California Appellate Court Rejected Car Owner’s Claim that Insurance Company Breached Duty By Repairing Vehicle and Not Compensating for Decline in Value After Vehicle Accident

Recently, a California Court of Appeal reviewed a lower court’s decision in favor of an automobile insurance company regarding coverage for vehicle damage resulting from a collision. The facts of this case are particular in that the vehicle at issue was parked at the time of the accident.  The appellate court reviewed the car owner’s allegations against his insurance company, ultimately finding that a general allegation that the car had not been restored to its pre-accident condition did not suffice to hold the insurer liable for breach of contract and bad faith.

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William Baldwin owned a nearly new Toyota Tundra Pickup that was struck, while parked, when two vehicles collided nearby.  Mr. Baldwin had car insurance that covered collision-related damage. His insurer refused to consider the pickup a “total loss” and instead chose to repair it at a cost of $8,196.06.  The future resale value of the pickup decreased by more than $17,100.

Mr. Baldwin brought a negligence claim against the drivers involved in the motor vehicle collision, as well as a claim against his insurance company for breach of contract and bad faith.  According to Mr. Baldwin, under his insurance policy, the company was required to pay for the pre-accident value of the pickup or repair it to its original condition.  During the repair of his vehicle, Mr. Baldwin’s  insurer provided him with a rental car.  In his lawsuit, he sought the difference in value for the period that his vehicle was being repaired.

The insurer demurred and argued that Mr. Baldwin wanted to recover the lost market value of his vehicle, which was a loss specifically excluded under his insurance policy. The trial court sustained the demurrer and eventually dismissed with prejudice for the insurer. Mr. Baldwin appealed.

In their discussion, the court of appeal stated that interpreting an insurance policy is a question of law.  When the policy language is clear, it governs.  In this case, the court stated the language was clear that regarding coverage for car damage, the insurer stated they “may” pay the loss in money or in repair. The court noted that since the insurer used the term “may,” they had the discretion to choose between these two options.

The court rejected Mr. Baldwin’s claim that it would not be possible to repair his almost new truck to its original pre-accident condition.  Mr. Baldwin did not offer specific factual allegations identifying unrepaired damage or stating that the car was unsafe or had specific cosmetic flaws.

The rule is that facts alleging a breach must be pleaded with specificity.  By generally alleging that his truck had not been restored to its pre-accident condition, the court found that Mr. Baldwin had stated a conclusion. The court rejected his allegation.  In support of their position, the court stated case law that held that by making an insurer liable for diminished value in an automobile, the insurer’s right to elect repair over paying cash value of the vehicle would be meaningless.  Specifically, when the policy language provides an insurance company with the right to choose the most economical way to pay claims, a policy cannot be reworded to compel the insurance company to give more than they promised.

The court also rejected Mr. Baldwin’s attempts to argue that the exclusion should not apply.  The exclusion was set forth in a part of the contract covering “Car Damage.”  The court made clear that Mr. Baldwin’s contention was that the insurer refused to compensate him for the decline in the pickup’s future resale value. But the court stated that an insurance company’s failure to account for a depreciation in a vehicle’s value when choosing to repair the vehicle is not against public policy.

Turning to the contention that the insurer breached the implied covenant of good faith and fair dealing, the appellate court stated that there must be an unreasonable action without proper cause.  Here, Mr. Baldwin contended that the insurer refused to declare his vehicle a total loss or repair it to the original condition.  The court stated Mr. Baldwin did not state a sufficient cause of action because the insurer had acted in a manner consistent with the provisions of the contract.

The court affirmed the lower court’s dismissal of the complaint against the insurer.

The car accident attorneys at Sharifi Firm provide guidance and representation to victims throughout Southern California in personal injury claims for compensation. Contact our office today for a free consultation at 866-422-7222 or complete our online form.

More Blog Posts:

California Court of Appeal Upholds Cancellation of Car Insurance Policy Before Car Accident; Plaintiffs’ Claims for Breach of Contract and Breach of Implied Covenant of Good Faith and Fair Dealing Fail, Southern California Injury Lawyer Blog, September 27, 2016

California Court of Appeal Finds in Favor of Plaintiff in Car Accident Lawsuit When Evidence Fails to Show Plaintiff’s Consent to Settlement Agreement, Southern California Injury Lawyer Blog, June 9, 2016

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