No matter where you live, Fort Worth, Dallas, Grand Prairie, Mansfield, Arlington, Haslet, Hurst, Euless, Bedford, or some other place in Texas, at some point you are going to need repairs to your vehicle due to an accident. So the question becomes: If you have insurance, does insurance cover the repairs? Of course, the answer will depend on the type of insurance you have. Plus, an experienced Insurance Law Attorney is probably a good source for guidance to an answer to the question. Here is a case to look at for some help.
The case is, Great Texas County Mutual Insurance Company v. Emmett C. Lewis. This case was decided in 1998 by the Austin Court of Appeals.
This case was appealed by Great Texas County Mutual Insurance Company (Great Texas) after the trial court ruled in favor of Lewis. The Austin Court of Appeals upheld the judgement against Great Texas.
The facts are undisputed. While covered by a policy issued by Great Texas, Lewis’s Dodge Caravan motor car sustained damage to the engine. The automobile had been driven 110,000 miles at the time. Great Texas inspected the automobile and calculated the cost of repairing the damage to be $3,608.27, which included the cost of a re-manufactured engine, replacement parts, and labor. From the $3,608.27, Great Texas subtracted the policy deductible of $527.00 and $2,031.72 for betterment or depreciation, leaving a net sum to discharge Great Texas’s obligation under the property damage section of the policy.
Alleging his coverage did not authorize the $2,031.72 deduction for betterment or depreciation, Lewis sued Great Texas on his policy to recover the $3,608.27 estimated cost, less the policy deductible of $527.00, together with other sums not in dispute. The trial court concluded the policy did not authorize a deduction for betterment or depreciation and rendered judgment accordingly.
Great Texas’s sole issue on appeal is one of law: whether the language of the policy authorized the deduction of $2,031.72 claimed by Great Texas for betterment or depreciation.
Concerning damage to a covered automobile, the policy provided as follows under the heading “Limit of Liability”:
Our Limit of Liability for loss will be the lesser of the:
1. Actual cash value of the … damaged property;
2. Amount necessary to repair or replace the property with other like of like kind and quality; or 3. Amount stated in the Declarations of this policy.
Here, the appeals court quoted, L.S. Tellier, Annotated, Measure of Recovery by Insured Under Automobile Collision Insurance Policy, saying “In arriving at the correct measure of damages in an action to recover under an automobile collision policy, it must be kept in mind that the action is not a suit for damages but one on the contract of insurance, and that therefore … the language of the contract sued upon must prevail … ”
The contract provision above gave Great Texas an election. They could pay Lewis (1) the actual cash value of the damaged property or (2) the amount necessary to repair or replace the property with another of like kind and quality. After inspecting the engine, Great Texas elected to pay the “amount necessary to repair or replace the property with other of like kind and quality.” The parties agreed that the engine required repairs totaling $3,608.27 and that the car had been driven 110,000 miles when the engine – original to the car – was damaged.
The words betterment and depreciation are not found in the policy. Great Texas argued that they are implied because the replacement engine costing $3,608.27 is tantamount to a new engine – it will carry a warranty even though it is re-manufactured. Thus, the rebuilt engine will have an expected useful life much longer than Lewis’s used engine that had been driven 110,000 miles when it was damaged. Great Texas argued that Lewis would be receiving a windfall unless there was a deduction for betterment or depreciation.
This court stated that by electing to pay Lewis the “amount necessary to repair or replace” the engine with another “of like kind and quality,” Great Texas elected a measure of loss that does not allow for depreciation.
The Corpus Christi Court of Appeals, quoting Appleman, Insurance Law and Practice, stated, “The words ‘repair’ and ‘replace’ mean restoration to a condition substantially the same as that existing before the damage was sustained.” Because Lewis’s car was a functioning car before the damage, Great Texas was required to pay an amount necessary for a repaired or replacement car of that character. The qualifying words “of like kind and quality” permit but do not require an engine of similar age, use, condition, or present cash value; they refer simply to repairing the damaged car so that it is suitable for it’s intended purpose.
In conclusion the court said, “If Great Texas may discharge its obligation by paying Lewis $1,049.55, he will not have, under the evidence, a sum sufficient to restore his engine and car to a functioning state. He will be deprived of the protection ostensibly purchased in his policy – protection against the risk of having to pay out his own pocket to restore his car and its parts to a functioning state in the event they are damaged. The insurance company is not entitled to a deduction for depreciation in the event of a partial loss, as distinguished from a total loss.”
Updated: