution in value to any persons. The trial
court's order makes no specific finding on either of those issues, and
State Farm has not identified on appeal any finding of fact as to which
there was a conflict in the evidence which would require submission to a
jury. Accordingly, there was no error in the trial court's refusal to
grant State Farm a jury trial. Id.
4. The basic conflict in the present case concerns the scope of State
Farm's contractual promise to compensate its policyholders for their
losses. The physical damage coverage in its policies provides that State
Farm will "pay for loss to your car," minus any deductible. The policy
contains a provision limiting State Farm's liability to the lower of the
actual cash value of the vehicle or the cost of repair or replacement, and
a provision giving State Farm the right to settle a loss by paying up to
the actual cash value of the car or paying "to repair or replace the
property or part with like kind and quality." That provision also requires
that the policyholder pay for any "betterment" resulting from repair or
replacement.
Plaintiffs contend that State Farm's duty under its policies, when a
physical damage loss is reported by a policyholder, is to assess every
element of that loss covered by the policy and to pay for the entire loss,
the measure of which, they contend, is the difference between the value of
the vehicle prior to the loss and its value after the loss. There is no
question that paying the policyholder the amount of the vehicle's pre-loss
actual cash value, which would be the result of a decision that the vehicle
is a total loss, satisfies State Farm's duty under the policy. The
conflict central to this case arises when State Farm determines that the
vehicle is not a total loss and exercises its option to repair. Plaintiffs
assert that in almost every case, a vehicle that has been damaged in a
covered event will suffer some diminution in value, regardless of the
efficacy of the repairs undertaken, and that State Farm is liable to the
policyholder for the amount of that diminution in value.
State Farm asserts, however, that questions of value arise only when
the vehicle is assessed as a total loss or when repairs cannot return the
vehicle to its pre-loss condition in terms of appearance and function.
When physical damage has been properly repaired, State Farm contends, there
is no objectively discernable diminution in value, and if there were such a
loss, it would not be realized until the vehicle was sold. State Farm also
denies any duty to assess vehicles for diminution in value unless the
insured specifically makes a claim, separate from the original claim of
loss, that the vehicle has lost value even though the physical damage to it
was repaired.
The trial court was presented, therefore, with the following questions
in the declaratory judgment portion of this case: whether the fact of
physical damage resulting from an event covered by the policy reduces the
value of a vehicle, even if repairs return it to pre-loss condition in
terms of appearance and function; if so, whether the policies issued by
State Farm obligate it to compensate its policyholders for that loss of
value, or permit it to discharge its responsibility under the policy by
making repairs that return the vehicle to pre-loss condition in terms of
appearance and function; and if State Farm is obligated to pay its
policyholders for diminution in value, whether it is required to assess
that element of loss along with the elements of physical damage when a
policyholder makes a general claim of loss.
The first question, whether diminution in value occurs even when
physical damage is properly repaired, is one of fact. The trial court
found that there is a potential for a diminution in value loss in every
event of loss, and that diminution in value can occur even when a vehicle
is repaired properly. In support of those findings, the trial court relied
primarily upon documents produced by State Farm during discovery and upon
the testimony of State Farm's witnesses. The documents from State Farm
acknowledged that there is a common perception that a wrecked vehicle is
worth less simply because it has been wrecked. Witnesses for State Farm
testified that a potential for diminution in value exists in every
automobile accident, and that the public perceives a loss of value in any
wrecked vehicle and would choose an unwrecked vehicle over a wrecked one,
assuming the vehicles are otherwise the same. "Based on that evidence, the
trial court's findings are not clearly erroneous and must, therefore, be
accepted by this court as correct. [Cit.]" Delta Cascade Partners, II v.
Fulton County, 260 Ga. 99, 100 (390 SE2d 45) (1990).
The next question, whether State Farm is required to pay for
diminution in value as a part of its physical damage coverage, is a matter
of contract construction and is, therefore, one of law. Magnetic Resonance
Plus v. Imaging Systems Intern., 273 Ga. 525, 526 (543 SE2d 32) (2001).
State Farm contends that its only obligation under the contract of
insurance, when it elects to rely on the limitation of liability provision,
is to pay for repairs which return the vehicle to its pre-loss condition.
Plaintiffs contend that the policy of insurance requires State Farm to
compensate them for their entire loss, to make them whole, and that when
State Farm elects to repair the vehicle, it is also obligated to pay for
any diminution in value that may occur.
As the Court of Appeals noted in Hartford Fire Ins. Co. v. Rowland,
181 Ga. App. 213 (1) (351 SE2d 650) (1986), the question of an insurer's
obligation to pay for diminution in value under the physical damage
coverage of automobile policies is not one of first impression. The basic
holding establishing the measure of damages and the effect of a limitation
of liability provision appeared 75 years ago in U.S. Fidelity & Guaranty
Co. v. Corbett, 35 Ga. App. 606 (1) (134 SE 336) (1926), where the Court of
Appeals held that
the undertaking of the company to insure the owner against "actual
loss or damage" must be taken as the primary obligation, under which
the measure of the liability would be the difference between the value
of the property immediately before the injury and its value
immediately afterwards [cit.]; and the stipulation that the liability
should not exceed the cost of repair or replacement must be construed
as a subordinate provision, limiting or abating the primary liability,
to be pleaded defensively if the insurer would diminish or limit the
amount of recovery by reason thereof.
The reasoning of the Court of Appeals in that case was expressly adopted by
this Court in Dependable Ins. Co. v. Gibbs, 218 Ga. 305, 315 (127 SE2d 454)
(1962). The Court of Appeals addressed the issue again in Simmons v. State
Farm Mut. Auto. Ins. Co., 111 Ga. App. 738 (2) (143 SE2d 55) (1965),
clarifying the effect of a limitation of liability clause:
"[T]he defendant insurance company here had an option to pay for the
loss in money, to repair the vehicle, or to replace it with other
property of like kind and quality, but the contract requires that no
matter which alternative is chosen, the market value of the property
plus $100 [deductible] after payment must equal the market value
before the loss. This is the rule generally with this type of
policy."
Although the Simmons case clearly held that the measure of damages is based
on value, the Court of Appeals found it necessary four years later in State
Farm Mut. Auto. Ins. Co. v. Smith, 119 Ga. App. 447 (1) (167 SE2d 610)
(1969), to reiterate that point and to distinguish "condition" from
"value." There, the insured contended that the car could not be repaired in
such a way as to return it to its previous value, while State Farm claimed
that its limitation of liability only required it to return the car to
pre-loss condition, and that repairs could do that. The policy language
relied upon by State Farm provided that "[t]he limit of ... liability ...
shall not exceed the actual cash value of the property ... at time of loss,
nor (sic) what it would then cost to repair or replace such property with
other of like kind and quality, less depreciation and deductible amount
applicable. The company may at its option pay for the loss in money or may
repair or replace the property...." The Court of Appeals explained State
Farm's contractual duty and the effect of an election to repair:
The obligation of an insurer under a contract containing such language
as is set forth above, where the insurer elects to repair, is "to pay
for the loss caused by collision and the correct measure of that loss
would be the difference in the market value of the automobile
immediately before the collision and its market value immediately
after being repaired." [Cits.] Thus an insurer under a policy such as
the one in this case has three basic options, to wit: (1) To replace
the property with other of like kind and quality less depreciation and
deductible, (2) pay the loss in money (the loss being the difference
in the market value measured immediately before and after the
collision), less any deductible, or (3) if the insurer elects to
repair it may do so, but to the extent that repairs do not restore to
the market value immediately before the collision, the insurer is
obligated to compensate for the difference, the total liability
reduced by any deductible. The insured must be made whole, except for
any deductible, under any option.
Id. When the Court of Appeals next revisited the issue, it spoke
specifically of adding diminution in value to the cost of repairs:
There was substantial evidence from both the plaintiff's and the
defendant's witnesses that a car damaged to the extent this vehicle
was could not be repaired to restore its value prior to the accident.
In such a case depreciation in market price should be added to cost of
repairs, or the property or its value replaced, so that the insured
will be made whole.
Georgia Farm Bureau Mut. Ins. Co. v. Lane, 129 Ga. App. 166 (3) (199 SE2d
273) (1973). The Court of Appeals touched on the appropriate measure of
damages again in Travelers Indem. Co. v. Cumbie, 128 Ga. App. 723 (2,3)
(197 SE2d 783) (1973), noting that the basic measure, the difference
between pre-loss value and post-loss value, was modified by an election to
repair so that the measure would be the difference between pre-loss value
and post-repair value. The meaning of "repair" was key to the next case in
which the Court of Appeals applied the basic rules it had stated in 1926.
In U.S. Fire Ins. Co. v. Welch, 163 Ga. App. 480 (294 SE2d 713) (1982), the
insurer insisted that its policy gave it the right to pay for repairs only
without regard to the value of the vehicle. The Court of Appeals rejected
that argument: "Appellant misconstrues the meaning of repair in the limit
of liability provision as meaning any repair. We construe repair to mean
restoration of the vehicle to substantially the same condition and value as
existed before the damage occurred." Id. at 481. Finally, the Court of
Appeals addressed these issues again in Hartford Fire Ins. Co. v. Rowland,
supra, reiterating the principles developed in this line of cases and
upholding a jury verdict for diminution in value and for statutory
penalties for failing to pay diminution in value. The foregoing review of
Georgia case law establishes clearly that value, not condition, is the
baseline for the measure of damages in a claim under an automobile
insurance policy in which the insurer undertakes to pay for the insured's
loss from a covered event, and that a limitation of liability provision
affording the insurer an option to repair serves only to abate, not
eliminate, the insurer's liability for the difference between pre-loss
value and post-loss value.
State Farm argues, however, that these cases do not apply to it
because the language of its limitation of liability is different and
because the diminution in value to which the cases refer is only that
diminution in value which results from repairs which do not return the
vehicle to its pre-loss condition. The assertion that the language of the
limitation of liability provision in State Farm policies is sufficiently
different than that in earlier cases that the long-standing interpretations
set forth above do not apply is inconsistent with the holdings in Rowland,
supra, and Welch, supra. Both of those cases involved limitation of
liability provisions framed in terms of "lesser" (Welch) or "smaller" (
Rowland) amounts, and in each case the Court of Appeals held that the
language of the limitation provisions did not distinguish that case from
previous cases on the subject. An interpretation more in keeping with
State Farm's appears in a dissenting opinion in Canal Ins. Co. v. Bryant,
173 Ga. App. 173 (325 SE2d 839) (1984), but was rejected by the majority.
State Farm's argument that the diminution in value recovery which is
authorized by case law is only that which results from inadequate repairs
is likewise not supported by the decisions. In Corbett, supra, there was no
suggestion of defective repair; in fact, no repair was undertaken. In
Dependable, supra, although this Court commented that the measure of
damages it stated was the appropriate standard in cases in which the
insurer undertook to repair and did so defectively, there is nothing in the
opinion to suggest the case involved defective repairs or that the measure
of damages stated was applicable only to that situation. There had been no
repairs undertaken in Simmons, supra, and the Court of Appeals rejected the
notion that paying the insured the amount of an estimate, in the absence of
"an uncontradicted showing by one or the other that a given sum of money
will restore the market value of the vehicle to its former level," would
meet State Farm's obligation. The evidence in Smith, supra, was that the
car could not be returned to its former value by repairing it. That does
not equate to inadequate repairs because the same words would describe a
car which was adequately repaired, but had lost value solely because it had
been in a wreck. In fact, State Farm took the position in that case that
the car could be returned to its former condition, but the court rejected
that position and required use of value, not condition, as the measure.
Lane, supra, was not a defective repair case, but one in which the insurer
asserted that paying for repairs would meet its obligation even though the
evidence of both parties showed that repairs would not return the car to
its pre-loss value. Cumbie, supra, was a defective repair case, but the
measure of damages is the same. From the emphasis used in a quote in
Cumbie ("The measure of damages is stated in Dependable to be that which
obtains 'under an automobile policy where the insurer has elected to make
repairs and did so defectively.' (Emphasis supplied.)" Cumbie, supra at
725.), it is apparent that the court's decision in that case relied more on
the fact that the insurer had elected to repair than on the fact that the
repairs were inadequate. In Welch, supra, the car was repaired and there
is no argument that the repairs were defective, only that they could not
return the car to its pre-loss value. Likewise, Rowland, supra, was not a
defective repair case, only one in which the evidence showed diminution in
value after repair.
State Farm also asserts in this appeal that the trial court is
essentially imposing a tort measure of damages rather than that measure
appropriate to a contract. That assertion disregards the holdings in the
cases discussed above. The first words of the first case in that line make
clear that these are contract cases and the measure of damages comes from
the contract.
In an action by the owner of personal property, such as an automobile,
to recover for loss or damage sustained by him as a result of a
tortious injury thereto, the measure of damages is to be determined
under general principles of law. [Cit.] But in a suit on a contract,
as a policy of insurance, whereby the owner is insured against actual
loss or damage to an automobile by collision, the measure of the
insurer's liability will be determined according to the terms of the
contract.
Corbett, supra, at 610. Most recently, in Rowland, supra, the Court of
Appeals spoke of the interpretation of contracts when considering the
insurer's obligations. The argument that the trial court is using an
inappropriate measure
of damages to describe State Farm's obligations is without merit.
We recognize that there is a split of authority regarding an insurer's
liability for any loss of value resulting from a covered loss event. See
43 ALR2d 327, "Measure of Recovery by Insured Under Automobile Collision
Insurance Policy." Some jurisdictions, for instance, have chosen to define
"repair" more narrowly. See, e.g., Siegle v. Progressive Consumers Ins.
Co., 788 So2d 355 (Fla. Ct. App. 2001) (certifying to Florida Supreme Court
question of insurer's liability under collision coverage for diminution in
market value). Others have determined that diminution in value is not an
element of loss under policies such as those involved in this case. See
Bickel v. Nationwide Mutual Insurance Co., 206 Va. 419, 423 (143 SE2d 903)
(1965). Georgia, however, has been consistent in interpreting the physical
damage coverage of automobile insurance policies to require that the
insured be made whole, basing the measure of damages on the value of the
vehicle. For other jurisdictions following that rationale, see 43 ALR2d
327, supra at 346.
Having reviewed both Georgia law and that of other jurisdictions, we
adhere to the long-standing contract interpretation set forth in the
Georgia decisions discussed above. The rationale of those cases remains
solid: the insurance policy, drafted by the insurer, promises to pay for
the insured's loss; what is lost when physical damage occurs is both
utility and value; therefore, the insurer's obligation to pay for the loss
includes paying for any lost value. That interpretation has stood for 75
years in Georgia and has become, therefore, part of the agreement between
the parties when they enter into a contract of insurance which includes the
promise to pay for the insured's loss. Magnetic Resonance Plus, supra,
Div. 2. Thus, our holding in this case that State Farm is obligated to pay
for diminution in value when it occurs is based in reason, precedent, and
the intent of the parties. Recognition of diminution in value as an
element of loss to be recovered on the same basis as other elements of loss
merely reflects economic reality.
Finally, the question of whether State Farm is required to assess for
diminution in value without a specific claim for that element of loss, is a
matter of the contract between the parties, interpretation of which is a
question of law. Id. at 526. State Farm's insurance policy includes a
provision outlining the duties of the insured in reporting a claim. Those
duties which are pertinent to the evaluation of the insured's loss are that
the insured report the "accident or loss" as soon as reasonably possible,
including the time, place, and circumstances of the accident or loss; that
the insured protect the damaged vehicle; that the insured show the insurer
the damage; and that the insured provide all records, receipts, and
invoices. Nothing in the insurance policy requires the insured to assert a
right to recover any particular element of damage. If the policy does not
require the insured to claim separately such items as damage to tires or
damage to bodywork, it stands to reason that the policy does not require a
separate claim for diminution in value.
State Farm argues that the imposition on it of a requirement that it
evaluate all first-party damage claims for diminution in value was error
because the requirement is based on the incorrect premise that diminution
in value is a proper element of loss to be recovered under State Farm's
policies and because nothing in its policy gives an insured the right to
insist on any particular claims handling procedure. The first assertion is
controlled by our holding above that State Farm's policy does cover
diminution in value as an element of loss. The second assertion fails
because, as noted in Division 2, supra, the trial court has not imposed any
particular claims handling procedure, but has merely required that State
Farm handle all of each claim. The trial court's construction of the
contract of insurance to require State Farm, not the insured, to determine
all the elements of loss in each claim is consistent with the language of
the contract with regard to the relative duties of the parties to that
contract.
In summary, we conclude that the trial court correctly answered the
questions presented by the declaratory judgment portion of this case: the
fact of physical damage resulting from an event covered by the policy can
reduce the value of a vehicle, even if repairs return it to pre-loss
condition in terms of appearance and function; the policies issued by State
Farm obligate it to compensate its policyholders for that loss of value,
notwithstanding repairs that return the vehicle to pre-loss condition in
terms of appearance and function, if the repairs do not return the vehicle
to its pre-loss value; and State Farm is obligated to assess that element
of loss along with the elements of physical damage when a policyholder
makes a general claim of loss.
5. We turn finally to a consideration of the trial court's grant of
injunctive relief. In support of its contention that the trial court erred
in issuing an injunction, State Farm has set forth an argument based on the
standards for granting an interlocutory injunction. However, the
injunction issued in this case does not perform the function of an
interlocutory injunction. "The sole purpose for granting interlocutory
injunctions is to preserve the status quo of the parties pending a final
adjudication of the case. 'An interlocutory hearing is designed to balance
the conveniences of the parties pending a final outcome of the case.'
[Cit.]" Poe & Brown of Georgia v. Gill, 268 Ga. 749, 750 (492 SE2d 864)
(1997). The injunction in the present case is not intended to preserve the
status quo pending a final adjudication nor to balance conveniences pending
a final outcome, but to require a party to perform contractual duties which
the trial court has declared that party is obligated to perform. That is
the function of a permanent rather than interlocutory injunction. Stephens
v. Geise, 226 Ga. 639, 641 (176 SE2d 923) (1970). Because it requires
action that can affect the rights of parties, the order constitutes the
grant of a mandatory injunction. Glynn County v. Waters, 268 Ga. 500 (1)
(491 SE2d 370) (1997). We discussed the appellate review of such
injunctions in Prime Bank v. Galler, 263 Ga. 286 (4) (430 SE2d 735)
(1993):
Equitable relief is generally a matter within the sound discretion of
the trial court. [Cit.] The action of the trial court should be
sustained on review where such discretion has not been abused. [Cit.]
However, in determining whether there has been an abuse of discretion,
the conveniences of the parties cannot be ignored. [Cit.] ... A
mandatory injunction is an extraordinary remedy, one of the most
powerful a court can issue. It is for that reason called the "strong
arm of equity." [Cit.] "There is no power the exercise of which is
more delicate, which requires greater caution, deliberation, and sound
discretion, or is more dangerous in a doubtful case than the issuing
of an injunction." [Cit.] It should be crafted in a manner that is
the least oppressive to the defendant while still protecting the
valuable rights of the plaintiff.
We have upheld above the trial court's declaration of the rights and duties
of the parties. Since the trial court found that State Farm has a duty to
evaluate all first-party physical damage claims for the existence of
diminution in value, requiring State Farm to perform that duty is no abuse
of discretion. The trial court also ordered State Farm to develop an
appropriate methodology for making such evaluations; to collect, catalog,
and maintain any information necessary to determine the amount of any
diminution in value; and to report to the court the manner in which it was
complying with the injunction. Requiring the development of an appropriate
methodology was necessary since the undisputed evidence shows that State
Farm had no such methodology in use. Permitting State Farm to develop its
own methodology rather than imposing one is the least oppressive means of
accomplishing that necessary task. Requiring State Farm to collect,
catalog, and maintain information needed to make diminution in value
evaluations was necessary because State Farm had admitted it did not
collect information for that purpose, and was not oppressive because, as
the trial court found, State Farm already collected and maintained such
information for other purposes, including initial determinations of the
actual cash value of cars in the course of deciding whether the declare the
car a total loss, and the determination whether repairs resulted in
"betterment" for which an insured would be charged by State Farm. Given
the latitude the trial court allowed State Farm in developing its own
procedures for complying with the basic requirement that it evaluate all
claims for the presence of diminution in value, the reporting requirement
was appropriate to allow the trial court to ensure that its mandate was
being followed. That requirement is less oppressive to State Farm than
other options for ensuring compliance such as the placement of
court-appointed monitors to oversee compliance. Given those factors, we
conclude that the trial court appropriately considered the convenience of
the parties, chose the least oppressive means of ensuring performance of
State Farm's contractual duties, and did not, therefore, abuse its
discretion in ordering injunctive relief.
Judgment affirmed. All the Justices concur.
__________________________________________________
The Insurance Consumer Advocate Network is an InterNet based consumer advocacy effort designed to Increase Consumer Awareness as to Insurance Related Issues, Encourage Consumer Involvement with Insurance Related Efforts and Facilitate Consumer Contact with Pro-Consumer Entities.
The InterNet web site for the Insurance Consumer Advocate Network is www.iCan2000.com
|
