Two auto policyholders were involved in separate accidents. Both autos were insured by State Farm Mutual Automobile Insurance Company. The policyholders filed claims for damages with their insurer, which included loss of market value due to their vehicles being wrecked (diminished value). State Farm denied this portion of their claims, alleging that their auto policy did not provide coverage for that category of loss. The policyholders filed a lawsuit accusing the insurer of breach of contract. The breach lay in the company’s failure to provide coverage for diminished value, a type of loss the policyholders expected was eligible for recovery. The trial court certified a group of suits into a class action and granted a declaratory judgment. The lower court ordered State Farm to handle requests for diminished value as eligible losses. The insurer appealed.

The State Supreme Court reviewed the lower court action and agreed with its decision. In both courts’ opinion, the insurer’s policy provides coverage for tangible losses including a loss in value that is related to the fact that a vehicle has been damaged in an accident. The fact that the insurer pays for repairs which, visibly, restores a vehicle to its pre-loss condition does not affect a claim for diminished value. The insurer was ordered to process any claim for diminished value by assessing such losses and, when applicable, paying claimants.

State Farm Mutual Automobile Insurance Company v. Mabry et al. GASCT. No. SO1A0982 filed November 28, 2001. Affirmed. www.appeals.courts.state.ga.us/opinions/index.cgi (downloaded 12/27/01)

(Editor’s Note: On December 7, 2001, Georgia’s Office Of Insurance And Safety Fire Commissioner, issued Directive NO. 01-P&C-1. This order requires all of the states authorized insurers to make assessments of diminished value as a routine part of its physical damage claim adjustments.)