(Editor’s Note: This following "classic" case demonstrates that settlement assumptions have always been battled within the courtroom. While we currently debate diminished value as a legitimate loss, previous suits argued over settlement approaches which, today, we consider to be a "given.")

Issue: The insured 1972 Chrysler Newport was "totaled" and the insurance company admitted liability, but there was a dispute as to the amount of the loss. The company wanted to settle on the basis of a publication known as the National Auto Dealers Association Book, which listed the average retail value of all automobiles together with variables for extra equipment. Other listed variables included high mileage, which decreased the value. The company’s offer of settlement was the average price, as listed, plus allowance for a vinyl roof, less a high mileage deduction and the $25 deductible. The insured contended the valuation was too low, citing extra equipment such as radio, automatic transmission, power steering, power brakes, air conditioning and the vinyl roof. While it had relatively high mileage, its general condition was described as "good," "excellent" or "topnotch."

Judgment: The insured finally filed suit to recover the value of his car, plus interest and attorney’s fees, on the grounds that there had been a vexatious refusal to settle. The trial court found in favor of the insured for $2,575 as the value of the car, but refused to allow interest and attorney’s fees. The company appealed the judgment concerning the valuation of the car, and the insured cross-appealed the issue of interest and legal fees.

The company relied upon Section 7 (Illinois Insurance Code) which provided that the company could elect a cash settlement "based upon the retail value of the automobile as published in a generally recognized source that is uniformly and regularly used by the company. Any deviation from this procedure must be supported by documentation that gives detailed information about the automobile’s conditions." The paragraph concluded with the statement, "Any additions or subtractions form the base dollar figure must be identified and explained."

The Court said:

"The purpose of the rule in our opinion was to fix in the abstract a generally recognized and accepted base value for an average automobile, and then adjust that figure upward, or downwards, depending upon the particular features and condition of the specific automobile in question. We find nothing in the language of the rule which makes it ironclad either as a maximum or minimum settlement figure, but rather we find it dictates flexibility for both the insure and the insured"

The court concluded that portion of the appeal by stating that when the matter passed the settlement stage and arrived at the litigation stage, the court will use the familiar rules of law in assessing damages. It said further:

"All of the witnesses, including defendant’s own, arrived at the cost of a specific, comparable and available vehicle, such cost being what a willing buyer would have paid and a willing seller would have taken. This is the proper measure of damages…"

The higher court further found that the company was justified in its failure to settle since it showed that it had relied upon the state’s regulation; therefore, the insured was not entitled to interest and legal fees. The judgment of the trial court in favor of the insured for $2,575 for the value of the car, but disallowing interest and attorney’s fees, was affirmed.

Crandall v. Country Mutual Insurance Company. No. 15659. Appellate Court of Illnois, Fourth District. February 15, 1980. 400 North Eastern Reporter (2d) 1100. - (Rough Notes Magazine, January 1981)