Oregon Supreme Court affirms recovery for post-collision diminished value in first-party automobile claim
October, 2008
On October 23, 2008, the Oregon Supreme Court held in the putative class action, Gonzalez v. Farmers Ins. Co. of Oregon, et al., SC S054486, that the policyholder plaintiff could recover payment from his first-party automobile insurer, in addition to the cost to repair, for his vehicle's "inherent diminished value" following a collision. The trial court had granted summary judgment for Farmers holding that the plain and ordinary meaning of the word "repair" in the policy did not incorporate a duty to pay diminished value. The Court of Appeals reversed, relying heavily on two sixty-year-old cases that stood for the proposition that, unless repair work could actually restore the vehicle to as good condition as it was prior to damage, diminished value should be paid.
Yesterday, the Oregon Supreme Court affirmed the Court of Appeals and held that "if an attempted ‘repair' does not or cannot result in a complete restoration of the vehicle's pre-loss condition, the vehicle is not ‘repair[ed],' and a resulting diminution of value of the vehicle remains a ‘loss to [the] insured car caused by collision,' for which defendants are liable under their policy."
The Supreme Court's opinion specifically limits its holding to the interpretation of the terms of the automobile insurance policy that the defendants issued in this case, and goes on to state: "This case does not call on the court to decide the principles applicable generally to diminished value claims and property damage disputes of all kinds." The opinion also provides, "Because this case involved a genuine dispute about whether defendants had restored the vehicle to its pre-loss condition, we need not decide whether the policy requires payment for a claim based solely on "stigma" (the supposed negative perception of prospective buyers regarding the repaired car's worth following a collision). However, the Gonzalez decision will encourage claimant's counsel to continue their attempts to seek diminished value and "stigma" damages in all sorts of property damage claims. It remains to be seen whether the Oregon Appellate Courts will, in fact, continue to limit these types of damages to automobile policies.