Insurance Policy Definitions and Damages

Grand Praire insurance law lawyers need to understand some of the definitions and interpretations of coverages in an auto insurance policy.
So, what are some of the basic exclusions to collision and comprehensive coverage? To start, most policy’s exclude loss due to “wear and tear.” An insurance policy is not a maintenance policy. It is intended to provide coverage for the unexpected and unforeseen. This was stated in the 1952, Fort Worth Court of Appeals case, Republic Casualty v. Mayfield, and is still good law. A policy would also exclude damage due to freezing, mechanical or electrical break down or failure, or road damage to tires.
Here is how damages are handled or calculated:
The limit of liability for a loss under this coverage is the lesser of:
1) the actual cash value of the stolen or damaged property 2) the amount necessary to repair or replace the property with like, kind, and quality 3) the amount stated in the declarations of the policy.
The terms “repair” and “replace” mean restoring the automobile to essentially the same condition as it was in immediately before the collision. It would not be restored to the same condition if the repairs left the market value of the auto substantially less than the value immediately before the collision.
If a vehicle is repairable, the insured is entitled to no more than what it would cost to repair the property.
In a ruling from a 1968, Texas Supreme Court case, the court said, this presumes the vehicle has been repaired to essentially the same condition that it was in before the loss. But if, after repair, the vehicle haas not been restored to the same condition as it was in immediately before the loss, the owner may be entitled to recover for diminution in value without necessarily showing the repairs were inadequate.
When an insured is entitled to receive replacement cost coverage, it it the insured’s responsibility to submit receipts once the work is completed in order to receive the replacement cost benefits.
As stated in the 2003, Texas Supreme Court case, American Mfrs. Mut. Ins. v. Schaefer, when an insurer repairs a vehicle, it must use parts of “like kind and quality.” Likewise, a replacement vehicle must be of “like kind and quality.” This latter part is important in a rental situation. If a person has and needs a pickup in his daily activities, then having a pickup as a replacement is required.
“Like kind and quality” permits the insurance company to deduct for betterment or depreciation. An Austin Court of Appeals case explained saying, “Like kind and quality refers to parts fit for their intended purpose rather than parts similar in age, condition or value to the parts damaged.”
“Actual cash value” is the value of the vehicle, less depreciation. The limitation of “actual cash value” has been upheld and found to be the reasonable cash market value of the vehicle before the loss.
As can be seen by the reference to court opinions, there are legal fights over what is covered under an auto policy. Because of this, it is important to seek the advice of an experienced Insurance Law Attorney.