Townsend v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 22 August 2001
• Docket Number: No. 34,901-CA.,34,901-CA.
• Citation: 793 So.2d 473
• Parties: Harry TOWNSEND, individually and as a Representative of all persons similarly situated, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.
• Court: Court of Appeal of Louisiana — District of US

793 So.2d 473

Harry TOWNSEND, individually and as a Representative of all persons similarly situated, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.

No. 34,901-CA.

Court of Appeal of Louisiana, Second Circuit.

August 22, 2001.

Sam N. Gregorio, Shreveport, LeBlanc & Waddell By Jody E. Anderman, Baton Rouge, Counsel for Appellant.

Stone, Pigman, Walther, Wittmann & Hutchinson By Wayne J. Lee, New Orleans, Casten & Pearce By Marshall R. Pearce, Shreveport, Counsel for Appellee.

Before STEWART, GASKINS and DREW, JJ.

STEWART, J.

At issue in this appeal from a summary judgment is whether an automobile insurance policy issued by State Farm Mutual Automobile Insurance Company ("State Farm"), allows the insured to recover the "diminished value" of the automobile, in addition to the cost to repair, in first-party claims when adequate repairs are made. The trial court concluded that the State Farm policy does not provide for recovery of diminished value in first-party claims and granted summary judgment in its favor. A summary judgment motion filed by the plaintiff, Harry Townsend, was denied. After conducting a de novo review of the record, we affirm the trial court's judgment.

FACTS

Harry Townsend owned a Plymouth Voyager van which was damaged in an accident on November 2, 1998. At the time of the accident, the van was insured under a State Farm policy which provided comprehensive/collision coverage.¹ Pursuant to the applicable policy provisions, State Farm paid $4,000 to repair the vehicle. Townsend then filed a class action suit for breach of contract on behalf of himself and similarly situated State Farm policyholders. He claimed that State Farm was obligated to pay the diminished value in addition to the repair costs—diminished value being the difference between the pre-damage value of a vehicle and its value after being properly repaired.

State Farm and Townsend filed cross motions for summary judgment on the issue of whether the policy provides coverage for diminished value claims. Referring to the existence of genuine issues of material fact, the trial court initially denied both motions. The parties renewed their respective motions and filed a joint motion to reconsider. They stipulated that there was no issue of fact with regard to the interpretation of the policy language and asked the court to resolve the threshold question of diminished value coverage before the litigation proceeded further.

On September 6, 2000, the trial court rendered a final judgment granting State Farm's motion for summary judgment and denying Townsend's motion. In a written ruling, the trial court referred to Section IV of the policy which limits State Farm's liability to the lower of the actual cash value or the cost of repair or replacement. Since State Farm paid the cost to repair Townsend's vehicle, the trial court determined that resolution of whether diminished value is recoverable hinged on the meaning of "repair." The trial court interpreted the term "repair" pursuant to its generally prevailing meaning, which the court determined to be the "physical fixing of a thing that is broken." The trial court rejected Townsend's argument that repair, as used in the policy, expresses the same obligations as those imposed upon a tortfeasor by La. C.C. art. 2315. Applying the basic principles applicable to contract interpretation, the trial court found the language of the policy to be clear and unambiguous in limiting State Farm's liability to repair the vehicle by restoring it to a useful condition or a condition as near as possible to its pre-accident physical condition. The trial court concluded that the policy did not contemplate restoration of the former value of the automobile. Townsend appealed.

DISCUSSION

Applicable Law

The summary judgment procedure is designed to secure the just, speedy, and inexpensive determination of every action, except those disallowed by law; the procedure is favored and shall be . construed to accomplish these ends. La. C.C.P. art. 966(A)(2); Crocker v. Roach, 33,507 (La. App.2d Cir.8/23/00), 766 So.2d 672, review denied, 00-2684 (La.11/17/00), 774 So.2d 983. Summary judgment shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, if any, show that there is no genuine issue as to material fact, and that the mover is entitled to judgment as a matter of law. La. C.C.P. art. 966(B). Appellate review of a summary judgment is de novo, utilizing the same criteria that guide the trial court's grant of summary judgment. Magnon v. Collins, 98-2822 (La.7/7/99), 739 So.2d 191; Crocker v. Roach, supra.

Interpretation of an insurance contract presents a legal question which usually can be resolved by means of a motion for summary judgment. Crocker v. Roach, supra; State Farm Mutual Automobile Insurance Company v. Casualty Reciprocal Exchange, 600 So.2d 106 (La. App. 2d Cir.1992). When a contact can be construed from the four corners of the instrument without looking to extrinsic evidence, the question of contractual interpretation is answered as a matter of law and summary judgment is appropriate. Peterson v. Schimek, 98-1712 (La.3/02/99), 729 So.2d 1024; Brown v. Drillers, Inc., 93-1019 (La.1/14/94), 630 So.2d 741. However, summary judgment declaring a lack of coverage under an insurance policy may not be rendered unless there is no reasonable interpretation of the policy, when applied to the undisputed material facts shown by the evidence supporting the motion, under which coverage could be afforded. Reynolds v. Select Properties, Ltd., 93-1480 (La.4/11/94), 634 So.2d 1180; Westerfield v. LaFleur, 493 So.2d 600 (La. 1986).

An insurance policy is a contract between the parties and should be construed using the general rules of interpretation of contracts set forth in the Louisiana Civil Code. Peterson v. Schimek, supra; Louisiana Ins. Guar. Ass'n v. Interstate Fire & Cas. Co., 93-0911(La.1/14/94), 630 So.2d 759; Reynolds v. Select Properties, Ltd., 93-1480 (La.4/11/94), 634 So.2d 1180; Tippett v. Padre Refining Co., 34,140 (La. App.2d Cir.11/15/00), 771 So.2d 300, review denied, 00-3443 (La.4/12/01), 789 So.2d 589, recon. denied, 00-3443 (La.5/25/01), 792 So.2d 746; Crocker v. Roach, supra. The parties intent, as reflected by the words of the policy, determines the extent of coverage. Louisiana Ins. Guar. Ass'n v. Interstate Fire & Cas. Co., supra; Reynolds v. Select Properties, Ltd., supra. When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent. La. C.C. art. 2046. In such cases, the insurance contract must be enforced as written. Peterson v. Schimek, supra; Central La. Elec. Co. v. Westinghouse Elec. Corp., 579 So.2d 981 (La.1991). Words and phrases used in a policy are to be construed using their plain, ordinary, and generally prevailing meaning, unless the words have acquired a technical meaning. La. C.C. art. 2047; Reynolds v. Select Properties, Ltd., supra.

An insurance contract is construed as a whole, and each provision must be interpreted in light of the other provisions so that each is given the I meaning suggested by the contract as a whole. La. C.C. art. 2050. See also La. R.S. 22:654.² However, an insurance policy should not be interpreted in an unreasonable or strained manner so as to enlarge or to restrict its provisions beyond what is reasonably contemplated by its terms or so as to achieve an absurd conclusion. Valentine v. Bonneville Ins. Co., 96-1382 (La.3/17/97), 691 So.2d 665. The rules of construction do not authorize a perversion of the words or the exercise of inventive powers to create an ambiguity where none exists or the making of new contract when the terms express with sufficient clearness the parties' intent. Peterson v. Schimek supra; Reynolds v. Select Properties, Ltd., supra. The fact that one party may create a dispute about the meaning of a contractual provision does not render the provision ambiguous. Slocum-Stevens Ins. Agency, Inc. v. International Risk Consultants, Inc., 27,353 (La.App.2d Cir.12/11/95), 666 So.2d 352, review denied, 96-0102 (La.3/8/96), 669 So.2d 399. Moreover, the mere fact that an insurance policy is a complex instrument does not render it ambiguous. Louisiana Ins. Guar. Ass'n v. Interstate Fire & Cas. Co., supra. The determination of whether a contract is clear or ambiguous is a question of law. Id.

Finally, it is well settled that insurance companies may limit coverage in any manner they desire, so long as the limitations do not conflict with statutory provisions or public policy. Reynolds v. Select Properties, Ltd., supra; Oceanonics, Inc. v. Petroleum Distributing Co., 292 So.2d 190 (La.1974); Crocker v. Roach, supra. Any provision which seeks to narrow an insurer's obligation should be strictly construed against the insurer. However, this does not empower a court to strain otherwise clear language or depart from the accepted meaning of words in order to create an ambiguity where none in fact exists. Tippett v. Padre Refining Co., supra.

Analysis of the Policy Provisions

Utilizing the aforementioned rules of interpretation, we turn now to examine the particular policy provisions at issue and to determine whether, as a matter of law, the policy obligates the insurer to pay for the diminished value of an automobile, after payment of repairs, when a first party claim is satisfied. This issue is one of first impression in the appellate courts of this state.

The claim from which this controversy arises was filed under the collision coverage provided by the policy. The section of the policy labeled "COLLISION—COVERAGE G" states that the insurer "will pay for loss to your car caused by collision but only for the amount of each such loss in excess of the deductible amount." Loss, as the term is used above, is defined in the policy as "each direct...