In prior blog posts, I’ve covered developments in the putative class actions against insurance companies in Georgia involving diminution in value on property insurance claims (see my March 11, 2016 post, for example). These cases stem from a 2012 Georgia Supreme Court decision ruling that diminution in value following completion of repairs was potentially covered under a property insurance policy (see my June 6, 2012 blog post). A Georgia federal court recently decided a motion to dismiss in one of these class actions.

In Morrow v. Allstate Indem. Co., 2017 U.S. Dist. LEXIS 46245 (M.D. Ga. Mar. 29, 2017), the court ruled as follows on the central issues:

  • The court denied the motion to dismiss the breach of contract claim, rejecting an argument that the policy did not cover diminished value because it covered only “sudden and accidental direct physical loss,” and rejecting an argument based on the policy’s replacement cost coverage provision. On the second point, the court noted that the policy provided actual cash value coverage unless and until the repairs were completed. The court wrote that “[a]ctual cash value’ implies the obligation to compensate for any diminished-value losses sustained by the insured,” and that “because the Building Reimbursement Payment is a payment in addition to the actual cash value payment, any limitations in the Building Structure Reimbursement provision are irrelevant.” at *12. The court further concluded that, for pleading purposes, it was sufficient for the plaintiffs to allege “that their home suffered foundational and/or structural support damage, water damage, and mold damage,” and that “despite these repairs, the fair market value of their home diminished because of the damage.” Id. at *15.
  • The court denied the motion to dismiss the claim for injunctive relief or specific performance, stating that “[t]he Court cannot say at this point that Plaintiffs have an adequate remedy at law in the form of a damages award.” at *20.
  • The court granted the motion to dismiss the declaratory judgment claim. Plaintiffs argued that they had a likelihood of future injury, asserting that they have a 10% chance of submitting a covered claim for property damage in any given year. The court concluded that this was insufficient to allege a reasonable expectation of a future injury, and thus dismissed the declaratory judgment claim. at *23-24.

It may be advisable for insurers to continue to monitor these cases. I’m not aware of any cases in which plaintiffs have sought to litigate the issue outside of Georgia. The diminished value issue has the potential to spread beyond Georgia, as occurred in the auto insurance context.