Indiana Court of Appeals Addresses Damages for Inherent Diminished Value of Personal Property

On February 19, 2020, the Indiana Court of Appeals issued an opinion that clarified whether plaintiffs can recover damages for the inherent diminished value of personal property caused by the negligence of a tortfeasor. In Shield Global Partners-G1, LLC v. Lindsay Forster, the defendant rear-ended a pickup truck and admitted the accident was her fault. The truck was repaired after the accident occurred and was appraised twice in order to determine its diminished value. The plaintiff then filed a negligence action against the defendant to recover damages for the inherent diminished value of the truck following repairs.

The trial court initially denied the plaintiff’s claim for damages for the diminished value of the truck by equating these damages to “stigma” damages, which are not recoverable unless the property is permanently damaged. However, the Indiana Court of Appeals interpreted the case relied on by the trial court, Wiese-GMC, Inc. v. Wells, to reach a different conclusion.

The Wells case established, among other things, that diminished value damages are recoverable when “repair will not restore the item of personal property to its fair market value before the causative event.” The Indiana Court of Appeals therefore read this case to mean that, “even if the repair restores the property to its previous condition, damages may still be recovered if there is a resulting loss of fair market value to the property as a result of it having been damaged and then repaired.”

The Court of Appeals went on to discuss how property that has been damaged is likely to have a lesser fair market value even if repaired. In other words, recovering the cost of repair is not always sufficient to make an injured party whole again. Even after repairs, an owner may not be able to sell the vehicle at its fair market value before the accident. The Indiana Court of Appeals therefore clarified that when the cost of repair will not restore personal property to its fair market value, the diminution in value may be recovered as well.

Coverage Issues After Catastrophic Losses

The recent catastrophic warehouse fires in Indianapolis and Fort Wayne are a good occasion to consider what type of coverage is best on large, older industrial or commercial buildings that have useful purposes but may, in fact, be impossible or impractical to replace.  It is also a good time to think about what amount your insurance company may owe you for business interruption or business income loss where it is not possible to return to business in the location where the original facility was located.

Many small to medium business owners have Business Owners Policies (“BOPs”) that are sold on a standard form.  These policies typically include coverages for things like loss of electronic data processing equipment, business interruption and extra expense, and coverage for all major property and liability risks.  They are often sold with additional optional coverages or endorsements which modify the standard terms of the policy.  In the case of an older building that is more difficult to rebuild or replace, such policies may include extended business income coverage that could provide additional recovery for your business.  A BOP with replacement cost coverage covering a building that is incapable of being replaced may present difficulty in calculating the amount owed under the policy.

Some owners of older properties choose to insure them pursuant to “actual cash value” policies.  In that case, Indiana’s Broad Evidence Rule should be applied, and the fact-finder should consider “all available evidence logically tending to establish” actual cash value.  See, e.g., Ohio Cas. ins. Co. v. Ramsey, 439 N.E.2d 1162, 1168 (Ind.Ct.App. 1982).

If your business has suffered a catastrophic loss, or even a minor one, or if you simply want to review your coverage, it is advisable to speak with an attorney knowledgeable about these types of policies and the issues that often arise following a loss or claim.

For answers to these and related questions, call Michael Schultz at (317) 501-2233, or Jim Buddenbaum at (317) 439-1181.