Allgood v. Meridian Sec. Ins. Co.

Decision Date28 April 2004
Docket NumberNo. 49A02-0307-CV-580.,49A02-0307-CV-580.
Citation807 N.E.2d 131
PartiesChristina M. ALLGOOD, individually and on behalf of all others similarly situated, Appellant-Plaintiff, v. MERIDIAN SECURITY INSURANCE COMPANY, Appellee-Defendant.
CourtIndiana Appellate Court

Irwin B. Levin, Scott D. Gilchrist, Eric S. Pavlack, Cohen & Malad, LLP, James Keller, Keller & Keller, James H. Young, Young & Young, Indianapolis, IN, Attorneys for Appellant.

Brent W. Huber, Robert L. Gauss, Brian J. Paul, Ice Miller, Indianapolis, IN, Attorneys for Appellee.

OPINION

ROBB, Judge.

Christina Allgood appeals from the trial court's dismissal of her class action lawsuit against Meridian Security Insurance Company and denial of her own motion for partial summary judgment. We reverse.

Issues

Allgood raises two issues for our review, which we restate as follows:

1. Whether the trial court properly determined that her complaint, alleging that Meridian breached a duty under an automobile insurance policy to pay for a loss to her automobile by paying only for repairs and not also for diminution in value, failed to state a claim upon which relief could be granted; and

2. Whether the trial court properly denied her motion for partial summary judgment which sought judgment as a matter of law that Meridian had a duty to compensate her for the inherent diminution in value of her automobile which remained after repairs had been made.

Facts and Procedural History

Meridian insured a 1999 Pontiac Grand Am owned by Allgood. The policy of insurance included the following relevant provisions:

PART D—COVERAGE FOR DAMAGE TO YOUR AUTO

INSURING AGREEMENT

A. We will pay for direct and accidental loss to "your covered auto" or any "non-owned auto," including their equipment, minus any applicable deductible shown in the Declarations.

* * *
LIMIT OF LIABILITY

A. Our limit of liability for loss will be the lesser of the:

1. Actual cash value of the stolen or damaged property; or

2. Amount necessary to repair or replace the property with other property of like kind and quality.

Appellant's Appendix at 100,103.

Allgood's vehicle was damaged on June 6, 2001. Meridian paid the cost of repairs to her vehicle, but did not pay for any diminution in value over and above the cost of repair. Allgood initiated a class action lawsuit seeking damages against Meridian for its failure to pay for the diminished value of its insureds' vehicles and injunctive relief in the form of a declaration that diminution in value was covered under the policy. Meridian filed a Trial Rule 12(B)(6) motion to dismiss and/or Trial Rule 12(C) motion for judgment on the pleadings. Allgood filed a response and a motion for partial summary judgment. After a hearing, the trial court entered an order denying Allgood's motion for partial summary judgment and granting Meridian's motion to dismiss, finding that the policy did not cover diminished value as a matter of law. Allgood now appeals.

Discussion and Decision
I. Standard of Review

Meridian moved to dismiss Allgood's complaint for failure to state a claim upon which relief could be granted, alleging that as a matter of law, she was not entitled to compensation for diminution in value and thus could not prove her claim of breach of contract. Allgood in turn moved for partial summary judgment, seeking judgment as a matter of law that diminution in value can be recovered. Thus, the same substantive question was approached from two different procedural angles.

A. Meridian's Motion to Dismiss

The standard to be applied when ruling on a Trial Rule 12(B)(6) motion to dismiss or a Trial Rule 12(C) motion for judgment on the pleadings that raises the failure to state a claim upon which relief can be granted is whether the complaint is legally sufficient to constitute any valid claim. Davis ex rel. Davis v. Ford Motor Co., 747 N.E.2d 1146, 1149 (Ind.Ct.App. 2001), trans. denied. We view the complaint in the light most favorable to the non-moving party, drawing every reasonable inference in favor of this party. Id. We stand in the shoes of the trial court and must determine if the trial court erred in its application of the law. Town of Plainfield v. Town of Avon, 757 N.E.2d 705, 710 (Ind.Ct.App.2001), trans. denied. Both Trial Rule 12(B)(6) and Trial Rule 12(C) motions should be granted only when it is clear from the face of the complaint that under no circumstances could relief be granted. Luhnow v. Horn, 760 N.E.2d 621, 626 (Ind.Ct.App.2001).

In determining whether any facts will support the claim, we look only to the pleadings. Town of Plainfield, 757 N.E.2d at 710. The trial rules require the pleader to attach to its complaint the written document upon which its action is premised, however. See T.R. 9.2(A). Therefore, we may look to both the complaint and the attached contract for purposes of determining the appropriateness of the court's ruling. Eskew v. Cornett, 744 N.E.2d 954, 957 (Ind.Ct.App.2001), trans. denied. Where allegations of a pleading are inconsistent with terms of a written contract attached as an exhibit, the terms of the contract, fairly construed, must prevail over an averment differing therefrom. Id.

B. Allgood's Motion for Partial Summary Judgment

Summary judgment is appropriate where no designated genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). A party appealing the denial of summary judgment carries the burden of persuading this court that the trial court's decision was erroneous. When the material facts are not in dispute, our review is limited to determining whether the trial court correctly applied the law to the undisputed facts; and, if the issue presented is purely a question of law, we review the matter de novo. C.M.L. ex rel. Brabant v. Republic Services, Inc., 800 N.E.2d 200, 202 (Ind.Ct.App.2003), trans. pending.

II. "Diminution in Value" as a Recoverable "Loss"

There is no dispute about the material facts of this case: Allgood was insured by Meridian for damage to her automobile. When her car sustained damage, she notified Meridian and it paid only to repair the damage. Allgood claimed that Meridian breached the contract of insurance by failing to fully compensate her for her loss, either because the contract unambiguously calls for compensation for diminution in value or because it is ambiguous and should be construed in her favor to require such compensation. Meridian claims that it satisfied the contract, which it claims is unambiguous and does not require compensation for diminution in value.

A. Cases from Other Jurisdictions

No Indiana case has addressed the issue of whether a collision insurer is obligated to include payment for diminution in value. Cases from other jurisdictions are divided on this issue. Both parties have cited numerous cases from other jurisdictions supporting their respective positions.1 As the cases favoring each side are premised on basically the same reasoning and similar provisions, we will look in depth at a representative case cited by the parties in support of their respective positions.

In State Farm Mut. Auto. Ins. Co. v. Mabry, 274 Ga. 498, 556 S.E.2d 114 (2001),

the Georgia Supreme Court held that the insurer was required to pay for the diminution in value of repaired vehicles. Id. at 123. The insureds brought a class action suit against the insurer seeking declaratory and injunctive relief. The relevant policy provisions were described as follows:

... State Farm will "pay for loss to your car." minus any deductible. The policy also 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.

Id. at 118. The court examined seventy-five years of Georgia case law dealing with an insurer's obligation to pay for diminution in value, beginning with U.S. Fidelity & Guaranty Co. v. Corbett, 35 Ga.App. 606, 134 S.E. 336, 338 (1926), which held that the undertaking to insure against "actual loss or damage" is the primary obligation, pursuant to which the measure of liability is the difference between the value of the property immediately before and immediately after the loss, and the limitation of liability provision is subordinate, serving to abate the primary liability. The effect of a limitation of liability clause was clarified in Simmons v. State Farm Mut. Auto. Ins. Co., 111 Ga.App. 738, 143 S.E.2d 55, 57 (1965), which noted the insurer's options for paying for the loss under the clause, but also noted that "no matter which alternative is chosen, the market value of the property ... after payment must equal the market value before the loss." Subsequently, in State Farm Mut. Auto. Ins. Co. v. Smith, 119 Ga.App. 447, 167 S.E.2d 610, 611-12 (1969), the Georgia Court of Appeals reiterated that if the insurer elects to repair the vehicle, its obligation is to restore to the insured the previous value of the vehicle, not just the previous condition, noting that the "insured must be made whole, except for any deductible, under any option." And U.S. Fire Ins. Co. v. Welch, 163 Ga.App. 480, 294 S.E.2d 713 (1982) held that "repair" as used in the limitation of liability provision did not mean "any repair," it meant "restoration... to substantially the same condition and value as existed before the damage occurred." The Georgia Supreme Court summarized the state's history on this matter as follows:

[V]alue, 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 ... a limitation
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