"Market Value" And "Loss Of Market" Are Distinguished

Commercial Property	Hail Damage
Inland Marine	Diminution In Value

Much of the new car inventory of an automobile dealer was severely damaged by hail. The damage was repaired, but not all of it with new parts. "Instead, much of the damage was repaired by hammering out the dents, smoothing out the surface with putty and repainting." The insurer of the automobile manufacturer's credit company settled the claim of the dealer, to whom coverage was extended on floor- planned automobiles, based on the cost of repairing the cars. The dealer sought an additional substantial sum for diminution in value of the inventory of cars, claim for which was denied by the insurer. Legal action by the dealer resulted in trial court judgment in favor of the insurer. The dealer appealed.

The pertinent inland marine policy provided coverage on the insured automobiles for "all risks of direct physical loss or damage" and specifically excluded "loss or damage caused directly or indirectly by loss of market." The trial court had found the insuring agreement broad enough to encompass coverage for the "residual diminution in value of the repaired vehicles" but denied the additional claim of the dealer based on the quoted exclusion.

The appeal court agreed with the trial court in its conclusion that the diminution in value of the repaired cars and the cost of repairs was embraced by the general coverage of the policy. But it took issue with the trial court's application of the pertinent exclusion. It found that the position of the insurance company and the trial court's judgment against the car dealer were, in essence, "grounded on the premise that 'loss of market' and 'loss of market value' are equivalent terms."

The appeal court took note of the dealer's contention that its inventory incurred a loss of market value and suffered depreciation because of physical alteration. By way of distinction, the dealer argued that "a market is lost when, for example, due to delay in distribution, changes in consumer habits, etc., a certain type of product is no longer in demand with its intended purchasers . . . ."

The court found the position of the claimant consistent with the treatment other courts have given to loss of market exclusions in policies. It held that the policy under review provided coverage for "the post-repair diminution in value" of the dealer's damaged inventory and that the loss of market exclusion did not apply to the claim. Accordingly, the trial court's judgment was reversed in favor of the car dealer and against the insurance company, and the cause was remanded for further proceedings.

Boyd Motors, Inc., Plaintiff, Appellant v. Employers Ins. Of Wausau, Defendant, Appellee. United States Court of Appeals, Tenth Circuit. No. 87-2260. July 20, 1989. CCH 1989-90 Fire and Casualty Cases, Paragraph 1958.