MFA Ins. Co. v. Citizens Nat. Bank of Hope, 76--202

• Decision Date: 10 January 1977
• Docket Number: No. 76--202,No. 1,76--202,1
• Parties: MFA INSURANCE COMPANY, Appellant, v. CITIZENS NATIONAL BANK OF HOPE, Arkansas, a corporation, Appellee
• Court: Arkansas Supreme Court

Page 70

545 S.W.2d 70

260 Ark. 849

MFA INSURANCE COMPANY, Appellant, v. CITIZENS NATIONAL BANK OF HOPE, Arkansas, a corporation, Appellee.

No. 76--202.

Supreme Court of Arkansas, Division No. 1.

Jan. 10, 1977.

Graves & Graves by Albert Graves, Jr., Hope, for appellant.

McMillan, Turner & McCorkle by Otis H. Turner, Arkadelphia, for appellee.

HOLT, Justice.

In a suit on an insurance contract brought by appellee, the trial court, sitting as a jury, awarded appellee a judgment for $3,450, plus 6% interest, 12% penalty and $1,000 attorney's fee. The insured (not a part here) had purchased an automobile with a loan from appellee bank which was named as loss payee on the policy. The purchaser made no payments and the appellee bank took possession after the automobile was damaged by fire. Appellant tendered payment for the damages based on the cost of repairs. Appellee refused and filed suit alleging it was entitled to recover the difference in the market value of the automobile before and after the fire since the car was 'almost totally destroyed by fire.' For reversal of the judgment for appellee, the appellant asserts the trial court erred in applying the 'before and after values' method in determining the measure of damages in this contract action.

The contract of insurance contains a provision which states:

10. Limits of Liability--* * * the limit of the Company's liability shall not exceed the actual cash value of the automobile, or if the loss is of a part thereof, the actual cash value of such part at the time of the loss, nor what it would then cost to repair or replace the property or such part thereof with other of like kind and quality, less depreciation . . .. (Italics supplied.)

Appellant argues that its liability is limited to the cost of repairing the automobile. Appellant relies upon Unigard Insurance Co. v. Wish, 254 Ark. 832, 496 S.W.2d 392 (1973), and Tri-State Ins. v. McCraw, 252 Ark. 1259, 483 S.W.2d 212 (1972), as typical cases in support of its argument. It is true that these cases hold that a limitation of liability as to property damage in an insurance contract is valid. The appellee acknowledges the validity of these provisions. However, it cites our cases as holding that the measure of damages is the difference in the market value of the vehicle immediately before and after the alleged damages. Home Insurance Co v. Springdale Motor Co., 200 Ark. 893, 141 S.W.2d 522 (1940); The Home Insurance Company of New York v. Williams, 201 Ark. 460, 145 S.W.2d 743 (1940); Service Fire Ins. Co. v. Horn, 202 Ark. 300, 150 S.W.2d 53 (1941); Motors Insurance Corp. v. Lopez, 217 Ark. 203, 229 S.W.2d 228 (1950); Southern Farm Bureau Cas. Ins. Co. v. Gaither, 238 Ark. 50, 378 S.W.2d 211 (1964); and Insured Lloyds v. Mayo, 244 Ark. 802, 427 S.W.2d 164 (1968). Suffice it to say that we do not deem Unigard and Tri-State controlling here. In these cases the issue was not presented, as here, whether the repairs to a fire damaged vehicle with parts of like kind and quality would restore the car to its former condition.

Here the appellee adduced evidence that the cost of repairs with parts of other like kind and quality would not restore the vehicle to its former market value....