O'BRIEN v. Progressive Northern Ins. Co.

• Citation: 785 A.2d 281
• Decision Date: 09 November 2001
• Docket Number: No. 22, No. 2001., No. 134, No. 58, No. 2001
• Parties: Randy and Eileen O'BRIEN Individually and as Representatives of all persons similarly situated Plaintiffs Below, Appellants, v. PROGRESSIVE NORTHERN INSURANCE COMPANY, Defendant Below, Appellee. Steven D. Connelly, Individually and as representative of all persons similarly situated, Plaintiffs Below, Appellants, v. Keystone Insurance Company, Defendant Below, Appellee. John E. Hocutt, Jr., Individually and on behalf of all others similarly situated, Plaintiff Below, Appellant, v. State Farm Mutual Automobile Insurance Company, Defendant Below, Appellee.
• Court: United States State Supreme Court of Delaware

785 A.2d 281

Randy and Eileen O'BRIEN Individually and as Representatives of all persons similarly situated Plaintiffs Below, Appellants, v. PROGRESSIVE NORTHERN INSURANCE COMPANY, Defendant Below, Appellee.

Steven D. Connelly, Individually and as representative of all persons similarly situated, Plaintiffs Below, Appellants, v. Keystone Insurance Company, Defendant Below, Appellee.

John E. Hocutt, Jr., Individually and on behalf of all others similarly situated, Plaintiff Below, Appellant, v. State Farm Mutual Automobile Insurance Company, Defendant Below, Appellee.

Nos. 58,2001, 22,2001, 134,2001.

Supreme Court of Delaware.

Submitted: September 26, 2001.

Decided: November 9, 2001.

Reargument Denied December 4, 2001.

Robert Jacobs and J.X. Hedrick, II of Jacobs & Crumplar, Wilmington; Richard L. Akel of Weitz & Luxenberg, New York City; Debra Brewer Hayes (argued) of Reich & Binstock, Houston, Texas, of counsel, for Randy and Eileen O'Brien and Steven D. Connelly. James W. Semple (argued) of Morris, James, Hitchens & Williams, Wilmington, for Progressive Northern Insurance Company.

Michael L. Vild and Christopher A. Ward of the Bayard Firm, Wilmington; Jeffrey A. Less (argued) and Paul B. Bech of Bazelon Less & Feldman, Philadelphia, Pennsylvania, of counsel, for Keystone Insurance Company.

William R. Peltz of Kimmel, Carter, Roman & Peltz, Wilmington; Lawrence E. Feldman, Mark C. Rifkin (argued), and Roseann E. Weisblatt of Feldman & Rifkin, Jenkintown, Pennsylvania; Jonathan Shub of Sheller, Ludwig & Badey, Philadelphia, Pennsylvania, of counsel, for John E. Hocutt, Jr.

Allen M. Terrell, Jr., (argued) Frederick L. Cottrell, III, and Chad M. Shandler of Richards, Layton & Finger, Wilmington, for State Farm Mutual Insurance Company.

Before WALSH, HOLLAND and STEELE, Justices.

STEELE, Justice.

Steven D. Connelly, Plaintiff-below, appeals the December 18, 2000 joint order of the Superior Court granting Defendant-below Keystone Insurance Company's Motion to Dismiss. Plaintiffs-below Randy and Eileen O'Brien appeal the Superior Court's February 5, 2001 order granting Defendant-below Progressive Northern Insurance Company's Motion to Dismiss the O'Briens' suit. John E. Hocutt, also Plaintiff-below, appeals the March 9, 2001 order of the Superior Court granting Defendant-below State Farm Mutual Automobile Insurance Company's Motion to Dismiss.¹ Because of the nearly identical nature of the issues in these cases, we have consolidated them for the purpose of this appeal.²

The question before this Court is whether or not the limits on liability found in the automobile insurance policies issued by the Appellee insurance companies to the Appellants preclude recovery for what is commonly known as the "diminished value" of a vehicle that has been repaired after an accident. Appellants argue that the trial judge erred in determining that the "repair or replace" provisions of the disputed policies cap the insurer's liability at the cost of returning the vehicle to substantially the same physical, operational, and mechanical condition as before the accident. They contend that, as a matter of law, 1) the policies specifically provide for the coverage of diminished value; and, 2) in the alternative, the language is ambiguous and should thus be interpreted broadly in favor of the insureds. We find that the language of the policy does not expressly covers loss from "diminished value," and that the "repair or replace" language crafted to limit the insurers' liability is clear and, therefore, not susceptible to more than one reasonable interpretation. Therefore, we AFFIRM the decisions of the Superior Court.

I.

The facts of these cases are as follows:

O'Brien: In December 1997, someone stole a 1995 Honda Accord owned by Randy and Eileen O'Brien from a Wilmington parking lot. The car was discovered later that month with substantial damage to the front-end, passenger side, and the interior. The O'Briens filed a claim with Progressive under the comprehensive coverage provision of their policy. The comprehensive section of the policy provided, in part, that if the policy-holder paid a premium for comprehensive coverage, Progressive would pay for loss to a covered vehicle, "subject to the Limit of Liability." The Limit of Liability section of the policy provided as follows:

1. The Limit of Liability for loss to a covered vehicle or non-owned vehicle will be the lowest of:

a. the actual cash value of the stolen or damaged property at the time of loss, reduced by the applicable deductible shown on the Declarations Page, and by its salvage value if you retain the salvage;

b. the amount necessary to repair or replace the stolen or damaged property with other property of like kind and quality, reduced by the applicable Deductible as shown on the Declarations Page; or

c. any applicable Limit of Liability or Stated Amount Vehicle Coverage shown on the Declarations Page, reduced by the salvage value if you retain the salvage. (Emphasis in original).

Progressive chose to repair the O'Briens' Honda, as was its option. The O'Briens contend that damage to the vehicle which remained after these repairs resulted in a loss in their vehicle's value. They claim that Progressive should indemnify them for that loss.

Connelly: In June 1998, Steven D. Connelly damaged his 1997 KIA Sportage Sport Utility Vehicle ("S.U.V.") in a collision in Chester County, Pennsylvania. Connelly's vehicle sustained substantial damage to the front and hood. He filed a claim with his insurance provider, Keystone, under the collision provision of the policy. The Limit of Liability section of the Keystone policy closely parallels the language in subsections (a) and (b) of the comprehensive section of the Progressive policy, supra. Like Progressive, Keystone limited recovery to the lesser of the actual cash value or the cost to repair or replace. The Keystone policy did not contain the "like kind and quality" language that appeared in the Progressive policy. After assessing the damage to Connelly's S.U.V., Keystone opted to repair the vehicle. The damage required replacement of major panels, refinishing and repainting of the vehicle. Appellant Connelly admits that the vehicle was properly repaired, but maintains that he should be indemnified for the diminished value resulting from residual physical damage.

Hocutt: In August 1999, John E. Hocutt, Jr. was involved in a collision that resulted in damage to his 1996 Isuzu Rodeo S.U.V. The vehicle suffered extensive structural damage and Hocutt submitted a claim to his insurer, State Farm, under the collision coverage section of the State Farm policy. The language in the State Farm policy closely resembles that of both the Progressive and Keystone policies. As in Keystone, the Limit of Liability for loss to property is the lower of actual cash value of the vehicle or the cost of repair and replacement. There is no language concerning "like kind and quality." Hocutt stated that the repairs were performed in a "workmanlike manner" at State Farm's expense. Nevertheless, he maintains that the vehicle was not restored to its pre-loss condition because, after the completion of the repairs, the vehicle was worth less than it was before the collision.

In granting the Defendants' Motions to Dismiss, the Superior Court made assumptions of fact consistent with Plaintiffs' allegations. The trial judge assumed that, even after all of the repairs had been made to plaintiffs' vehicles, physical damage, including evidence of repair, remained.³ He concluded that this type of damage resulted in a loss of value known as "diminished value."⁴ Moreover, the judge assumed that diminished value is both real and non-speculative and, that if given the opportunity, Plaintiffs could prove real damages.⁵

II.

Under Delaware law, the interpretation of contractual language, including that of insurance policies, is a question of law.⁶ This Court reviews questions of law de novo.⁷

The Delaware Code neither mandates nor regulates the carrying of comprehensive or collision coverage in the automobile insurance policies for vehicles registered in this State. Instead, insurers make comprehensive and collision coverage available for purchase as supplements to the insurance required by the State. Parties to an insurance contract are free to agree upon any terms so long as that agreement is not inconsistent with a statutory prohibition or public policy.⁸ Because the State of Delaware has no policy interest in the coverage at issue in this case, the role of the Court is to determine from the contract documents the terms agreed upon by the parties.

The Court noted supra that minor differences exist in the language of the three policies at issue in this litigation. The most notable among these is the absence of the term "like kind and quality" from both the Allstate and State Farm policies. The Superior Court correctly determined that the presence or absence of these terms was not dispositive in this case.⁹ While these differences may govern the standards of workmanship to which the claimants may hold their insurers, that question is not before us today. Therefore, the "like kind and quality" language does not affect whether the policies provide coverage for diminution of value and is irrelevant to our decision in these cases.

III.

Appellants contend that the policies in question explicitly provide for coverage of diminished value, despite the lack of any clear statement to that effect in the policies. They argue that the plain and ordinary meanings of the terms "loss," "repair," and "damage" favor coverage. Under their theory, these words taken together require that, in the context of an insurance contract, an insurer opting to repair a damaged vehicle must restore that vehicle to substantially the same condition that it was in before the damage occurred. We find this to be an accurate statement of the insurers' duties under the language of the...