67 The Alabama Lawyer 260 (2006). Making the Plaintiff-Property Owner Whole - The Recovery of Stigma Damages.

• Author: BY STEPHEN T. ETHEREDGE

The Alabama Lawyer

2006.

67 The Alabama Lawyer 260 (2006).

Making the Plaintiff-Property Owner Whole - The Recovery of Stigma Damages

Making the Plaintiff-Property Owner Whole: The Recovery of Stigma DamagesBY STEPHEN T. ETHEREDGE Litigation arising from damage to homes and business properties, whether arising from subterranean termites, mold or chemical contamination, is increasing. The arguments and/or possible explanations for the increases are varied and often depend upon the position being advocated. Whatever the reason, lawyers and clients have come to the realization that simply recovering the costs of repairing damage often is not sufficient to make the client whole. A negative market perception exists to cause a diminution in the market value of property even after repairs have been made. Who among us would not choose the undamaged automobile rather than the one that has been severely damaged and repaired? Just as clearly, who would not choose to avoid problems with termites, mold or chemical contamination even when we are told that the problems have been repaired or remediated?

The concept of stigma damages is often overlooked as a factor in the proper measurement of damages to real property. Are such damages recoverable and, if so, how do you prove them? These are questions which will be addressed.

The starting point for such an analysis is a review of the measure of damages to property as recognized by Alabama law. In Fuller v. Fair, 202 Ala. 430, 80 So. 814 (1919) the court set forth the following methods of measurement which remain applicable today:

"From the cases, a statement of the measure of damages to real estate may be said to be: (1) If the land is taken, or its value totally destroyed, the owner is entitled to recover the market value thereof at the time of the taking or destruction, with legal interest thereon to the time of the trial. (2) If the land is permanently injured, but not totally destroyed, the owner will be entitled to recover the difference between the market value of the land at the time immediately preceding the injury and the market value of the land in its immediate condition after the injury, with legal interest thereon to the time of the trial. (3) If the land is temporarily, but not permanently, injured, the owner is entitled to recover the amount necessary to repair the injury or to put the land in the condition it was at the time immediately preceding the injury, with legal interest thereon to the time of the trial."

Thus, the proper measure of damages for injury to real property varies with the type of injury, but the underlying principle of such damages was succinctly stated in Rickenbaugh v. Asbury, 28 Ala. App. 375, 185 So. 181 (Ala. App. 1938): "the measure of damages is such sum as will compensate the person injured for the loss sustained, with the least burden to the wrongdoer consistent with the idea of fair compensation, and with the duty upon the person injured to exercise reasonable care to mitigate the injury, according to the opportunities that may fairly be or appear to be within his reach, and the same rule obtains whether the loss is claimed for injury to property, personal injury, or breach of contract."

Placing the temporary injury/permanent injury concept into context may be assisted by reviewing some all too common scenarios of property damage involving both temporary and permanent injuries to property.

Typical Property Damage Scenarios

The following factual statements were selected from actual cases. Where the names of one or more of the parties are mentioned the factual statements were taken either from actual cases or appellate decisions.

(1) Buyers execute a "Real Estate Purchase Agreement" whereby they agree to buy the sellers' home. As part of the contract, the sellers agree to pay for a termite inspection conducted by a licensed or bonded pest control operator for the purpose of establishing that the property is free and clear of any active infestation or damage by wood-destroying insects or fungus. Sellers also agree that, if possible, they will transfer the existing termite bond on the house to buyers at closing. Terminix, the sellers' existing termite company, performs the inspection and renders a wood infestation inspection report (WIIR). The WIIR, delivered at closing, represents the home to be free of any evidence of an active infestation of the five specified wood destroying organisms identified in the report, including subterranean termites; it further identifies a previous infestation of subterranean termites in the garage, but states it has been re-treated and "proper measures were taken care of." In addition, the WIIR indicates that Terminix had treated the residence in January 1992 and that there is a contract providing treatment warranties which can be transferred to subsequent owners upon proper payment. The purchase and sale are completed and the Termite Protection Plan is transferred to the buyers. Within days after the closing buyers discover an active infestation of termites. Terminix is called upon to re-treat. In the months following the closing, buyers continue to discover additional areas of termite infestation and damage to their house and additional claims for re-treatment are made. In less than ten months the buyers' home is treated four times and live infestations continue to be found. Investigation reveals that three days prior to closing and prior to delivery of the WIIR at closing, Terminix, with knowledge of and at the direction of sellers, re-treated due to an active infestation of subterranean termites to an area of the house which was not disclosed in the WIIR. Everyone in the neighborhood, if not most of the small town, is aware of the continuing termite problems at the buyers' home.

(2) In the factual recitation of a Florida appellate decision to be discussed later, DelGuidice completed the construction of his 10,000-square-foot, $1.3 million dollar, home. Two years later he purchased from Orkin a termite protection plan providing for an initial treatment and, if necessary, subsequent retreatment and repair of termite damage provided DelGuidice annually renewed the contract. During the course of seven years...