Collecting for Loss-of-Value and Loss-of-Use
In its recent decision in Hellenbrand v. Hillard, et al., the District IV of the Court of Appeals clarified the rules, which govern claims against third parties for loss-of-value and loss-of-use of a vehicle stemming from an accident. The court concluded that a person whose vehicle is damaged may be entitled to maintain a claim for the consequent loss-of-value, even though the vehicle has been fully repaired. In addition, the court found that when the defendant elects to repair the vehicle, a potential claim exists for the loss-of-use of the vehicle, even if the owner purchases a similar vehicle. The court grounded its decision on the fundamental principle that a person who has suffered damage through another’s negligence should be made whole and, in doing so, rejected the defendant’s attempt to significantly limit the scope of the made whole doctrine in cases involving damage to vehicles which are repairable.
A Factual Backdrop
The plaintiff purchased a 2001 Honda Odyssey minivan for $24,500.00 and was understandably unhappy when it sustained serious damage in an accident five months later. The defendant’s insurer, American Family, accepted responsibility for the accident and concluded that the vehicle could be repaired. Hellenbrand initially rented a vehicle and approximately one month post accident purchased another 2001 Honda Odyssey minivan. The repairs on the damaged minivan were not completed until August 3, 2001, and Hellenbrand eventually sold that vehicle for $19,000.00. Hellenbrand subsequently produced evidence that prior to the accident the vehicle had been worth $23,000.00 and the post repair value was $19,000.00.
The Hellenbrands claimed that they were entitled to be compensated for the $4,000.00 disparity in the value of the vehicle pre-accident and post-accident. They further contended that they were entitled to be compensated for the loss-of-use of their vehicle during the period it was being repaired, despite the fact that they had purchased another vehicle.
American Family asserted that there could be no recovery for diminution of value once the vehicle was successfully repaired. They also contended that any claim for loss-of-use terminated upon purchase of what they characterized as a replacement vehicle.
The trial court granted summary judgment in favor of American Family in part on procedural grounds, but based principally upon the court’s perception that American Family was correct on the merits. Hellenbrand appealed.
Does Fix Equal Made Whole
The parties took dramatically different approaches to what was effectively an issue of first impression. Can the owner of a vehicle recover for any provable loss in its value even after it has been successfully repaired?
Hellenbrand argued that the fundamental purpose of tort law is to make the victim whole. If the repaired vehicle was, in fact, worth $4,000.00 less than it had been just prior to the accident, simply repairing and returning the vehicle to them did not make them whole.
American Family relied on two cases: Nashban Barrel & Container Co. v. G.G. Parsons Trucking Co., 49 Wis.2d 591, 601, 182 N.W.2d 448, (1971) and Krueger v. Steffen, 30 Wis.2d 445, 141 N.W.2d 200 (1966). Those cases are reflected in Wisconsin Jury Instruction – Civil 1804. Based on the case law and the instruction, American Family argued that when damaged personal property is repairable, recovery is limited to the lower of two measures of damages:
- The cost or estimated cost of repair, or
- The diminution in fair market value.
The Court of Appeals analyzed both the Nashban Barrel and Krueger decisions, and concluded that they did not support the position advanced by American Family. The Court of Appeals first pointed out that while the Supreme Court affirmed an award in Krueger which was based on diminution in value evidence, the court did not conclude that this was the proper amount because it was less than the cost of repair. The court pointed out that Krueger did not contain an all encompassing rule that limited damages to either repair costs or diminution in value, whichever was lower.
In analyzing Nashban Barrel, the Court of Appeals noted that the Supreme Court had faulted the Circuit Court for failing to instruct a jury that one possible measure of damages was the cost of repair. The Court of Appeals went on to note, however, that the loss-of-value issue inNashban Barrel was a narrow one, and what was before the Supreme Court was the failure to give Wisconsin Jury Instruction – Civil 1804, under circumstances where the failure to give the instruction effectively forced the jury to calculate diminution in fair market value and barred the jury from awarding a lower cost of repair amount. In Nashban Barrel, the Supreme Court was dealing with damage to property which had “no readily ascertainable market value” and could be repaired at a cost lower than the market loss value asserted by the plaintiff. The Supreme Court in Nashban Barrel did not conclude that the pattern jury instruction was sufficient in all cases where an item of property was repairable.
The court went on to cite the Supreme Court’s decision in Kim v. American Family Mutual Insurance Company, 176 Wis.2d 890, 501 N.W.2d 254 (1993), where the Supreme Court concluded: “As a practical matter a court cannot anticipate every factual scenario that could be presented in determining how to phrase an opinion. The fact situation presented in this case was not presented or addressed in the Nashbancase.”
The Court of Appeals found that language apt because it determined that neither Nashban Barrel nor Krueger presented the opportunity to address the arguments advanced by Hellenbrand. In neither case had the plaintiff argued that an item of property which had been repaired and returned had sustained a loss-of-value. It concluded, “In that situation awarding a plaintiff the amount needed to repair the property has the effect of fully compensating the plaintiff for his or her loss.”
In reaching that conclusion, the court noted that the Court of Appeals decision in Hawes v. Germantown Mutual Insurance Co., 103 Wis.2d 524, 309 N.W.2d 356 (Ct. App. 1981) was instructive. Hawes involved the collapse of a home’s basement walls and the trial court awarded damages which included both the repair cost and the diminished value of the home after repair. The Court of Appeals in Hawes rejected the defense contention that damages were limited to the lesser of cost of repair or diminution in value based on Laska v. Steinpreis, 69 Wis.2d 307, 231 N.W.2d 196 (1975). After distinguishing Laska because it dealt with loss-of-value before repairs, the court went on to state, “The diminution in value which the trial court awarded in addition to cost of repair does not fall within the rule of Laska, but is in the nature of special damages. It reflects evidence that the repairs, when made, will not restore the property to its pre-collapse value.”
American Family contended that the Hawes decision should not be given weight because it involved real property and had not been followed by other courts. The Court of Appeals found neither argument persuasive. American Family also contended that Hawes was in conflict with Wisconsin Jury Instruction – Civil 1804. The Court of Appeals also rejected that argument, stating, “Suffice it to say here that we agree withHellenbrand that WIS JI – CIVIL 1804 is a useful instruction, but one that does not cover all valid damages theories when an item of personal property is repairable.”
The court held, “…when a plaintiff proves that repairs to personal property have not restored the property to its pre-injury value, and the plaintiff demonstrates that he or she has been or will be harmed by such loss in value, the plaintiff is entitled to damages for the proven lost value.” The court qualified its holding by noting that a particular area of the law may contain an established exception to the general made whole rule, citing Schubbe v. Peninsula Veterinary Service, Inc., 204 Wis.2d 37, 552 N.W.2d 634 (Ct. App. 1996), which determined that damages should not be higher based on a particular plaintiff’s inability to afford replacement calves.
The court also noted that it was not addressing what would occur if the repair costs, plus the loss-of-value after repaired damages exceeded the fair market value of the vehicle prior to the accident. The court reversed the grant of summary judgment with respect to the loss-of-value claim and remanded for further proceeding on that issue.
When is Loss-of-Use Not Really a Loss?
The defendants did not dispute the viability of the Hellenbrands’ claim for the loss-of-use of their vehicle, but the parties differed dramatically as to the scope of that claim. The defendants argued that all rights ended when Hellenbrand purchased a new minivan, approximately twenty-eight days after the accident, even though the damaged van was still undergoing repairs at the time. Hellenbrand asserted that they were entitled to be compensated for loss-of-use during the entire period that the vehicle was under repair.
The Circuit Court accepted American Family’s legal argument that Hellenbrand had purchased a permanent replacement vehicle and that purchase terminated any claim for loss-of- use.
Hellenbrand argued that the fact that the owner of a damaged vehicle decided to purchase a new vehicle while repairs were underway should not bar a claim for loss-of-use. The Court of Appeals agreed with Hellenbrand, “…when a vehicle is repaired and returned to its owner, the relevant loss-of-use time period does not end simply because the owner decides to cope with loss-of-use by purchasing a vehicle.” The court went to state, however, that there was a material factual dispute as to the extent of any compensable damages which Hellenbrand had incurred.
American Family again cited Nashban Barrel, this time for the principle that the proper measure of damages for loss-of-use of a vehicle is the cost of buying or renting another vehicle during, “either the period of replacement or repair.” American Family also cited the Kim decision for the proposition that the purpose of the law governing damages for loss-of-use “is to limit damages to the period of time in which the claimant is burdened by the loss of his vehicle.”
The Court of Appeals noted that American Family’s argument confused the common usage of “permanent replacement” with a more particular meaning that term has in cases involving claims for loss-of-use. The Court of Appeals found that this term was properly used when a claimant is notified that a damaged vehicle would not be repaired and an agreement is reached that the claimant may acquire a permanent replacement vehicle. In that instance, the claimant is made whole when he receives damages for loss-of-use up until the time money is tendered toward the purchase of the replacement vehicle. That was not what occurred here.
The Court of Appeals noted that the Nashban Barrel decision made reference to allowing damages for loss-of-use
- During a time period reasonably required for replacement, including time required to determine whether the vehicle was repairable and
- An amount equal to that which was actually expended.
The Kim decision clarified Nashban Barrel, holding that loss-of-use damages may be appropriate even when a party does not expend money for a temporary replacement vehicle. The Kim court stated that loss-of-use was not dependent on a claimant having procured a replacement vehicle. As the court noted, “Whether a replacement vehicle is unavailable or a claimant does not choose to procure a replacement, the claimant suffers the loss of the use of the vehicle. While measuring damages may be more difficult in the absence of a replacement vehicle, claimant remains entitled to receive as damages such sum as will compensate for the loss of use of the vehicle.”
Based upon the Nashban Barrel and Kim decisions, the Court of Appeals held, “a claimant may recover loss-of-use damages for the time his or her vehicle is unavailable because of the accident and efforts to repair the vehicle, and such damages are available regardless of whether the claimant copes with the loss of use by renting a temporary replacement vehicle, purchasing a vehicle, or taking some other action.” The Court of Appeals felt that the evidence concerning Hellenbrand’s compensable loss-of-use damages was not sufficiently developed and returned that matter to the trial court for its determination.
Hellenbrand establishes the right to be made whole for the loss in value of a vehicle which has been repaired following an accident. It is important to note that the decision applies only to claims against parties who negligently cause damage to a vehicle. First party claims under the collision or comprehensive sections of the policy are subject to the terms of the policy and fall outside the scope of this decision. While we believe the plaintiff’s burden of proof on this issue can be met by providing testimony from an automobile dealer or other appropriate expert, the court in Hellenbrand did not have to come to grips with that issue.
Given the availability of services which report prior damage to a vehicle, and the seller’s obligation to provide such information, it would appear that claims for loss-of-value will be justified in a number of cases. This consideration may also tip the scales in the direction of declaring a vehicle a total loss when a newer vehicle sustains substantial damage.
The proper measure of damages for loss-of-use will likely not present in this specific factual context in most cases. It is, however, quite common to have companies argue that another vehicle was available to the plaintiff and, therefore, they sustained no actual damage. While the Hellenbrand decision does not define with specificity how those damages are to be measured, it does establish the right to maintain a claim for such damages until the vehicle is repaired and returned to the owner.
To subscribe to email alerts from Axley Law Firm, click here.