Gonzales v. Farmers Insurance Company of Oregon

• Decision Date: 20 December 2006
• Docket Number: A128598.,9910-11479.
• Citation: 210 Or. App. 54,150 P.3d 20
• Parties: Jose GONZALES, Appellant, and Al Bathke, Plaintiff, v. FARMERS INSURANCE COMPANY OF OREGON, an Oregon corporation; Farmers Insurance Exchange, a foreign corporation; Farmers Group, Inc., a foreign corporation; and Mid-Century Insurance Company, a foreign corporation, Respondents.
• Court: Oregon Court of Appeals

Page 20

150 P.3d 20

210 Or. App. 54

Jose GONZALES, Appellant, and Al Bathke, Plaintiff, v. FARMERS INSURANCE COMPANY OF OREGON, an Oregon corporation; Farmers Insurance Exchange, a foreign corporation; Farmers Group, Inc., a foreign corporation; and Mid-Century Insurance Company, a foreign corporation, Respondents.

9910-11479.

A128598.

Court of Appeals of Oregon.

Argued and Submitted September 18, 2006.

Decided December 20, 2006.

Terrell W. Oxford, Texas, and Jeremy J. Brandon, Texas, argued the cause for appellant. On the briefs were Susman Godfrey, LLP, Texas, and Daniel J. Gatti and Gatti, Gatti, Maier, Krueger, Sayer & Assoc., and Tom D'Amore and D'Amore & Associates, and James Nelson and Nelson & MacNeil, and Christopher Hardman and Law Office of CR Hardman.

James N. Westwood, Portland, argued the cause for respondents. With him on the brief were Lois O. Rosenbaum and Stoel Rives LLP.

Before HASELTON, Presiding Judge, and ARMSTRONG and ROSENBLUM, Judges.

HASELTON, P.J.

Plaintiff Jose Gonzales appeals, assigning error to the allowance of summary judgment in favor of defendants, various Farmers Insurance-related companies.¹ The only issue presented is whether, under the terms of his automobile coverage with defendant, plaintiff is entitled to recover payment for his vehicle's "inherent diminished value" (IDV) following a collision. Specifically, is plaintiff entitled, in addition to payment for the cost of repair to the vehicle, to recover for the difference in his vehicle's fair market value before and after the collision? The trial court determined that a limitation of liability provision in the auto policy precluded recovery for IDV. As amplified below, we conclude that Dunmire Co. v. Or. Mut. Fire Ins. Co., 166 Or. 690, 114 P.2d 1005 (1941), and Rossier v. Union Automobile Ins. Co., 134 Or. 211 291 P. 498 (1930), which are to the contrary, are controlling and dispositive. Consequently, we reverse and remand.

Summary judgment is proper if the "pleadings, depositions, affidavits, declarations and admissions on file show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." ORCP 47 C. In reviewing the allowance of summary judgment, we draw all reasonable inferences in favor of plaintiff, who was the nonmoving party. West v. Allied Signal, Inc., 200 Or.App. 182, 187, 113 P.3d 983 (2005).

We state the material facts consistently with that standard of review. In January 1998, plaintiff's 1993 Ford pickup truck, which was insured under the terms of a "car policy Oregon" issued by defendant, was damaged in a collision. As a result, plaintiff incurred $6,993.40 in repair costs, which defendant paid, minus the deductible. However, notwithstanding those repairs, the pickup could not be completely restored to its "pre-accident condition." Consequently, even after being repaired, the vehicle's market value was diminished.

Plaintiff subsequently filed a complaint against defendant, alleging that, under the terms of the auto insurance policy, defendant was obligated not only to pay for the cost of repairing the pickup, but also to compensate plaintiff for loss corresponding to IDV:

"In the event Defendants elect to repair a vehicle, they are obligated to restore the vehicle to its pre-loss condition. This includes the amount of loss of value to the vehicle that occurs as a result of the accident that is not repaired, called diminished value. Diminished market value occurs in situations where an insured vehicle has sustained damage such that the vehicle cannot be repaired to its pre-loss condition. Even after being repaired, these vehicles are worth less than similar vehicles that are in their original condition. Diminished market value is a loss which is not excluded by Defendants' insurance policy."

Defendant moved for summary judgment, contending that, under the terms of the auto policy, its liability was limited to the actual cost of repairs. In so contending, defendant relied on various provisions of the policy, particularly its "Limits of Liability" provision. The collision coverage provision of the policy states, "We will pay for loss to your insured car caused by collision less any applicable deductibles." (Boldface in original.) The policy, in turn, defines "Loss" as "direct and accidental loss of or damage to your insured car, including its equipment." (Boldface in original.) The "Limits of Liability" provision provides, in pertinent part:

"Limits of Liability

"[Defendant's] limits of liability for loss shall not exceed:

"1. The amount which it would cost to repair or replace damaged or stolen property with other of like kind and quality; or with new property less an adjustment for physical deterioration and/or depreciation."²

(Boldface in original.) The policy further provides that "[w]e will pay the loss in money or repair or replace damaged or stolen property." (Boldface in original.) Finally, under "Rights and Responsibilities," the policy provides that "[t]he insured has the right to payment for the loss in money or repair or replacement of the damaged or stolen property, at the option of [defendant]."

Plaintiff, in opposing summary judgment, argued that the policy's "Limits of Liability" provision did not preclude recovery for IDV-related loss. Plaintiff argued, in part, that the Oregon Supreme Court's decisions in Dunmire Co. and Rossier were dispositive.³

The trial court allowed summary judgment, concluding:

"Any ambiguity in an insurance contract is to be construed against the insurer according to a long line of Oregon cases. The essential question then becomes whether or not there is any `ambiguity' in the `repair' clause taken in context with the options that Defendant has regarding reimbursement. The three options are not equal in kind or in value to the insured. A cash payment would likely take into [account] factors different from a decision to repair the vehicle (which is only an option if the vehicle is repairable) and the replacement option could arguably include diminution of market value. `Replace' is defined as `to put back into former position' or `take the place of' (American Heritage Dictionary, Third Ed., p. 1157) and thus, putting something back into former position could arguably include the former `undamaged' position.

"However, `repair' is defined (in the same Dictionary p. 1156) as meaning `to restore to a sound condition after injury or damage' which was done in this case. The `repair' option chosen by Plaintiff in this case along with the standard definition of `repair' coupled with no specific mention anywhere about `diminution of market value' requires me to grant Defendant Farmers['s] motion for summary judgment."

The trial court, in so concluding, did not refer to either Dunmire Co. or Rossier.

On appeal, as before the trial court, plaintiff invokes Dunmire Co. and Rossier. Plaintiff contends that both cases are dispositive and that the circumstances in Dunmire Co., in particular, were materially indistinguishable from those presented here. Defendant, as described more fully below, counters that Rossier is materially distinguishable; that Dunmire Co. and Rossier were both wrongly decided in the first instance; and that, in all events, neither Dunmire Co. nor Rossier is controlling because both were premised on a method of insurance policy construction that has been superseded by the analysis described in Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464, 836 P.2d 703 (1992). Defendant further contends that, under the analysis described in Hoffman Construction Co., it is entitled to prevail. For the reasons that follow, we agree with plaintiff.

We begin, inevitably, with Rossier and Dunmire Co. In Rossier, the plaintiff purchased a Studebaker sedan, which was involved in an accident after it had been driven only 140 miles. 134 Or. at 215, 291 P. 498. The car was insured under a policy issued by the defendant. That policy provided coverage for property damage to the vehicle caused by an accidental collision. The policy further provided as follows:

"`The company's liability for loss or damage under this endorsement by reason of any one collision is limited to the actual cost of replacement of the property damaged or destroyed, and in no event, to exceed the true cash value of the automobile current at the time loss or damage occurs.'"

Id. at 213, 291 P. 498.

The defendant insurer took the position that, under the policy, it was obligated to pay only "the actual cost of replacement of damaged or broken parts." Id. at 212, 291 P. 498. The plaintiff, however, brought an action seeking to recover the difference between the Studebaker's precollision "fair cash value" ($1,535) and its post-collision fair cash value (which, the plaintiff alleged, was "no greater * * * than $450"). Id. at 212-13, 291 P. 498. The trial court, over the defendant's objections, instructed the jury consistently with the plaintiff's construction of the policy, and the jury awarded damages of $950. Id. at 212, 291 P. 498.

On appeal, the defendant assigned error to the instruction on damages. The Supreme Court affirmed, concluding that that instruction comported with the proper construction of the policy—and, particularly, with its limitation of liability provisions:

"That an insurer may, by contract, limit its liability, is well recognized. It is also uniformly held that if there is any doubt or ambiguity in the terms of such limitation it will be resolved in favor of the insured. An insurance policy, like any other kind of contract, must be considered in its entirety and conflicting clauses reconciled if possible.

"Unquestionably the primary object or purpose of the plaintiff was to be indemnified against loss or damage to his automobile resulting from accidental collision. It is common knowledge that the nature and extent of damage to a car may be such that replacement or repair of...