INDIANAPOLIS – The Indiana Supreme Court today ruled that insurance policies are not obligated to compensate damaged property for decline in value of the property after adequate repairs have been made. The insurance industry views the ruling as a major clarification of the ambiguity and confusion that has surrounded the diminished value issue for years.
The Insurance Institute of Indiana participated in the case by submitting an Amicus Curiae brief, prepared by the law firm of Bose McKinney & Evans, arguing that the language in the policy in question clearly states that diminished value is not included as a "loss".
The class action suit, Allgood v. Meridian Security Insurance Company, was brought by a policyholder who claimed Meridian Insurance should have reimbursed her for the decline of value of her repaired car as a result of it having been damaged. The trial court ruled in favor of the insurance company, but the Indiana Court of Appeals reversed the decision.
The Indiana Supreme Court denied transfer on October 27, finding "that an insurance policy that provides coverage for loss limited to the lesser of the actual cash value or the amount necessary to repair or replace the property with other property of like kind and quality does not obligate the insurer to compensate for diminution in value of the property after adequate repairs have been made."
Insurance Institute President Stephen A. Williams called the decision a critical victory in upholding the integrity of insurance contracts.
"The class action suit sought to redefine the meaning of the language in a policy" Williams said. "The plaintiffs were seeking a tort based solution to a matter that should clearly be based on the coverage provided within the scope of the insurance policy.
"This will provide insurers with a level of security in the language they use in a particular contract," Williams continued. "It should be clear to insurers doing business in Indiana that the integrity of the language in their policies is being honored."
All five justices voted to affirm the trial court’s dismissal of the case.
The Insurance Institute of Indiana is a non-profit state trade association representing property/casualty, health and life companies doing business in Indiana.
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