Settling insurance claims using a combination of repairs and cash (DV) isn’t new thinking.  Claims have been settled this way for years.  The concept has been around since long before college educated bean counters arrived on the insurance scene and began micromanaging the repair and settlement process, in an effort to allow their employers to reap a windfall of unjust benefits by shortchanging consumers.  Whether the property consists of cars, boats, motorcycles, RVs, artwork or some other tangible asset, if something can’t be fixed so it equals in everyway it’s condition before the loss, insurers are obligated to either replace it or make a cash settlement offer (i.e., payment for DV).

Gone fishin’

Consider one of the first recorded cases where repairs couldn’t restore property to its preloss condition, and a DV cash payment made up the difference.  Massachusetts’ Supreme Court heard the case known as “ Samuel Giles & Another v. The Eagle Insurance Company" in 1840.  One interesting point: The repairs were shorted at the property owner’s request (to prevent a total loss) and DV was still awarded by the court!

The fishing schooner Good Hope, a “first rate vessel of her class,” was anchored off shore in Chitecamp Harbor after fear of a raging storm forced her from the open sea along with five other schooners.  A heavy gale on September 14, 1837, which had begun a day earlier, turned inward, blowing directly into the harbor, pushing the Good Hope ashore, and imbedding her among the rocks, even allowing the sea to “breech over her.”  Four other vessels also suffered damage.

The next night brought more of the same, and the vessels were badly beaten.  The Good Hope’s crew and captain, with some of the shore’s inhabitants, emptied the boat and even sold some of its contents to raise cash for repairs.  Eight days and many long hours later, with seas subsided and temporary repairs made with caulking, the Good Hope was able to return to her home port in the Massachusetts town of Gloucester. 

“On her voyage to Gloucester she leaked badly…and two pumps were kept going half the time.  The master carpenter, who repaired the vessel, stated that the whole body of the vessel was injured; that some of her timbers were lifted; that some of her treenails were started in the bilge, so as to come half through; that the seams and butts were opened in several places, and that some bolts were broken and others started; and he stated that the injury from the strain or hogging could not be perfectly repaired except by rebuilding her.”

Safely at Gloucester, “skillful persons were employed….to make necessary repairs.”  But the plaintiffs didn’t want the vessel totaled out.  Instead, they;

“directed the carpenters to repair the vessel and make her sea worthy, but to do it economically…not (wanting) anything out of reason to be done upon her. Craftsmen bored out some treenails and put in more bolts; taking out, and afterwards putting in again, so much of the ceiling as was necessary for that purpose, and re-caulked her and spiked her decks.  After these repairs she was sea worthy…constantly employed, and…performed her voyages well.”

But a hogg* remained in the vessel after repair, a condition that would affect not only the beauty of the vessel but it’s strength.  According to witnesses at the trial, the vessel originally insured at $2,500 had diminished in value $800 to $1,000 due to the hogg.

Imaginary Damage

Not surprising, the insurer contended that the hogg and strain were “imaginary damage, for which it was not responsible.”  Ironically, this is almost identical language that insurers use today to deny claims for Inherent Diminished Value, a claim very similar in that it is often difficult to see with one's eyes.

A court battle began and the jury recognized that the schooner could not be “perfectly repaired, except by rebuilding her” and awarded $835 for damage of hogging and strain. 

The court wrote:

“The case is not without its difficulties….there is no room for mistake about the main fact.  She is obviously so much hogged as not to be perfectly repaired, unless by rebuilding her.  She has been made sea worthy; but it is in evidence that she is not so strong as she would be if she were as straight as she was built.  Now the insured is entitled to an indemnity.  If an insurance policy should be obtained as she now is, and a damage should happen to her, all that could be required of the underwriter would be to put her in as good a state and condition as she was when the policy was made.  It could not, on any principle of indemnity, be required that she should be put in a better shape and condition.  Here, at the time of insurance, this schooner was of the first class.  By the perils of the sea, she has received an injury obvious to the eye, essentially effecting and diminishing her value.  How can it be said the plaintiffs are indemnified, if compensation should not be made for this damage?”

Conclusion

Obvious parallels link this case to auto insurance settlements 165+ years later.  In most cases, consumers have no obligation to repair  damages to their vehicles in order to be paid for their covered losses.  And, a minimal repair and cash (DV) is one option of settlement now, just as it has been for many years – an option consumers might be wise to consider.

*  Hogg:  When a hogg condition exists, the sides of the vessel buldge, much like the sides of a shoe when the wearer bends his/her foot.

content & design 2002-2008 David Williams and SafeCollisionRepairs.com

About Safe Collision Repairs

For more than ten years, David Williams of Wheelersburg, Ohio's Safe Collision Repairs has worked with consumers and attorneys in the tri-states of Ohio, Kentucky and West Virginia to expose unsafe auto repairs and maximize recovery on auto insurance claims. Some of the company's services include Post-Repair Inspections, Prepurchase Inspections, Auto Damage Assessments, Lemon Law Investigations, Expert Court Testimony and Diminished Value Calculations using an advanced version of Network Information Communication's WreckCheck program.

Inquiries can be directed to: Safe Collision Repairs David A. Williams Post Office Box 70 Wheelersburg, Ohio 45694 (740) 456-1111 (740) 355-4056

Disclaimer

The content expressed on this website and in the article above represents the opinions of David A. Williams. Williams is neither an attorney nor public insurance adjuster, but is an expert, consultant, and writer specializing in the field of automotive collision repair and valuations. The information provided herein is not intended to be a substitute for legal or insurance advice. Because collision repair is a continually evolving science, any text, materials or links found herein are provided without claim or guarantee to their accuracy or completeness.