Long v. McAllister

Decision Date19 May 1982
Docket NumberNo. 66642,66642
PartiesArthur LONG, Appellant, v. Dan McALLISTER; McAllister Seed Company, Inc., An Iowa Corporation; and I.M.T. Insurance Company, An Iowa Corporation, Appellees.
CourtIowa Supreme Court

Edwin F. Kelly and Barry D. Farmer of Kelly & Morrissey, Fairfield, for appellant.

Craig D. Warner of Pryor, Riley, Jones & Aspelmeir, Burlington, for appellees.

Considered by REYNOLDSON, C. J., and LeGRAND, HARRIS, McCORMICK and ALLBEE, JJ.

McCORMICK, Justice.

This tort action arose from a dispute concerning adjustment of motor vehicle property damage under the liability coverage of the tortfeasor's insurance policy. In entering summary judgment for defendants, the trial court limited plaintiff's recovery to the reasonable value of his automobile at the time it was damaged, with interest from the date of judgment. The questions here are whether the court erred in refusing to award prejudgment interest, in denying the right to damages for loss of use, and in dismissing plaintiff's claim against the insurer for bad faith in adjusting the loss. We find that plaintiff was entitled to prejudgment interest and an opportunity to prove loss of use damages, but we refuse to recognize a bad faith claim of the nature alleged. Therefore we affirm in part and reverse and remand in part.

Plaintiff Arthur Long's automobile was damaged on October 19, 1978, when a farm wagon of defendants Dan McAllister and McAllister Seed Company, Inc., rolled down an incline and struck it. These defendants had property damage liability insurance covering the loss with defendant I.M.T. Insurance Company and another insurer. Although I.M.T. obtained repair estimates from plaintiff shortly after the occurrence, thirty-three days passed before the insurers agreed between themselves on how the loss would be shared. Eight days later I.M.T. offered plaintiff $1250 to settle the loss in behalf of McAllister and the seed company. No dispute existed concerning liability or the fact the vehicle was damaged beyond repair.

After first agreeing to the settlement, plaintiff later in the same day rejected it as inadequate. Eventually plaintiff employed an attorney who demanded $1500 in settlement. I.M.T. raised its offer to $1300 but received no response. Plaintiff later brought the present action in two counts.

In the first count, he sought recovery against McAllister and the seed company on negligence grounds. He alleged he was entitled to the market value of the vehicle of $1300 with interest at seven percent from the date of the accident and at the maximum legal rate from the date the petition was filed. He also alleged he was required to rent substitute transportation at a cost of $500 "during the time he was requested to await adjustment" of the loss, and he asked judgment for this amount as well.

In the second count of the petition, plaintiff alleged I.M.T. had a fiduciary responsibility to its insureds and to plaintiff to adjust the loss promptly and in good faith. He alleged that I.M.T. breached this duty by failing to pay the part of his claim not in dispute, asked for judgment for that amount, with interest, and asked for $10,000 in punitive damages.

In their answer, defendants admitted all of the essential allegations of count I except the allegations concerning loss of use and rental of substitute transportation, which they denied. Among the allegations admitted was paragraph 7 of the petition which alleged:

Because of the [occurrence] herein, Art Long's vehicle was made inoperable and the cost of repairing Art Long's vehicle exceeded its market value of $1300.00 and Art Long is entitled to judgment for its October 17, 1978 value of $1300.00 with interest at the rate of seven percent from October 19, 1978 through date of filing this Petition and thereafter at the maximum legal rate, allowed for interest.

In addition, defendants asserted an affirmative defense, alleging that the exent of their obligation was to pay plaintiff $1300 with interest from the date of the accident.

Subsequently defendants offered to confess judgment for $1300 with interest at seven percent from the date of the accident to December 31, 1980, and at ten percent thereafter. Defendants also moved for adjudication of law points, alleging unavailability of loss of use damages when a motor vehicle has been totally destroyed. Plaintiff did not accept the confession of judgment, and the trial court ruled in defendants' favor on the motion to adjudicate law points.

Defendants next filed a motion for summary judgment, alleging that McAllister and the seed company owed plaintiff only $1300 plus interest at ten percent per annum from the date of filing the petition under count I. That amount was deposited with the clerk. I.M.T. asked for judgment on count II of the petition on the ground it failed to state a claim on which relief could be granted. The trial court subsequently sustained the motion and entered judgment for plaintiff on count I for the $1314.25 deposited with the clerk, and for I.M.T. on count II. As authorized by Iowa R.Civ.P. 237(c), plaintiff filed a rule 179(b) motion challenging the court's failure to award prejudgment interest on count I. The court refused to change the judgment, and this appeal followed.

I. Prejudgment interest. The question of plaintiff's entitlement to prejudgment interest on the amount representing the reasonable market value of his automobile at the time of the accident is controlled by the admission in defendants' answer. Plaintiff alleged and defendants admitted plaintiff's entitlement to interest on the $1300 award at the rate of seven percent from the date of the accident and at the maximum legal rate from the date of filing of the petition. When a fact alleged in a pleading is admitted, the fact is no longer an issue. Smith v. Bitter, 319 N.W.2d 196, 199 (Iowa 1982) (filed separately this date); Cowles Communications, Inc. v. Board of Review of Polk County, 266 N.W.2d 626, 631 (Iowa 1978); Welter v. Heer, 181 N.W.2d 134, 136 (Iowa 1970). Even though defendants took a different position in resisting plaintiff's rule 179(b) motion, they did not seek to amend their answer.

We have no occasion to decide whether plaintiff would have been entitled to prejudgment interest in any event under the principle in Vorthman v. Keith E. Myers Enterprises, 296 N.W.2d 772, 778 (Iowa 1980). Nor do we have occasion to decide the effect of section 535.3, The Code. Because the entitlement to interest was admitted, the court erred in refusing to award plaintiff prejudgment interest on the terms alleged.

II. Loss of use damages. In denying damages for loss of use of the destroyed automobile, the trial court followed existing precedent. See, e.g., Aetna Casualty and Surety Co. v. Insurance Department of Iowa, 299 N.W.2d 484, 485 (Iowa 1980):

(1) When the automobile is totally destroyed, the measure of damages is its reasonable market value immediately before its destruction.

(2) Where the injury to the car can be repaired, so that, when repaired, it will be in as good condition as it was in before the injury, then the measure of damages is the reasonable value of the use of the car while being repaired, with ordinary diligence, not exceeding the value of the car before the injury.

(3) When the car cannot, by repair, be placed in as good condition as it was in before the injury, then the measure of damages is the difference between its reasonable market value immediately before and immediately after the accident.

These rules were first distilled in Langham v. Chicago, R.I. & P. Ry., 201 Iowa 897, 901, 208 N.W. 356, 358 (1925). The court expressly held that loss of use damages are not allowed under the first and third rules in Kohl v. Arp, 236 Iowa 31, 33-34, 17 N.W.2d 824, 826 (1945).

The rule denying loss of use damages in these situations has not been specifically discussed in the cases. Because the rule has been challenged in the present case, we must determine its continued viability. We do so against the background "that the principle underlying allowance of damages is that of compensation, the ultimate purpose being to place the injured party in as favorable a position as though no wrong had been committed." Dealers Hobby, Inc. v. Mary Ann Linn Realty Co., 255 N.W.2d 131, 134 (Iowa 1977).

Inherent in our present rules governing damages to motor vehicles is the concept that the market value of the vehicle is the ceiling on recovery whether the vehicle can be repaired or must be replaced. In some cases the owner will be fully compensated despite that limitation. Even when the vehicle is destroyed and delay occurs before compensation is received, interest on the market value of the vehicle from the date of the accident theoretically pays the owner for the delay. The same is true when the vehicle is not destroyed but cannot be restored to its prior condition and the owner receives interest on its depreciated value. Moreover, when the vehicle can be restored by repair to its prior condition, the owner is not only entitled to compensation for the reasonable cost of repair but for reasonable loss of use damages. Although market value is nevertheless a ceiling on recovery even in this situation, full compensation is possible when the cumulated damages do not exceed the limitation.

In other cases, however, the present rules plainly do not permit full compensation. Loss of use damages will be incurred as readily when a vehicle is totally destroyed or when it cannot be restored by repair to its prior condition as when the vehicle can be restored by repair. Just as loss of use damages are necessary for full compensation when the vehicle can be restored to its prior condition, they are warranted when the vehicle is destroyed or cannot be so restored. No logical basis exists for cutting them off when the total reaches the vehicle's market value before the injury.

The origin of the market value limitation lies...

To continue reading

Request your trial
62 cases
  • Coulter v. CIGNA Property & Cas. Companies
    • United States
    • U.S. District Court — Northern District of Iowa
    • August 14, 1996
    ...use damages are typically those damages recoverable when property is temporarily unusable or damaged in some way. See Long v. McAllister, 319 N.W.2d 256, 261 (Iowa 1982). The amount of damages awarded for loss of use is the value of losing the benefit of that property for the time reasonabl......
  • Elmore v. State Farm Mut. Auto. Ins. Co.
    • United States
    • West Virginia Supreme Court
    • June 22, 1998
    ...Co., 368 A.2d 1161, 1163-64 (Me.1977). "[T]he insurer stands in the shoes of the insured in dealing with the victim." Long v. McAllister, 319 N.W.2d 256, 262 (Iowa 1982). Because the insurer is an adversary of a third-party claimant in the settlement process, the law cannot expect the insur......
  • J & D Towing, LLC v. Am. Alt. Ins. Corp.
    • United States
    • Texas Supreme Court
    • January 8, 2016
    ...l.149 Id. § 927(c).150 See Alaska Constr. Equip., Inc. v. Star Trucking, Inc., 128 P.3d 164, 168–69 (Alaska 2006) ; Long v. McAllister, 319 N.W.2d 256, 259 (Iowa 1982) ; Reynolds v. Bank of Am. Nat'l T. & S. Ass'n, 53 Cal.2d 49, 345 P.2d 926, 927–28 (Cal.1959).151 Prosser And Keeton § 15, a......
  • Jordan v. Jenkins
    • United States
    • West Virginia Supreme Court
    • June 15, 2021
    ...before the injury."15 J & D Towing, LLC v. American Alt. Ins. Corp., 478 S.W.3d 649, 676 (Tex. 2016). See also Long v. McAllister , 319 N.W.2d 256 (Iowa 1982) (collecting cases).16 The parties generally agree that the basic measure of damages for loss of use is the fair rental value of a re......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT