SUIT FILED
Discussions with various levels of Nationwide were of no avail. The
Nationwide claim adjustor's supervisor finally said, "There is no way I am
going to pay $3,000 for that car unless directed to do so by my superiors or
a judge." So, on October 13, 1989 Mr. Flippin filed suit in the General
District Court of Fairfax County for $7,000 ($3,000 for the car plus $4,000
punitive damages). Mr. Flippin represented himself and did not do too well
The judge awarded him only $1,500, which was the low value listed in the
current CPI (Cars of Particular Interest) guide and dismissed the punitive
damages portion of the case. He, unfortunately, based his opinion on the
value of the car at the time of loss. As a result, Mr. Flippin appealed the
case to the Circuit Court of Fairfax County in an effort to confirm, in a
court of record, his allegations the policy is ambiguous and Nationwide
practiced constructive fraud by saying the policy would do one thing but
settling it differently. A procedural error (combining both allegations into
the same case) prevented Mr. Flippin from successfully pursuing the fraud
portion of the case. As a result, Nationwide agreed to settle the property
damage portion out of court for the full $3,000. Unfortunately, it was a
shallow victory because the case was not decided on its legal merits. It was
a case of simply wearing down Nationwide until they were willing to settle
just to close out the claim, showing that plain old tenacity sometimes pays
off.
LEGAL PRECEDENCE
There is Legal precedence for both of these positions. With respect to
ambiguity (a breach of contract), they are always decided against the
drafter. In addition, there is the doctrine of reasonable expectation. The
courts interpret an insurance policy to mean what a reasonable buyer would
expect it to mean, even though the actual words may say something else. The
Virginia Supreme Court has held as far back as 1887 that ambiguities are to
be decided in favor of the insured (more recently St. Paul Ins. v. Nusbaum &
Co., 227 Va. 407). As for the constructive fraud portion (a tort), the
Virginia Supreme Court has clearly defined the five elements that constitute
constructive fraud in Nationwide Ins. Co. V. Patterson 229 Va. 627. In
addition, punitive damages usually cannot be found in a breach of contract
"...unless there is an independent and willful tort ..," in which case a
joinder is permitted (Kalmer Corp. V. Haley, 224 Va. 699 and the Code of
Virginia Section 8.01-272).
ADVICE TO OWNERS
If you currently have (or have had in the recent past) a total loss against
such a policy and they did not pay the full stated amount, it is recommended
you run (do not walk) to your nearest lawyer and show him this article. There
is a possibility you may have grounds to recover the full amount. If you have
a stated value policy and have not yet suffered a loss, it is suggested, in
the strongest possible terms, that you read it, paying particular attention
to the section entitled "limits of liability." The words STATED AMOUNT on the
declaration page is a red flag. Read the respective endorsement very
carefully (in the case of Nationwide in Virginia, it is their Endorsement
2004 entitled "Family Automobile Policy - Stated Amount Insurance"). More
than likely, it is based on ISO form E167 which states:
"The limit of the company's liability or loss shall be the lesser of:
(a) the stated amount shown in the Declarations,
(b) the actual cash value of the stolen or damaged property, or
(c) the amount necessary to repair or replace the stolen or damaged
property."
Unless it is was written by one of the few companies issuing such policies,
you probably will find the policy does not say the company will automatically
pay the stated amount in the event of a total loss. In addition, discuss this
with your agent immediately. Ask the following questions:
1) Will the policy, in fact, pay the stated amount in the event of a total
loss?
2) If no, why did you buy it?
3) If yes, have him show you where it says that in the policy.
4) Will the company insure the same car under a standard indemnity policy?
5) If so, what would be the premium?
6) What additional consideration are you receiving by paying the additional
premium?
FINAL RECOMMENDATIONS
The best recommendation was from an independent agent who admitted such
policies were rip-offs when sold to those looking for a valued policy. He
said the best thing a person can do is use the cheaper standard indemnity
policy and maintain a portfolio on the car in question. Include a complete
set of close up and detailed photographs, a current appraisal from someone
qualified in that type of car (and does not sell them), and a collection of
clippings from car magazines and newspapers showing the current market prices
for cars of the same type and condition along with copies of all receipts
related to the car.
Another alternative is to obtain insurance from one of the few companies
writing valued types of policies. Some of the companies offering such
include: Central Mutual, Chubb, Midwestern Indemnity and Zurich-American.
Remember, have your agent show you, in writing, where it says the insurance
company will pay the stated amount in the event or a total loss.
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