Insured Not Entitled to Sue for “Loss of Resale Value” of Repaired Auto

At the end of a subrogation trial, the judge instructs the jury that the subrogating carrier is entitled to the lesser of: (a) the cost to repair, or (b) the loss in market value of property damaged in a loss. [1]   The value of property at the time of a loss is known as its “actual cash value” or ACV.  The ACV is typically calculated by estimating the cost to replace the item, then subtracting depreciation.  Many times the insured is paid an extra amount (replacement cost, or “RC”) if they actually rebuild their house or replace contents.  However, RC payments are typically not recoverable in subrogation.  Whereas ACV payments restore the insured to the condition he/she was in just prior to the loss, RC payments actually put the insured in a better condition than they had been in.  For example, suppose a fire destroys my eight-year old television.  At the time of the fire, my TV was only worth $100.   Because my policy has RC coverage, I buy a nice, new flat-screen TV valued at $800.  My life is actually better because I have a brand new TV, not an eight-year old one.   If my carrier pursues subrogation, the carrier can only seek to recover the $100 ACV value of the TV, not the $800 replacement cost.

With regard to a building loss, most insurance companies calculate what it would cost to repair the premises to its pre-loss condition, and that is typically the measure of damage I use at trial.  The defendant may introduce evidence as to diminution of market value to limit my carrier’s recovery.  For example, suppose I prove that XYZ Insurance paid $250,000 ACV to repair a house following a fire.  Defendant may use a real estate appraiser to show the house only fell in market value $150,000 (comparing the value of the house immediately before the fire with the value immediately after the fire); thus, the defendant can reduce my recoverable damages from $250,000 down to $150,000 since the law allows me to recover the lesser of cost to repair or loss of market value.  A recent court decision concerned whether an insured could sue a tortfeasor damages above and beyond cost to repair.

Mr. Parkoff’s 2011 Mercedes-Benz convertible only had 398 miles on its odometer when it was rear-ended by Ms. Stavsky.  Parkoff’s carrier paid him for the full cost to repair the Mercedes.   Still upset, Parkoff sued Ms. Stavsky arguing that the insurance check they received did not adequately compensate him since the resale value of the vehicle was diminished.  He argued that any future “Carfax” report would forever indicate that the vehicle had been in an accident.  After the suit papers were served, Stavsky immediately moved to dismiss and the judge granted the motion, throwing out the lawsuit.   Mr. Parkoff appealed and the appellate court affirmed the dismissal.  [2] There was no dispute that Mr. Parkoff had been paid the full cost to repair the vehicle.  Parkoff could not then seek to recover the “loss of market value” (i.e., the drop in the resale value of the car) in addition to the cost to repair, which he had already received.  The Court reasoned that Mr. Parkoff had already been fully compensated and he was not allowed to recover both the cost to repair his car and the supposed loss in resale value.

[1] See, Pattern Jury Instruction 2:311
[2] Parkoff v. Stavsky, 2013 NY App.Div. LEXIS 5661 (2nd Dept August 28, 2013)

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