Glossary of Diminished Value Terms

Total Diminution: The total diminution as indicated in one of our reports is a projection of the loss in value the subject vehicle has sustained as a result of a physical damage loss. Because it is impossible to definitively predict the selling price an item offered on the open market, the figures provided herein are for the purpose of settling a claim or documentation for financial records. All vehicle sales should provide full disclosure of prior damage history as required by state and federal laws. In addition to criminal penalties imposed by states, attempts to conceal damage and repair history may incur civil liabilities.

Pre-Accident Value:  Also known as pre-loss value. This is what a vehicle was worth before the covered loss or accident. The values used herein are generated from an accepted used car and truck value guide. To establish the pre-loss value of a car AutoClaimsHelp.net uses the Kelley Blue Book, a standard treatise utilized by consumers, lenders and those in the automotive trade.

Perceptual Diminution: The loss in value based solely upon the disclosure of the damage. The physical damage causes the loss, and the repair restores the majority of that loss in value. Using an undamaged vehicle as a baseline, there is a differential in the market for used cars with a history of damage. Perceptual diminution is irrespective of repair quality. Many states require that collision damage be disclosed or noted on title documents.

Work Defects – Repair: Also known as Repairer Deficiency. Diminution of value is most often attributed to poor repair quality. If, in the opinion of the program operator, the repair work is flawed, contains defects, or could have been performed in such a way that the end result would have been better in terms of accuracy, safety, appearance or durability, those defects will be noted under this heading.

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More Jack-in-the-Box Hoods

On this hill in North Jersey the imitation hood showed its true colors, a structural failure that led to the first national recall of a non-OEM sheet metal auto part.

If the ID sticker falls off a CAPA hood in the woods, and there’s no one there to see it blow away, is it still a CAPA certified hood? CAPA will tell you no.

What spurred the rhetorical question is this most recent incident in which a CAPA certified aftermarket replacement hood on a Toyota Tacoma opened unexpectedly when a technician took it for a test drive. What has been determined in investigations is that the secondary striker on the hood contained a nonconformity. Basically, it doesn’t work. And not just this one, the word is that none of the hoods like this made by Jui Li and its manufacturing partners in Taiwan are fit for duty.

Despite a recent acknowledgment by the manufacturer’s US importer that the nonconformity in the hoods’ strikers exists, and a recall by a US distributor, there’s been no rush to judgment by CAPA on this hood. They did, however, decertify the part, albeit reluctantly.

Some will recall the cover story of the February 1999 issue of Consumer Reports that featured another hood that flew up in the face of the owner of a Honda Accord. That also was a CAPA certified part with a major nonconformity that caused it and others like it to fly in the face of its owners. That hood, however, has faded into memory, having been dismissed by the association as a hoax. So it’s back to the business of rubber-stamping bootleg parts.

This incident has CAPA taking cover again. Their first response was to deny it was one of theirs, despite the Jui Li, API and Ensure hoods being in their public database, not to mention displaying the yellow badges in distributor inventories and on who knows how many Toyota Tacomas. Apparently someone scraped the CAPA sticker off the inside of this particular part before it was painted.

CAPA spokesperson Stephanie Ackerman said, “We know of no reason why a repair shop would have a need to remove the CAPA seal. Doing so would only eliminate their ability to prove the use of a CAPA part or trace the part if necessary… If a repairer, distributor, consumer or insurer removes a seal from a part, then they are effectively voiding the certification of that part.”

I think this could be a case of Ms. Ackerman smoking her own press releases. What Ms. Ackerman may not understand is that there aren’t a whole lot of body shop owners that would want a CAPA part traced to them. Let’s have a quick poll…all those shop owners reading this whose technicians proudly leave CAPA stickers on the non-OEM hoods they install raise their hands…I rest my case.

What’s of more concern than their out-of-touch-with-reality attitude is that by right of the mere de-certification of this hood, CAPA thinks they can simply walk away from this part. Their responsibility in this goes a great deal deeper, I’m afraid.

If CAPA is what they purport to be, then it could be argued that body shops, insurance companies and distributors have formed a reliance on the CAPA certification. Ostensibly the CAPA part is a cut above one that is safe to use and presumed to be the functional equivalent to the OEM part. This presumption, as we know, is dubious, but is significant in the fact that people depend on a validating organization like CAPA to actually do something when certifying these parts, outside of selling their makers little yellow seals. One would expect a person would at least have done what I did and put a dial caliper on the striker and measured it against the OEM part.

CAPA has now dropped their certified hood in the hands of NHTSA and once their investigation is completed, they will have apparently washed their hands of the matter. Not so fast. One could argue that but for the CAPA certification, many distributors and end users might never have installed this hood on a Tacoma, so whose responsibility is it? The shops? Those insurance companies enriched in the substitution? Or should the validator play some part in retrieving these oversized box cutters before someone gets seriously hurt?

Apparently, the insurance industry has had varying reactions to the possibility of another one of these hoods causing a world of hurt to them. A few companies have notified their DRP shops and claims offices not to use this hood. Others have adopted a see what happens attitude, and are content to wait for the results of the CAPA investigation.

Rod Enlow, Chairman of CAPA’s Technical Committee was quick to respond to what he sees as a rush to judgment. “This is only one hood,” he said. Enlow also dipped into the aftermarket parts industry bag of phrases and insisted that “safety is not a factor of cosmetic sheet metal [body] parts.”

The distance between the primary striker and the secondary hood safety striker measured greater than the original part, which essentially only left a little paint to hold the hood down. That wasn’t nearly enough, it turns out.

Oh really?

Enlow said that instead of being stampeded by an isolated incident of one hood flying open, he would urge the industry to abide the results of the CAPA study being done presently by their Entela Laboratories in Grand Rapids, MI. This is the same group that had a hand in certifying this hood in the first place and all the rest of the CAPA’s best, lest we forget.

I would submit that this is not a case of “only one hood.” Apparently the dies that position the secondary striker during its manufacture were slightly off, leaving the nose of the striker too far from the latch’s hook on the OEM assembly. This means that the hood will hold on its primary striker, but the moment one is not fastened securely (how often does that happen?), it will let go like the one we saw in New Jersey. Therefore this is not just one hood, but all hoods made by this plant in Taiwan. In fact, the importer for Jui Li actually saw the hood in question, and confirmed this fact. What’s more, the distributor that sold this hood agreed and issued an immediate recall on all the hoods of this type he sold this year, which in my opinion was the right thing to do – quick and decisive action.

Quick and decisive, however, are not terms found in CAPA literature. They favor slow and deliberate, which is fine in pharmaceutical trials, but not what we look for in the face of impending disaster, such as a hood flying open at speed. This is not the slow corrosion that works its way around the hem flanges of the typical aftermarket hood, but is of consequence only when the truck is moving fast. But hey, call me an alarmist.

One more thing: there is something disturbing about the fact that CAPA is investigating themselves. Any conclusion of their study that would confirm the nonconformity in this hood exists would prove their certification was bogus in the first place. The easy solution is to A. claim this is a result of a conspiracy and another well-executed hoax, B. simply de-certify the part and leave it to the federal government, or C. stop answering the phone and send the staff on a badly needed vacation.

If I were Jack Gillis, CAPA Executive Director, I’d pick C and board the next chopper evacuating their Washington office. Having blown yet another opportunity for CAPA to prove its efficacy in the industry, his choices in this matter are limited. CAPA could have stepped up to this the moment they were notified. Instead they went on the defensive immediately, and only de-certified the part after the manufacturer recalled the hood.

I see wanton disregard for safety on the part of CAPA, its underwriters and anyone satisfied to sit back and let the system fly the plane. Can anyone be so reckless as to believe that the mere act of decertifying this hood will prevent another hood from flying open? This accident in New Jersey was caused by a system in which these events are viewed like collateral damage. But we’re not at war with our customers, nor should their insurance companies be sending them off like so many unsuspecting pilots in cars rebuilt with questionable parts.

The sight of those skid marks in New Jersey where the blinded driver hit the guardrail was enough to convince me that it wasn’t just a hood that failed, but the failure of an entire system. The aftermarket parts advocates say competition is good. The same goes for CAPA and their tenuous hold on the certification business.

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Body Shop Fraud: A Question of Intent

By Charlie Barone, October 2001

A New Jersey body shop customer has some questions that no one, it seems, wants to answer.

Insurance fraud is a hot topic these days. Industry-sponsored ads and billboards tell us that the cost of fraudulent claims is spread over all insured parties and that it affects everybody’s money when people cheat. However, most assume that if a fraudulent act involves an insurance claim, it’s the insurance company that’s victimized. Yet there’s another type of fraud, one that’s far more common and even more devastating to consumers: the all-too-familiar body shop do-si-do.

Specifically, we’re talking about the circumstances in which a body shop collects funds from a customer based on a proposal that lists specific parts and labor operations to repair collision damage. Such a proposal could be the insurance estimate, the body shop’s estimate or the final repair order (invoice) of the repairing shop. This is the controlling document. While customers can have you repair their car any way they want, it’s how the work is represented to the customers when they pay the bill that counts. When there’s a deviation from the specifics set forth within the controlling document and repair work is misrepresented to the customer, you’ve got fraud.

The confusion over which party is the real victim in these fraud cases and how hard it can be to prove fraud is illustrated in the story I’m about to tell you.

In June of this year, I was contacted by a man from Mt. Laurel, N.J., who had his car repaired after an accident in Philadelphia. The central character in this tale is a retired gentleman by the name of Joe Raffaele, whose 1999 Honda Accord was severely damaged in a rear-end collision. It happened at 2 in the afternoon on Feb. 9, 2001, when he and his wife were in the Northeast part of the city doing some shopping. Raffaele says his life hasn’t been the same since.

When the accident occurred, Raffaele’s first instinct was to see if anyone was injured. As it turned out, both he and his wife were fine, but the driver of the offending car was bleeding from the face. Within minutes, a number of tow trucks arrived on the scene (all vying for a piece of the action). Being a member of AAA and believing this was a time to use the benefits of his membership, Raffaele felt most comfortable awarding the tow job to the truck displaying the AAA logo. Unbeknownst to him, the tow truck actually belonged to Autocare USA, Inc., a body shop on Torresdale Avenue in Philly. As you would expect, Autocare USA got the job.

Raffaele knew neither the tow truck driver nor the body shop where his Honda was taken, but after meeting with the owner of the shop, George Hoffman, Raffaele authorized Autocare USA to do the repair work on his vehicle. At the time, he recalls being impressed with the operation and not that concerned with the damage to his car.

“It was just sheet metal,” he says. “The important thing was that my wife and I were OK.”

That was then. Today, Raffaele is consumed with his Honda, the manner in which it was repaired and with finding a solution. And considering the fact that Raffaele is retired and has made the car his sole mission in life, we’re talking about a determined man … almost obsessed.

Raffaele’s Honda was shoddily repaired. No one (including shop owner George Hoffman) will dispute that. But it was a long, arduous journey that led Raffaele to me – and there appears to be a longer road ahead of him before the situation is resolved.

After having the car for 52 days, Autocare USA released it to Raffaele – only to have the Honda returned with a leaking trunk by its irate owner (one with a penchant for documenting facts and sending certified letters).

But there’s a twist in this story, based on the fact that Raffaele’s insurance company hired two different independent appraisal companies to inspect the car and write damage appraisals. First came American Loss Control (ALC), whose appraiser wrote an estimate and two supplements totaling $7,302.89. The labor rate on that sheet was $38 across the board. Then came another independent from Maryland, E. J. Meisner of PRO-Claims, who was also hired by AIG to adjust the loss. Meisner wrote an estimate for $8,410.27, using a rate structure of $40 per hour, with $42 per hour paid on the frame and mechanical procedures. Outside of that, the two appraisals were essentially the same, each calling for the replacement of the rear floor pan, the left frame rail, the bumper assembly, the L quarter panel, the deck lid and related parts. PRO-Claims wrote for an aftermarket bumper reinforcement, cushion and tail lamp.

On March 15, 2001, Raffaele authorized Autocare to go by the PRO-Claims estimate, making it the controlling document in the repair. In fact, Raffaele sent a certified letter to the shop confirming this. Most important of all (and this is crucial), Hoffman’s shop collected checks totaling $8,410.27 on April 27, 2001, when Raffaele picked up his car. That transaction was the defining moment. When Autocare didn’t go over the estimate and final invoice with Raffaele – line for line and item for item – or present him with the shop’s own repair order, the controlling document became the $8,410.27 PRO-Claims estimate.

This isn’t always so clear because in Philadelphia, the custom is this: You got the check? Here’s your keys. In many cases, customers never see any documents.

Had a representative of the shop made it clear at that time that the shop had deviated from the PRO-Claims estimate and took its own route of repair (one different, but nonetheless safe and guaranteed), Autocare would have nothing to worry about. But that didn’t happen.

Like most consumers, Raffaele was none the wiser when he drove his car away, but a major malfeasance was about to unfold in the coming weeks. When PRO-Claims E.J. Meisner saw the car at a New Jersey Honda dealer – in for a supplement on a bent seat back that was overlooked by both the shop and the appraiser – Meisner broke the news. “He told me my car was now a lemon,” says Raffaele.

And that’s putting it kindly. When asked to elaborate on what Meisner actually said about what had been done to his Honda, Raffaele responds, “You don’t want to know.”

But Raffaele didn’t need an expert to see that the trunk was full of water, that the deck lid didn’t close properly, that the A/C condenser was damaged and that the trunk light failed to work.

When I saw the car in June, Meisner’s comments had real meaning. The floor looked like my bedspread on Saturday morning, and the left quarter panel was obviously the original part – loaded up with plastic filler and still wearing the federal anti-theft standard VIN label in its left lock pillar.

New Jersey shop owner Sam Mikhail, who inspected the car prior to me, says: “I remember seeing the wavy body work and scratches from all the body fillers. I also have a scope with which I was able to see inside the quarter panel. I could see the spaghetti hanging from inside the quarter panel. [The shop owner who did this] must have balls the size of watermelons.”

In a letter dated May 12, 2001, Autocare USA owner George Hoffman sent a letter to David Tatrombone of AIG. In it he explained that due to the confusion between the ALC estimate and the PRO-Claims estimate, his company was overpaid by $2,393.78. He enclosed a check made payable to AIG. Hoffman concluded by saying, “We apologize for the delay in discovering this error and any confusion this may have caused.” Autocare also sent a copy of the letter to Raffaele. Hoffman didn’t, however, account for the fact that both the ALC and the PRO-Claims estimates provided payment for a new floor and a new quarter panel.

On Aug. 29, 2001, I visited Hoffman for his side of the story. I arrived at a busy, well-equipped facility, complete with a towing operation with three trucks. Hoffman was very accommodating and expressed regret for the state of Raffaele’s car.

“I hate being in this position as an owner,” he says. “I’ll lose money on a job to satisfy a customer’s concerns, but Joe Raffaele will not return my calls. I wouldn’t be comfortable with the job either.”

When asked to comment on the discrepancies on the billing and what got done with the car, Hoffman says: “We fixed the vehicle based on ALC’s estimate. AIG overpaid the claim. It was AIG’s money. I did what I thought was right.”

When I asked him why the quarter and the floor were in such poor condition, Hoffman insisted the quarter panel was replaced and had the two paint jobs and filler in it due to his shop’s second attempt to repair the car. “We re-worked it,” he says, offering no explanation for the floor pan.

I then asked Hoffman if he believes Joe Raffaele’s car is now safe to operate. “I don’t know,” he replies. “Safe? Yeah. But I’m not happy with the way the car is. We’re only as good as our worst technician. I fired the tech over the job. I admit fault where we screwed up.”

And screwing up, as Hoffman puts it, is not against the law.

Since my June inspection of the Honda, Raffaele has embarked on a campaign to seek justice in this case, which included his contacting claims supervisors at AIG, the Philadelphia District Attorney and fraud task forces in both New Jersey and Pennsylvania. AIG’s in-house lawyer, Anthony Zarella, stated in a letter dated Aug. 10, 2001, to Raffaele, “The shop has since returned the money to us for the parts that were paid for but not replaced. We in turn sent the money back to you because it’s your money.”

Raffaele notes that the money was only sent to him after two months and it took a certified letter to that effect to get it.

It’s interesting to note that Zarella’s letter consistently referred to the incident as one involving “faulty repairs” and never once used the word fraud to describe what happened. This raises a critical point because to prove fraud, it’s necessary to prove the intent was to maliciously misrepresent facts regarding a financial transaction. In fact, after reviewing Raffaele’s complaint, Philadelphia Assistant District Attorney David Wasson refused to prosecute Hoffman on fraud charges. He told Raffaele this was a civil matter.

Repeated calls to Wasson and the DA’s public affairs office for this article weren’t returned.

“You picked the shop,” is often the word track used by insurers faced with body shop malpractice claims. It’s as if to say the victims of this type of crime in some way shared responsibility for their misfortune. However, if that was a valid excuse to avoid payment of a claim, an insurance company might say the same thing when one of their insureds enters a hazardous highway in the rain or leaves their car parked in a bad neighborhood. The point being, no one expects bad things to happen. And it’s clear in cases like Raffaele’s that insured drivers don’t want improper repair work done to their cars. More importantly, in most cases, insured drivers are in no way an accomplice to fraud.

Furthermore, what possible difference could it make in terms of a claim being valid if the loss was a result of an error in judgment? Errors in judgment cause all sorts of covered losses, such as following too closely, driving too fast, failure to see another car or to look both ways before pulling out. Besides, it’s unreasonable to expect a consumer to be a good judge of a business’ ethics based only on the appearance of a body shop. For example, a recent fraud conviction in the Philadelphia area involved a shop that from all outward signs looked like a first-class establishment, flew an I-CAR Gold Class banner and was located in an upscale suburban location. Nevertheless, the husband and wife owners of the shop were both convicted of multiple counts of insurance fraud.

The circumstances of this Carol Carmon-Whitemarsh Collision case were nearly identical to those that befell Joe Raffaele. The woman whose car got the litigious ball rolling was told by her insurance company to file suit against the shop to recover her losses. This tactic, I might add, runs contrary to the unfair claims statute that forbids an insurer to compel litigation in lieu of fair settlements. That’s like telling an insured to take a thief to court for stealing his radio.

In an effort to have this explained to me and to get AIG’s official position on body shop fraud and malpractice, I contacted Gary Willoughby Sr., vice president of claims for AIG. He refused to comment on the record.

Had he consented to an interview, I would have asked him why AIG wouldn’t step in to protect their policyholder in these kinds of claims. Was there an exclusion from coverage for willful, or even accidental, malpractice? Could AIG not recover all their costs in such a claim in subrogation? This posture, taken by all the insurance companies I’ve come in contact with in these kinds of cases, makes their unwillingness to step up to the plate that much more unconscionable. Yet that’s the way it is.

Though life goes on and the malpractice business shows no sign of stemming, Raffaele keeps fighting the fight. He tells me that AIG hired yet another appraiser to gather the facts in this case, who’ll visit Raffaele’s home in New Jersey to assess the car. Whether this guy’s opinion of the job, the intent of the shop or what their policyholder has been left with will make any difference in the disposition of the claim remains unknown. It’s been AIG’s position all along that the fraud and malpractice are a matter strictly between the shop and Raffaele.

“If this guy had a job to go to, he’d put it behind him and get on with his life,” says Hoffman.

Maybe so. But that doesn’t change the facts. Nor does it change Raffaele’s resolve to see this through to the end.

“There’s the emotional side of this thing,” says Raffaele. “I wake up in the morning, I get my briefcase and I wonder what I’m going to do about George Hoffman.”

Writer Charlie Barone has been working in and around the body shop business for the last 30 years, having owned and managed several collision repair shops. He’s an ASE Master Certified technician, a licensed damage appraiser and has been writing technical, management and opinion pieces since 1993. Barone can be reached via e-mail at (charlie@autoclaimshelp.net).

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Excerpts from Couch Law Digest on Diminished Value

§ 175:16 – MODERN VIEW THAT POLICY LIMIT APPLIES TO EACH LOSS
§ 175:47 – DIMINISHED VALUE AFTER REPAIR
§ 175:49 – REPAIR OR REPLACEMENT COST AS AFFIRMATIVE DEFENSE
§ 175:60 – GENERALLY
§ 176:38 – CONVERSION; INSURER’S FAILURE TO RETURN PROPERTY AFTER REPAIR
§ 177:19 – RECOVERY OF DIMINUTION IN VALUE
§ 177:45 – MEASURE OF DAMAGES
§ 177:68 – PARTY WALLS


§ 175:16 MODERN VIEW THAT POLICY LIMIT APPLIES TO EACH LOSS

Contrary to the view that total amount available for recovery for each successive loss is reduced by the amount of prior losses, [FN61] other jurisdictions hold that the insured may recover up to the face value of the policy regardless of the number of successive losses provided that the insured sustains an actual loss. [FN62]

    Observation: This rule has practical limits. If an initial loss lowers the value of the property, and the property is not restored to its prior value by the time the second loss occurs, the second loss is potentially “limited” not by reduction of the applicable policy limit, but by the diminished value of the covered property. [FN63]

Policy provisions may expressly address this result, as where the insured purchases a policy which expressly states that losses thereunder will not reduce the amount available for each covered occurrence; however, the policy may also provide that the insurer may terminate the policy within a specified period after the initial loss, and where termination occurs in a timely fashion, the insured’s recovery for a subsequent loss may be limited to the recovery of unearned premiums during the cancellation period. [FN64]

Observation: Where the insurer is liable for successive losses, such liability may also dictate the insurer’s ability to offset a separate deductible as to each loss. [FN65]
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§ 175:47 DIMINISHED VALUE AFTER REPAIR

A vehicle is not restored to substantially the same condition if repairs leave the market value of the vehicle substantially less than the value immediately before the collision. [FN80] Hence, where the property is repairable but after repair the property does not have the same market value as before the harm was sustained, such additional loss element may be taken into consideration. [FN81] Thus, it has been held or recognized in a number of cases that an element of damage for which recovery may be had under an automobile collision insurance policy is the difference in value before the collision and after repairs have been made. [FN82]

However, there is some authority to the contrary, holding that under a homeowners’ policy limiting recovery for loss to covered building structure to the smaller of the replacement cost or the cost of repair, the insurer could not be held liable, in addition, for loss in the market value of a house after repair of a collapsed basement wall. [FN83]
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§ 175:49 REPAIR OR REPLACEMENT COST AS AFFIRMATIVE DEFENSE

An insured in an action on a policy insuring property or a dwelling to the extent of its actual cash value at the time of loss, but not exceeding the amount it would cost to repair or replace, properly alleges actual cash value as damages; [FN85] the cost of repair or replacement has to be pleaded defensively by the insurer, since the actual cash value is the basic measure of loss. [FN86]

    Observation: In some jurisdictions if this defense is not affirmatively pleaded in an answer by the insurer, it is waived and lost. In addition, the insurer should request that an interrogatory be submitted to the jury that determines the market value as well as repair or replacement cost in order to determine how the jury arrived at any potential award. This will help prevent an inconsistent verdict.

Nevertheless, under such a provision covering “actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind or quality within a reasonable time after such loss,” a jury is entitled to award damages based on replacement cost where, following the insureds’ presentation of evidence of such cost, the insurer did not argue that it exceeded market value or make any effort to establish the property’s market value. [FN87]
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§ 175:60 GENERALLY

There are cases allowing full recovery to the owner of a qualified or limited interest. These cases either draw a distinction to justify the divergence, or are distinguishable on their facts or on some fundamental legal principle rendering a contrary view inequitable and unjust. In some instances, the ruling is clearly because the limited interest of the insured was only temporary, and was made complete before the insured claimed the proceeds. [FN29] Other rationales are less clear. Thus, where a building supported by a party wall is insured and such wall is destroyed, the insured may recover the diminution caused thereby in the value of its building, which may include the full value of the wall, since the value of the building is dependent upon the full use of such wall. [FN30]

    Observation: It is extremely difficult to reconcile this line of cases with the cases in the preceding division based upon traditional principles. The practitioner should initially research the law in the particular jurisdiction and, if not satisfied with the holdings in that jurisdiction, review the cases in other jurisdictions to determine whether there is a basis to argue for a change in the law.

Where the insured is merely the agent, bailee, consignee, factor, and so forth, of the owner and insures the property as such representative of the owner, he or she may recover the full value of the property and hold the excess for the owner. [FN31]

Some cases which allow full recovery to the qualified owner base their holdings upon elements of estoppel on the part of the insurer, as where the insurer, with full knowledge of the nature of the insured’s interest, insures the property for its full value and charges premiums accordingly. [FN32]
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§ 176:38 CONVERSION; INSURER’S FAILURE TO RETURN PROPERTY AFTER REPAIR

Where an automobile collision insurer agrees to settle a loss by making repairs, and makes repairs but wrongfully withholds the use and possession of the car from the insured, it converts it and is liable as for the conversion. [FN28]

    Observation: In most jurisdictions, a conversion cause of action must be separately pled and must contain specific allegations pertaining to ownership rights and the interference with those rights.

Thus, for example, where an automobile collision insurer left a draft with the repairer for the amount of repair bill less deductible portion, and instructed the repairer not to deliver the car to the insured unless he or she executed a full release notwithstanding that the insured had the contractual right to collect from the insurer for the diminution in value of the automobile, and insured refused to execute the release, insurer was liable for conversion and insured could recover actual and punitive damages. [FN29]

Where the insured under an automobile collision policy and the insurer were unable to agree upon the amount of the loss after the insured refused to allow repair because he or she considered the automobile a total loss, and the insurer took the liberty of removing the automobile from the shop where it had been stored following the accident and sold it to a salvage company while ownership was still vested in the insured, the insurer tortuously converted the automobile. [FN30]

A collision insurer covering a tractor trailer which performed acts of dominion over the unit after the collision in defiance of the insured’s right to possession was liable for conversion, as against the contention that since such acts were part and parcel of an effort to repair, the insurer’s good intentions should be a complete defense. [FN31]

While a collision insurer of a tractor trailer had contractual duties and obligations to perform with regard to repairs after a collision, it was not entitled to approach those duties in such a manner as to breach the rights of the insured in the performance, and had no right of conversion. [FN32]
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§ 177:19 RECOVERY OF DIMINUTION IN VALUE

By one view, an automobile collision policy limiting liability to actual cash value or what it would cost to repair or replace with an other of like kind and quality does not require that the repairs restore market value, but only restore physical condition. [FN72] By an opposing view, under an automobile collision policy with a liability limit of the lesser of the actual cash value of the damaged vehicle or the amount necessary to repair or replace the vehicle, less the deductible, the term “repair” means restoration of the vehicle to substantially the same condition and value as existed before the damage occurred, so that the correct measure of loss caused by collision is the difference in market value of the automobile immediately before the collision and the combined amount of its market value immediately after being repaired, plus the deductible; thus, where the insurer elects to pay the insured the repair cost less the deductible, which was less than the actual cash value of the vehicle, the insured was entitled to recover the difference in value of the vehicle before the collision and after the repairs, plus the deductible. [FN73] Stated otherwise, where the repairs by the insurer under a collision policy did not substantially restore the automobile to its former condition and value, the proper measure of damages was the difference in the value before it was wrecked and the value after it was wrecked, repaired, and tendered to the insured. [FN74]

And, under yet another view, which may perhaps explain the different conclusions actually reached in the foregoing cases, the issue of recovery of loss of value in addition to repair costs presents a question of fact under the particular circumstances; [FN75] where the fact finder determines that the insured is entitled to recover any diminution in value, the insured could establish this loss by showing the reasonable value of labor and materials used for repairs and the amount of any permanent impairment in value of the property after it is repaired, provided the aggregate of these amounts, together with loss on property while incapable of being used, does not exceed the value of the property immediately before injury or damage together with interest thereon. [FN76]

Observation: The insured should make a public policy argument that any formula used must be adequate to place the insured in the same position he or she was prior to the loss.
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§ 177:45 MEASURE OF DAMAGES

Under a policy of boiler insurance providing that where liability arises on account of an explosion, proper deduction for previous depreciation should be made in determining the true cash value, the difference between the value of the boiler immediately before and immediately after the explosion is the measure of damages, unless it is believed that the boiler has been adequately repaired, in which case it is the cost of such repairs plus the diminution in value caused by the explosion and repair. [FN73]

Where a machinery and boiler policy covering a turbine and generator insured against loss to the property directly damaged by an accident, and expressly excluded losses indirectly resulting from such damages, the damage sustained by the turbine is the measure of damages, [FN74] whereas incidental loss resulting therefrom, such as expenditures for fuel in excess of what would have been expended had the turbine continued in service, the cost of purchasing electric current, and the cost of using a standby plant, cannot be recovered. [FN75]
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§ 177:68 PARTY WALLS

The owner of a building supported by a party wall which is injured by the burning of the adjoining building may recover, under the insurance policy on his or her building, an amount equal to the diminution in its value because of the injuries to the party wall, which may include the full value of the wall. [FN61]

Where an insurance policy covers property described as a frame building and an undivided interest in a brick wall, and no separate valuation is placed upon the building and the wall, and subsequently the building is destroyed by fire without injury to the wall, and the insurer is prevented from restoring the building by the fire ordinances of the city in which the property is located, in which event it is provided in the policy that the insurer shall be liable for the amount that it would cost to make such repairs, the insurer is liable for the amount it would thus cost to restore the premises, or the actual loss to the insured, without deduction for the value of the wall. [FN62]

But the owner of adjoining buildings, who obtains from different companies a separate fire insurance policy on each building, is not entitled, on the complete destruction by fire of one of the buildings, together with the party wall, for which loss he or she has recovered judgment against the insurer, to duplicate his or her recovery for the damage to the wall from the other insurer, whose policy contains a provision for prorating insurance on the property, but his or her recovery should be limited to that proportion of the cost of replacing the wall which the amount of the policy bears to the whole insurance. [FN63]

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