New Wave of Diminished Value Suits Wash over Ga. Courts

July 22, 2003

Several class action lawsuits have recently been filed in Georgia based on the state Supreme Court’s decision on the issue of diminished value related to auto insurance claims, according to the Alliance of American Insurers. The latest such suit seeks certification not only of a plaintiff class, but of a defendant class as well.

The genesis of these suits dates back to a 2001 decision by the Georgia Supreme Court in State Farm Mutual Automobile Insurance Co. v. Mabry. The court held that physical damage coverage under an auto insurance policy includes not only repair of the damaged insured vehicle, but also first-party claims for diminished value.

“This recent string of class action suits is not unexpected given the state Supreme Court’s decision in Mabry,” said Kirk Hansen, Alliance director of claims. “Already settlements related to diminished value have cost insurers doing business in Georgia more than $358 million. Nevertheless, the Alliance continues to believe that the court erred in reaching its decision in that case. The decision puts Georgia out of step with the majority of courts to have recently decided the issue of coverage for claims of diminished value. The Mabry decision, along with the flood of suits to follow in its wake will only serve to increase the cost of auto insurance for the Georgia insurance buying public.”

The most troublesome case since the Mabry decision is Walker, et al. v. American National General Ins. Co., et al., which was filed June 30, 2003 in Muscogee County, GA. The plaintiff alleges that American National paid repair costs but did not give any information with respect to making a claim for diminished value, nor did it offer to pay that loss. As a result, Walker contends that American National breached the insurance contract, including the covenant of good faith and fair dealing.

The plaintiff seeks certification of two plaintiff classes. The first class would be composed of all persons currently insured by the defendant class. The second class would be composed of all former or current policyholders of the defendant class who presented first-party physical damage coverage claims within the past six years and who were not compensated for diminution of value. The proposed defendant class consists of all insurers who currently or within the past six years have entered into automobile insurance contracts in Georgia providing comprehensive, collision or uninsured motorist coverage to Georgia residents.

Neal Pope, the attorney who sued State Farm in Mabry and filed the Walker case filed a similar suit, Case, et al. v. Guideone Elite Ins. Co., et al. June 26, 2003. He also has filed diminished value suits against several other insurers doing business in Georgia, and the Alliance has learned that he will be filing more class actions in the next few months. A number of carriers already have settled diminished value class actions with Pope in Georgia totaling more than $358 million.

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