Royal Capital Development LLC v. Maryland Cas. Co. Holds Diminution in Value Recoverable Under First-Party Property Policies in Georgia

     On May 29, 2012, the Georgia Supreme Court issued its decision in Royal Capital Development LLC v. Maryland Cas. Co., Case No. S12Q0209 (Ga. 2012), and, in what may be a first of its kind decision, found that diminution in value or “stigma” damages may be recoverable under a property policy.  The decision was predicated on a line of Georgia cases largely addressing similar issues under automobile policies.

     Since 1926, it has been the rule in Georgia that, under an insurance policy, “the measure of the liability would be the difference between the value of the property immediately before the injury and its value immediately afterwards."  U.S. Fidelity & Guaranty Co. v. Corbett, 134 S.E. 336 (Ga.App. 1926).  How that applied to modern insurance policy wording, however, was unclear.  

     In 2001, affirming a class action against insurers, the Georgia Supreme Court held that insurers were required to inform insureds of their right to recover diminution in value under first-party automobile policies, permitting class actions to proceed.  In State Farm Mut. Auto. Ins. Co. v. Mabry, 556 S.E. 2d 114 (Ga. 2001), the Georgia Supreme Court held that an automobile insurer’s obligation to pay for loss includes paying for diminution in value and that an insurer is required to consider diminution in value even if the insured does not make a claim for that element of loss. Id. at 122.  In Mabry, the Court also upheld an injunction requiring State Farm to evaluate and pay all first-party physical damage claims for the existence of diminution in value, to develop an appropriate methodology for making such evaluations, and to collect, catalog, and maintain any information necessary to determine the amount of any diminution in value.  Id. at 123-24.  

     In the wake of Mabry, insurers paid hundreds of millions of dollars in settlements and incurred sanctions totaling tens of millions of dollars for failing to comply with injunctions.

     On May 29, 2012, the Georgia Supreme Court extended the logic of Mabry to a first-party commercial property loss.  Royal Capital claimed diminution in value from the stigma of having suffered a loss caused by construction on an adjacent property.  Royal Capital’s insurer, Maryland Casualty, paid over $1 million in actual losses but refused to pay diminution in value.  The Eleventh Circuit Court of Appeals certified the potential application of Mabry to the property insurance field to the Georgia Supreme Court, which held that stigma damages may be recovered, subject to the wording of the particular insurance policy.    

  

     This appears to be a first of its kind ruling and the reach of the decision remains unknown.  Currently, there is a split of authority among U.S. states regarding whether diminution in value is recoverable for automobile claims, and it remains unknown whether some of those states will follow Royal Capital.  If you have any questions or would like to discuss these issues further, please do not hesitate to contact Paul L. Fields, Jr. (404-214-1252; pfields@fieldshowell.com) or Gregory L. Mast (404-214-1262; gmast@fieldshowell.com).

Fields Howell Recognized as Insurance Law Leader

U.S. News & World Report’s Best Law Firm Ratings designated Fields Howell a Tier One (highest tier) Insurance Law firm. The publication’s rankings are based on surveys of thousands of law firm clients, leading lawyers and law firm managers, partners and associates, and marketing officers and recruiting officers.

Mike Athans, Matt Barrett and Jeff Kershaw represent Fields Howell on the Council on Litigation Management. Mike has been one of CLM's Georgia Chairs since the organization's inception three years ago, and he became the lead Georgia Chair in 2010. Mike was a speaker at the 2010 CLM annual conference, is a member of CLM's bad faith committee, and has taught CLM's claim handling and litigation management classes for insurance company professionals at Colony Specialty, Arrowpoint, Infinity, Merchant's and McGriff Seibels, among others. CLM is an alliance of corporations, insurance companies, law firms and service providers committed to furthering the highest standards of litigation management.

Bob McLaughlin, Emily Bramer and Nikki Baker received a plaintiff's verdict in a pro bono case.

Bob McLaughlin, Emily Bramer and Nikki Baker received a plaintiff's verdict in a pro bono case last week. The case involved a lawsuit against one of four individuals responsible for beating up the plaintiff and breaking his jaw. The defendant refused to settle, arguing that he did not participate in the beating. The verdict for the plaintiff was $95,000, $75,000 compensatory damages and $20,000 punitive damages, after a two-day trial.

Fields Howell attorneys Richard Zelonka and Christy MacPherson recently obtained a victory on behalf of their restaurant client.

Fields Howell attorneys Richard Zelonka and Christy MacPherson recently obtained a victory on behalf of their restaurant client in a slip-and-fall lawsuit in the State Court of Carroll County. In granting Richard and Christy’s Motion for Summary Judgment, the Court adopted their argument that the Plaintiff could not prove that, despite exercising ordinary care for her own personal safety, she lacked knowledge of a stack of bathroom mats due to the restaurant’s actions. The Court also agreed that the Plaintiff could not create a question of fact simply by submitting an affidavit contrary to her prior deposition testimony, and that any such conflict must be construed against her. The Court held that Richard and Christy had established Plaintiff’s knowledge of the mats by evidence in the record, to a level of being plain and palpable, and that the jury’s intervention was not required.

Fifth Circuit Holds that International Insurance Contracts are Subject to Arbitration Regardless of Individual States’ Laws

The United States Court of Appeals for the Fifth Circuit held earlier this week that state law does not reverse-preempt the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a treaty requiring its signatories, including the United States, to recognize written agreements to arbitrate. At issue was a Louisiana statute providing that no insurance contract delivered in that state could deprive Louisiana’s courts of jurisdiction in any action against an insurer, a provision frequently cited by Louisiana courts in invalidating arbitration provisions in insurance contracts. The United States District Court for the Middle District of Louisiana had held that the McCarran-Ferguson Act, a federal law expressly leaving the regulation of insurance up to the states, required the application of Louisiana’s statute. The Court of Appeals disagreed, however, since the Act specifies only that no “Act of Congress” will supersede state law without addressing the effect of treaties.

The case is Safety Nat’l Cas. Corp. v. Certain Underwriters at Lloyds, London, No. 06-30262 (Nov. 16, 2009).

Chinese Drywall Presentation at 2009 FETTI Conference

Matt Barrett and Jeff Kershaw discussed the insurance coverage implications of Chinese Drywall on Friday, October 2, 2009 at the 2009 FETTI Conference in Chicago. The National Forum for Environmental & Toxic Tort Issues (FETTI) is an organization that was created by the environmental sector of the insurance industry. Members are typically individuals, companies and firms actively engaged in the adjustment, settlement and defense of casualty or property claims arising out of environmental damage or exposure to toxic substances.

From 2004 through 2006, drywall manufactured in China was imported for residential construction projects. This “Chinese drywall” was used across the country but mostly in Florida, where there was a housing boom, and in Louisiana, in the aftermath of Hurricane Katrina. Thereafter, homeowners began complaining of foul odors, corrosion, and respiratory and other health problems that they attributed to the drywall. Although hard science regarding the causes of these issues or the drywall’s purported effects remains scarce, claims have be been made and lawsuits filed since reports began surfacing in late 2008. Matt and Jeff's presentation focused on coverage defenses available with regard to drwyall-related damages under commercial general liability, first-party, and pollution liability insurance polices.

For more information including a copy our paper titled "Chinese Drywall: Coverage Implications," please contact Matt Barrett at mbarrett@fieldshowell.com or (404) 214-1733.

Fields Howell attorneys Mike Athans and Matt Barrett received a favorable decision

Fields Howell attorneys Mike Athans and Matt Barrett received a favorable decision from US District Court Judge Louis Sands on September 30, 2009, granting summary judgment to their clients, CNA insurance companies, in a construction defect insurance coverage Declaratory Judgment action in the Middle District, Georgia. Judge Sands ruled that alleged defective construction of apartment buildings in Columbus that resulted in settling, cracking and other alleged damage needing repair did not constitute an accident or occurrence under Georgia law. Therefore, the insurers did not have an obligation to defend or indemnify the insured general contractor that was sued by the property owner in the underlying lawsuit.