V. Insurer's Limit of Liability and Measure of Damages
Library | The Law of Automobile Insurance in SC (SCBar) (2015 Ed.) |
V. Insurer's Limit of Liability and Measure of Damages
A. General
The measure of damages in physical and property damage47 cases generally depends upon whether the vehicle is a total loss or a partial loss.48 Most policies provide one measure of damages for both total and partial first-party physical damage losses: the lesser of the (a) actual cash value of the stolen or damaged property or (b) the amount necessary to repair or replace the property. Other, more expensive coverage provides for a replacement cost method. In cases involving first-party claims, the insured is entitled to the appropriate contract measure of damages provided for in the purchased policy, less the amount of any deductible.49 The wording of the insuring agreement, together with any exclusions or conditions therein, directly affects the amount and method of recovery.
In third-party property damage cases, the plaintiff is entitled to damages under standard common law negligence tort principles, without any decrease by way of a deductible. As a practical matter, aside from the deductible, the measurement of damages is often the same in both first-party and third-party cases. Interestingly, laypersons in South Carolina have generally been allowed to express their opinion within state courts as to the value of their own personal property and the amount of damages sustained.50 This matter is controlled by the South Carolina Rules of Evidence. The rule governing opinions by laypersons is Rule 701, SCRCP. Rule 701 is substantially the same as the Federal Rule, as well as prior South Carolina common law.
B. Duty to Mitigate
In both first-party and third-party cases, the vehicle owner may be entitled to recover costs directly resulting from the accident, such as towing and rental car charges.51 Many policies require the insured to take reasonable steps to protect the vehicle from further loss — such policies pay the insured only the reasonable costs incurred.52 Under common law, the owner of property that is injured by another person's negligence also has the duty to use all reasonable effort to minimize the damage.53
The amount of damages awarded may be reduced if the plaintiff fails to avoid reasonably preventable losses.54 Generally, "[a] party injured by the acts of another is required to do those things a person of ordinary prudence would do under the circumstances, but the law does not require him to exert himself unreasonably or incur substantial expenses to avoid damages."55 This rule this applies to damages which one can prevent, rather than damages which have already been accrued.56 For example, a truck owner was not permitted to recover for the loss of use of the truck for three years because the truck owner had a duty to minimize his damages and secure alternate transportation during such an extended period of time.57 Note, however, a plaintiff has no requirement to have his vehicle repaired in order to be entitled to recover his damages.58
The party asserting a lack of due diligence in minimizing damages has the burden of proving such a claim by a preponderance of the evidence.59 The reasonableness of actions to mitigate damages is ordinarily a question for the jury.60
C. Total Loss
When an automobile is damaged beyond repair, the insured "is entitled to recover within the limits of the policy, the fair market value of the car immediately prior to the accident, minus the salvage value immediately after the accident."61 Damages for loss of use following a total loss were generally not awarded by the trial courts under the common law. However, loss of use may be recoverable where there is an unavoidable delay in time required to secure a replacement vehicle. For example, in Laney Tank Lines, Inc. v. United States, the court permitted recovery for loss of use after total loss of a tractor trailer because the evidence demonstrated that, at minimum, the delivery time for a replacement tractor trailer was 90 days, and replacement actually took four months.62 Further, even after delivery, some added time was required for proper setup and licensing. Importantly, evidence was introduced that alleged that the destroyed unit was necessary for the claimant's business. The Court noted, "[u]ncontradicted is its testimony that the destroyed equipment was needed, missed, had to be substituted for, [and] was eventually replaced."63 While acknowledging the general rule disallowing recovery, damages for loss of use were justified in these circumstances.
The Restatement (Second) of Torts takes the position that "[t]here are, however, cases in which the loss of use is not otherwise compensated; and in them the plaintiff may recover damages for it . . . . [One] type of case is that in which the plaintiff is unable promptly to find a replacement for the chattel on the market and is deprived of use during the period of delay. The loss of that use is not made good by a subsequent purchase and it is therefore compensable."64
The burden of proving that the vehicle is a total loss falls on whichever party — insured or insurer — claims the vehicle to be a total loss. Unlike an estimate of the property's value, the opinion of the owner is generally insufficient to demonstrate total, rather than partial, loss.65 It is incumbent on the party claiming a total loss to demonstrate by specific facts that a total loss of a vehicle has occurred. There must be something more than generalizations and the opinions of the owner.66
Insurers may declare a vehicle a total loss over the insured's objections when the vehicle is severely damaged, especially an old vehicle with a diminished market value. In that case, insurers pay the vehicle's market value immediately prior to the accident, rather than the higher cost of repair.67 In some instances, the insured cannot afford to replace the vehicle for the value at the time of damage offered by the insurer and would prefer to have the vehicle repaired. One avenue of compromise is for the insured to bargain with the insurer to accept a fair value, less the deductible and salvage amount, for the total loss of the vehicle, and retain ownership of the vehicle. The owner may then apply for a new title after the original has been delivered to the Department Motor Vehicles for cancellation. The insured can then attempt to repair the vehicle. However, the vehicle will most likely be devalued by the mandatory issuance of a salvage title by the Department of Motor Vehicles.
Many insurers use formulas to declare a vehicle a total loss. These formulas are generally based on the cost of repairs as a percentage of the fair market value of the vehicle immediately preceding the accident. Technically, a vehicle is a total loss when the cost of repairs plus the salvage value exceeds the market value of the vehicle. In addition, S.C. Code Ann. § 56-19-485 requires the titles to vehicles, when the total cost of repairs exceeds 75% of the vehicle's fair market value, to be permanently labeled as salvage.
D. Insurer's Duties after a Total Loss
If a vehicle is either acquired by an insurer or left with an insured after being declared a total loss by the insurer, then that insurer or its agent is required to immediately deliver the certificate of title for cancellation to the Department of Motor Vehicles with a report indication the type of damage, for example, fire or collision, and the severity of damage to the vehicle.68 If the insurer subsequently intends to transfer the damaged vehicle, then the insurer must notify the Department of Motor Vehicles, using a form detailing to whom the transfer will be made. The insurer may then effectuate the transfer. The manufacturer's serial plate and the vehicle identification number, or VIN, must remain attached to the vehicle at all times until the vehicle is destroyed.69
In Snyder's Auto World, Inc. v. George Coleman Motor Co., the South Carolina Court of Appeals affirmed a verdict in favor of Snyder's Auto on an unfair trade practice action for damages incurred when, after repurchasing a vehicle from a customer, Snyder's discovered that the vehicle had previously been wrecked, salvaged, and rebuilt.70 The court held...
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