D:\Brief temp\01-1219

IN THE SUPREME COURT OF FLORIDA

CAROLE M. SIEGLE,

Plaintiff/Petitioner, CASE NO.: SC01-1219

Lower Tribunal No.: 4D00-1503

PROGRESSIVE CONSUMERS

INSURANCE COMPANY,

Defendant/Respondent.

__________________________________/

PETITIONER’S AMENDED REPLY BRIEF

MIKE PEACOCK

Florida Bar No. 303682

W. CHRISTIAN HOYER

Florida Bar No. 162703

JAMES, HOYER, NEWCOMER &

SMILJANICH, P.A.

One Urban Centre, Suite 550

4830 West Kennedy Boulevard

Tampa, Florida 33609-2522

Telephone: 813/286-4100

Facsimile: 813/286-4174

TABLE OF CONTENTS

TABLE OF CITATIONS ......................................... ii

I. Introduction .............................................. 1

II. Split of Authority Nationwide ................................. 3

III. Florida courts have held insurers liable to their insureds for

the diminished value ........................................ 5

IV. Option of Respondent to Limit Liability ......................... 9

V. The Department of Insurance’s position as set forth in Informational

Bulletin 84-270 is entitled to great weight

.......................

IV.

Conclusion .............................................. 11

TABLE OF CITATIONS

Arch Roberts and Co. v. Auto-Owners Ins. Co., 305 So.2d 882

(Fla. 1

DCA 1975) .................................5, 6, 7, 8, 11

Auto-Owners Insurance Co. v. Green, 220 So.2d 29 (Fla. 1

DCA

1969) ............................................ 6, 7, 8, 11

Campell v. Calvert Fire Ins. Co., 109 S.E.2d 572 (S.C. 1959)

..............

Carlton v. Trinity Universal Ins. Co., 32 S.W.3d 454 (Ct. App. Tex. 2000)

....

Consumer Credit Counseling Serv. of the Fla. Gulf Coast, Inc. v. Dept. Of

Revenue, 742 So.2d 259 (Fla. 2

DCA 1997) .................... 11

Delledone v. State Farm Mutual Automobile Ins. Co., 621 A.2d 350 (Del.

Super. Ct. 1992) ........................................... 3

Dodson Aviation, Inc. v. Rollins, Burdick, Hunter of Kansas, Inc., 807 P.2d 1319

(Ct. App. Kan. 1991) ....................................... 3

Edwards v. Maryland Motorcar Ins. Co., 197 N.Y.S. 460 (1922) ........... 3

Fort Pierce Util. Auth. v. Fla. Public Serv. Comm’n, 388 So.2d 1031

(Fla. 1980) .............................................. 11

Gordon v. State, 608 So. 2d 800 (Fla. 1992)

...........................

Grubbs v. Foremost Ins. Co., 141 N.W.2d 777 (S.D. 1966)

................

Hartford Fire Ins. Co. v. Rowland, 351 S.E.2d 650 (Ct. App. Ga. 1986)

......

MFA Ins. Co. v. Citizens National Bank of Hope, 545 S.W.2d 70

Ark. 1977) ............................................... 3

Morrison v. Allstate Indem. Co., 1999 WL 817660 (M.D. Fla. 1999)

.........

Northbrook Prop. & Cas. Ins. Co. v. R & J Crane Service, Inc., 765 So.2d 836

(Fla. 4

DCA 2000)

........................................

Potomac Ins. Co. v. Wilkinson, 57 So.2d 158 (Miss. 1952)

...............

Rezevskis v. Aries Ins. Co., 784 So.2d 472 (Fla. 3

DCA 2001)

.............

Romco, Inc. v. Broussard, 528 So.2d 231 (Ct. App. La. 1988)

..............

Salomone v. State Farm Mut. Auto. Ins. Co., Case No. 95-9117 CC

(March 25, 1997) .......................................... 7

Senter v. Tennessee Farmers Mut. Ins. Co., 702 S.W.2d 175, 178 (Ct. App.

Tenn. 1985) .............................................. 4

Torpy v. State Farm Mut. Auto. Ins. Co., Case No. 96-17624-CC

(January 15, 1999) ...................................... 6, 7, 8

Traveler’s Indemnity Co. v. Parkman, 300 So.2d 284 (Fla. 4

DCA 1974) .... 9

Westmoreland v. Lumbermans Mut. Cas. Co., 704 So.2d 176

(Fla. 4

DCA 1997) ....................................... 10

Williams v. Farm Bureau Mut. Ins. Co. Of Missouri, 299 S.W.2d 587

(Ct. App. Missouri 1957) .................................... 3

iii

I. Introduction

Petitioner asks this Court to determine the Petitioner’s and purported Class

Member’s rights and Respondent’s obligations under Respondent’s insurance policy,

which indemnifies its insureds for property loss. Petitioner’s loss in value is a tangible,

identifiable and quantifiable loss, not merely a stigma or psychological perception.

Respondent’s portrayal of “diminished value” as an attempt to create nonexistent

coverage is misleading and inaccurate.

In its insurance policy Respondent agreed to “pay for loss to a covered

vehicle,” and defined the term “loss” as “direct and accidental loss or damage to your

insured auto, including its equipment.” (Record p. 162). As Petitioner alleged in her

Second Amended Complaint, Respondent elected to repair her vehicle but did not

return it to her repaired to “like kind and quality” as required by the insurance policy

because her vehicle after repaired and returned had diminished in value by $2,677.19.

(Record p. 142) The substantial loss in value Petitioner suffered is clearly and

undeniably a loss as defined by Respondent’s insurance policy. Although Respondent

seems to claim that no loss in value exists, this position flies in the face of reason and

jurisprudence.

The question is whether under the existing contract of insurance the Respondent

has limited its liability sufficiently to protect itself from having to pay Petitioner and

purported Class Members for this quantifiable financial loss. Respondent does not

explicitly exclude indemnification for the loss in value described as diminished value.

It does limit its liability in another respect, when it elects to repair a vehicle to “the

amount necessary to repair or replace the property with other of like kind and quality

less the applicable deductible shown on the Declarations page.” (Record pp. 164-165)

If a repaired and returned vehicle is worth substantially less than it was worth before

the accident, has the vehicle been repaired or replaced with other of like kind and

quality?

Petitioner pled in her Complaint and has maintained throughout that her vehicle

was repaired and returned to her with significantly less value than before the accident.

(Record p. 142) Additionally, Petitioner alleged that her claim does not arise from

faulty repairs and that not every vehicle that is repaired and returned will suffer a

quantifiable loss in value. (Record pp. 141, 142) Petitioner carefully identified a class

of policyholders that has experienced the same loss. Only those policyholders whose

vehicles were damaged in the following ways are included in the class: “structural

damage, paint work, deformed sheet metal, body repair, suspension repair or

replacement, windshield replacement or electrical work.” (Record p. 145) This

MFA Ins. Co. v. Citizens National Bank of Hope, 545 S.W.2d 70, 72 Ark. 1977)

(whether the repairs with parts of like kind and quality could restore the vehicle’s pre-

accident value was a question of fact and affirmed the lower court’s award of

diminished value damages to the insured); Delledone v. State Farm Mutual

Automobile Ins. Co., 621 A.2d 350, 353 (Del. Super. Ct. 1992)(restoration to pre-

accident condition can not be said to have been effected if the repairs fail to render the

vehicle as valuable as before); Hartford Fire Ins. Co. v. Rowland, 351 S.E.2d 650,

652 (Ct. App. Ga. 1986) (the market value of the property plus (deductible) after

payment must equal the market value before the loss); Dodson Aviation, Inc. v.

Rollins, Burdick, Hunter of Kansas, Inc., 807 P.2d 1319, 1321 (Ct. App. Kan. 1991)

(measure of damages include the loss of value even though the property was repaired

by the insured); Romco, Inc. v. Broussard, 528 So.2d 231, 233 (Ct. App. La. 1988)

(where the measure of damages is the cost of repairs, damages for depreciation are

also recoverable); Potomac Ins. Co. v. Wilkinson, 57 So.2d 158, 160 (Miss. 1952)

(If, despite repairs, there remains a loss in actual market value such deficiency is to be

added to the cost of repairs); Williams v. Farm Bureau Mut. Ins. Co. Of Missouri,

carefully identified class presents a cognizable claim that such damage carries a

financial loss falling within Respondent’s obligation to remedy.

II. Split of Authority Nationwide

Many state courts in this country have addressed the issue of whether an

insurance company must reimburse the insured for the difference in the value of the

insured’s vehicle once the company elected to repair the vehicle pursuant to a “like

kind and quality” repair option. The state courts have split in their decisions. The

majority of state courts have held that an insurer must restore the vehicle to

substantially the same appearance, function and value as before the accident to comply

with the company’s contractual obligations.

Some courts have disagreed, finding that

299 S.W.2d 587, 589 (Ct. App. Missouri 1957) (insurer obligated to restore vehicle

to its function, appearance and value immediately prior to the accident); Edwards v.

Maryland Motorcar Ins. Co., 197 N.Y.S. 460, 461 (1922) (diminution in value is a loss

not limited by insurer’s election to repair the vehicle); Campell v. Calvert Fire Ins.

Co., 109 S.E.2d 572 (S.C. 1959) (if, despite repairs, a loss in actual value remains, the

insured is entitled to compensation for the deficiency); Grubbs v. Foremost Ins. Co.,

141 N.W.2d 777 (S.D. 1966) (recovery is limited to the cost of repair or replacement

only if that restored the property to substantially its prior condition); Senter v.

Tennessee Farmers Mut. Ins. Co., 702 S.W.2d 175, 178 (Ct. App. Tenn. 1985); cert.

denied, Dec. 30, 1985 (If the repairs restore function and appearance but not market

value, then the insured is entitled to recovery).

once the vehicle is properly repaired and returned the company has met its contractual

obligations under contract language similar to the language at issue in this cause.

However, most adverse rulings are based upon the market psychology of a “wrecked

vehicle,” rather than an actual, identifiable and quantifiable loss in value. Respondent

alleges in its Response that the cases Petitioner cited supporting the recovery of

diminished value are factually dispositive or apply tort law. Without summarizing each

of the eleven cases individually, each case involved an insured suing its insurer for

damages tantamount to what Petitioner terms diminished value; that is the difference

in the value of the vehicle immediately prior to the accident and its value once repaired

and returned. In each case the courts considered contract language substantially

similar to the language at issue in the cause before this Court; i.e. an insurer’s

obligations and the insured’s rights when an insurer elects to repair or replace damaged

property. In most instances the contract language in the cases also included the “like

kind and quality” limitation as well. In each of the cited cases, the court interpreted

this contract language to require the insurer to restore the pre-accident value to the

damaged property.

Petitioner maintains that this reading is the better reasoned approach under

Florida law, as Florida jurisprudence has established that “upon [the insurer] making

the election [to repair the damaged vehicle] it was then obligated to restore it to

substantilly [sic] the same condition as to function, appearance and value as existed

before the accident.” Arch Roberts and Co. v. Auto-Owners Ins. Co., 305 So.2d 882,

884 (Fla. 1

DCA 1975). Respondent’s attempts to distinguish the decisions from

other jurisdictions based upon the specific facts of the cases are misplaced. The

cause before this Court, as it was before the cited courts, is a breach of contract claim

requiring only that this Court review the contract language in the insurance policy and

construe that language in accordance with Florida law. Requiring Respondent to pay

the costs of repairs, and the difference in the vehicle’s value prior to the accident and

after it is repaired and returned fulfills the insurer’s obligation to repair with “other of

like kind and quality” as required by the insurer’s own policy contract language.

III. Florida courts have held insurers liable to their insureds for the

diminished value.

Trial courts in Florida have addressed the same issue before this Court and have

held that when an insurer elects to repair an insured’s vehicle, the vehicle must be

restored to substantially the same appearance, function and value as existed

immediately before the accident. In Torpy v. State Farm Mut. Auto. Ins. Co., Case

No. 96-17624-CC (January 15, 1999), the trial court in Brevard County thoroughly

discussed the recovery of diminished value based upon a breach of contract where the

insurance policy contained a “repair or replace with like kind and quality” clause

limiting the insurer’s liability in the event of a loss. First, the court surveyed disparate

opinions from other jurisdictions, citing several cases allowing recovery for diminished

value and cases for the denial of recovery of diminished value. The court then turned

to a complete analysis of Florida law on the issue of diminished value, thoroughly

discussing Auto-Owners Insurance Co. v. Green, 220 So.2d 29 (Fla. 1

DCA 1969)

and Arch Roberts and Co. v. Auto-Owners Ins. Co., 305 So.2d 882 (Fla. 1

DCA

1974). The county court held that when State Farm elected to repair the vehicle it

agreed to return the vehicle to its pre-loss condition. “Applying Arch Roberts, ‘pre-

loss condition’ would mean restoring the vehicle to the same condition as to function,

appearance, and value as existed immediately before the accident.” Torpy p.8. The

county court recognized that in interpreting the insurance policy language the relevant

issue is whether the company must restore the vehicle to its pre-accident value as well

as appearance and function and found that the insurer must do exactly that.

A trial court in Hillsborough County, Florida addressed the same issue in

Salomone v. State Farm Mut. Auto. Ins. Co., Case No. 95-9117 CC (March 25,

1997). As in Torpy, the insured brought an action against the insurer to recover the

difference in the value of the vehicle immediately prior to the accident and the value of

the vehicle once repaired and returned. In this case the court noted that the evidence

at trial established that value was the only issue, since the vehicle was returned to

substantially the same condition as to appearance and function. Citing Arch Roberts,

supra. and Auto-Owners, supra, the court held that “once the Defendant opts to repair

the vehicle, the law implies a duty to substantially return the vehicle to its pre-accident

value.” Salomone p. 2. In this case, the court found after a non-jury trial, that based

upon the specific facts presented to the Court that the vehicle was returned to

substantially the same value and therefore ruled in favor of the insurer. Although the

court found for the insured, the court required, based on Florida jurisprudence, that

once the insured ted to repair the vehicle, it must return the vehicle to substantially the

same value as existed immediately prior to the accident.

As the aforementioned Florida trial court decisions illustrate, although neither

Arch Roberts nor Auto-Owners address the issue of “diminished value,” both appellate

cases shed light on the meaning of the contract language found in the cause before this

Court. The facts in Arch Roberts involve an insurer’s option to repair or replace with

like kind and quality. The appellate court followed the decision in Auto-Owners

holding that “the contractual undertaking of the insurer for damages due to collision

is substantial restoration as to function, appearance and value.” Arch Roberts at 883.

Recently in Rezevskis v. Aries Ins. Co., 784 So.2d 472 (Fla. 3

DCA 2001), the

Third District Court of Appeals misconstrued the case law, finding that neither Arch

Roberts nor Auto-Owners specifically addressed the issue of diminished value. Rather

than applying Arch Roberts or Auto-Owners as the trial courts did in Torpy and

Salomone, the Third District Court of Appeals relied upon a recent Texas case,

Carlton v. Trinity Universal Ins. Co., 32 S.W.3d 454, 464 (Ct. App. Tex. 2000).

Citing Carlton, the Rezevskis court stated that: “Nowhere does that obligation include

liability for loss due to ‘a stigma on resale resulting from ‘market psychology’ that a

vehicle that has been damaged and repaired is worth less than a similar one that has

never been damaged.’” Rezevskis at 474. Petitioner does not allege that the

diminished value of Petitioner’s vehicle is based upon stigma or market psychology

but rather is based upon a tangible, identifiable and quantifiable loss. Petitioner’s and

purported Class Member’s vehicles have substantially diminished in value after being

repaired and returned because it is not possible for a body shop to repair certain

damage, as limited in the Complaint. Petitioner does not argue that all vehicles

involved in an accident suffer a diminution in value once repaired and returned.

Respondent relies heavily upon Morrison v. Allstate Indem. Co., 1999 WL

817660 (M.D. Fla. 1999), however, this case was reversed at 228 F.3d 1255 (11

Cir

2000). Moreover, the Middle District of Florida effectively declined to address the

issue of an insurer’s obligations under an insurance policy allowing the election to

repair stating that “This is not within the province of this Court.” Additionally,

Respondent’s reliance on Traveler’s Indemnity Co. v. Parkman, 300 So.2d 284 (Fla.

DCA 1974) is also misplaced. The Travelers court addressed the issue of

derivative damages for plaintiff’s loss of the use of his vehicle. The court found that

loss of use is not a direct loss but is a consequential damage and is therefore not

recoverable under a breach of contract theory. The cause before this Court concerns

a loss that is the direct result of the covered automobile accident, not a derivative or

consequential damage; therefore, Travelers is inapplicable.

IV. Option of Respondent to Limit Liability

Petitioner acknowledges Respondent’s right under the insurance policy to

choose to repair the vehicle rather than replace it. However, Florida law requires that

once an insurer elects to repair a vehicle it must be restored to substantially the same

appearance, function and value. Contracts implicitly incorporate the law of the land

unless expressly stated otherwise. Gordon v. State, 608 So. 2d 800, 802 (Fla. 1992)

and Northbrook Prop. & Cas. Ins. Co. v. R & J Crane Service, Inc., 765 So.2d 836,

839 (Fla. 4

DCA 2000).

As Respondent did not limit its liability for the difference between the vehicle’s

pre-accident value and the value of the vehicle once repaired and returned, Respondent

is liable to Petitioner and the purported Class Members for those losses. Respondent

was required to draft its insurance policy to specifically exclude the obligation to

restore the vehicle to substantially the same appearance, function and value as existed

immediately prior to the accident; had Respondent intended its obligation under the

insurance policy to be something other than the obligations required by Florida law.

Westmoreland v. Lumbermans Mut. Cas. Co., 704 So.2d 176, 179 (Fla. 4

DCA

1997).

V. The Department of Insurance’s position as set forth in Informational

Bulletin 84-270 is entitled to great weight.

Respondent’s reliance on a legal memorandum drafted by an employee of the Florida

Department of Insurance in lieu of Information Bulletin 84-270, a published position

from the Insurance Commissioner is misplaced and unreasonable. An internal legal

memorandum cannot be said to carry the same weight as a published opinion by the

Florida Insurance Commissioner.

Contrary to Respondent’s arguments in footnote 4 of its Answer Brief, the

Commissioner of the Florida Department of Insurance, knowing full well the difference

between first party and third party claims, published Informational Bulletin 84-270

clarifying Florida law on the issue of diminished value, and requiring insurers to

restore insureds’ vehicles to substantially the same function, appearance and value.

The suggestion that this published Bulletin relates to third party claims rather than first

party claims is misplaced. The Insurance Commissioner could have limited his

statement to third party claims, but did not. Additionally, the language the

Commissioner chose tracks the language in Arch Roberts, supra and Auto-Owners,

supra. Finally, the interpretation or construction of a law “by the agency or body

charged with its administration is entitled to great weight and will not be overturned

unless clearly erroneous.” Consumer Credit Counseling Serv. of the Fla. Gulf Coast,

Inc. v. Dept. Of Revenue, 742 So.2d 259,260 (Fla. 2

DCA 1997), citing Fort Pierce

Util. Auth. v. Fla. Public Serv. Comm’n, 388 So.2d 1031, 1035 (Fla. 1980).

IV. Conclusion

Respondent does not ask this Court to impose obligations upon Respondent

arising from “stigma” or “market psychology.” Petitioner asks this Court to require

Respondent to comply with its obligations as set forth in the plain language of the

insurance policy Respondent drafted. Respondent agreed to indemnify Petitioner for

a tangible, identifiable, and quantifiable covered loss. Because Respondent chose not

to explicitly limit its obligation to restore insureds’ vehicles to substantially the same

appearance, function and value that existed immediately prior to the accident,

Respondent must do no less. To rule otherwise allows Respondent to ignore Florida

law, rewrite its contract to Petitioner’s and purported Class Members’ detriment, and

create a windfall for itself.

Respectfully submitted,

JAMES, HOYER, NEWCOMER &

SMILJANICH, P.A.

____________________________

MIKE PEACOCK

Florida Bar No. 0303682

W. CHRISTIAN HOYER

Florida Bar No. 162703

One Urban Centre, Suite 147

4830 West Kennedy Boulevard

Tampa, Florida 33609-2522

Telephone: 813/286-4100

Facsimile: 813/286-4174

DEBRA BREWER HAYES (TX 05656790)

DENNIS REICH (TX 16793600)

REICH & BINSTOCK

4265 San Felipe, Ste. 1000

Houston, TX 77027

Telephone: 713/622-7271

Facsimile: 713/623-8724

MICHAEL L. SPRAIN (TX 00791712)

SPRAIN LAW FIRM, P.C.

6464 Savoy Drive, Suite 100

Houston, TX 77036-3321

Telephone: 713/592-6300

Facsimile: 713/592-6557

ATTORNEYS FOR PETITIONERS

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of Petitioner’s Reply Brief

and Appendix to Petitioner’s Reply Brief was furnished by Federal Express Delivery,

to the Attorneys for Respondent on this ____day of September, 2001.

Francis Anthony Anania, Esq.

ANANIA, BANDKLAYDER, BLACKWELL & BAUMGARTEN

Nationsbank Tower, Ste. 4300

100 S.E. Second Street

Miami, FL 33131

____________________________

___

Mike Peacock

Florida Bar No. 0303682

CERTIFICATE OF COMPLIANCE

I hereby certify that Petitioner’s Reply Brief On The Merits complies with the

applicable Florida Rules of Appellate Procedure.

________________________

Mike Peacock

Florida Bar No. 0303682

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