Salvage Title Under Auto Policy

Fort Worth insurance lawyers might run into this type of strange situation and if they do, they will be glad they have this opinion to reference.
It is a 2004, case from the Houston Court of Appeals [1st Dist.] and is styled Hamby v. State Farm Mutual Auto Insurance Company. Here is some of the relevant information.
This is an appeal of the trial court’s judgment sustaining State Farm’s second special exceptions to Hamby’s pleadings, rendering a take-nothing judgment for Hamby, and dismissing the cause. In his sole issue, Hamby contends that the trial court erred in dismissing his case because an insurer cannot force an insured to transfer title to a “totaled” vehicle as a condition of paying the insured the actual cash value of the vehicle. This court affirmed the trial court.
A truck collided with Hamby’s car, causing extensive damage. Because the cost to repair Hamby’s car exceeded its actual cash value, State Farm elected to total the car rather than repair it; the parties agreed the actual cash value of the car was $25,970.75, minus a $500 deductible. The salvage value of the unrepaired car was $7,000.
State Farm instructed Hamby to assign title to the company, which he did not wish to do. The company would not issue a check for the actual cash value until it obtained the car’s title. Following a series of letters exchanged between Hamby and State Farm, Hamby eventually accepted the check and assigned the title to State Farm “under protest.”
Hamby sued State Farm challenging State Farm’s right to require him to assign it title to the car in order to receive payment for the car’s actual cash value. In other words, he asserts that he should have been allowed to accept the cash value payment and keep the car.
Here, after Hamby amended his pleadings, the trial court reached the conclusion that, accepting as true all of Hamby’s factual allegations, his petition did not sufficiently allege a cause of action.
Hamby argued that his pleadings clearly state a claim for breach of contract. While this appeals court agreed that the pleadings indicate that breach of contract is the cause of action, that was not the focus of their inquiry. The focus was whether the factual allegations comprise a claim for breach of contract.
Hamby’s auto insurance policy with State Farm contained the following pertinent provision:
LIMIT OF LIABILITY Our limit of liability for loss will be the lesser of the:
1. Actual cash value of the stolen or damaged property;
2. Amount necessary to repair or replace the property with other of like kind and quality; or 3. Amount stated in the Declarations of the policy.

State Farm offered, and Hamby accepted, payment of the car’s actual cash value, in accordance with the terms of the contract.
Hamby’s contention was that the plain language of the Limit of Liability clause does not require him to forfeit title to his car to State Farm if State Farm chooses to pay actual cash value for the car. Thus, he argued that State Farm breached the contract by forcing him to forfeit title to the car as a condition of its paying him the actual cash value of the car, whereas the “Limit of Liability” provision does not require forfeiture of title. However, the Limit of Liability clause does not resolve the matter because this provision does not address the issue.
What Hamby is actually challenging is State Farm’s right to keep the car. To determine whether State Farm could impose such a condition, the court looked to a different provision of the insurance contract:
PAYMENT OF LOSS We may pay for loss in money or repair or replace the damaged or stolen property. We may, at our expense, return any stolen property to:
1. You; or 2. The address shown in this policy If we return stolen property we will pay for any damage resulting from the theft. We may keep all or part of the property at an agreed or appraised value.

Hamby contended that this clause applies only if the car has been stolen. Based on the plain language of this contract provision, however, it is not reasonable to conclude that, because the next-to-last sentence mentions only stolen cars, the last sentence only applies to stolen cars. As a matter of law, the court held that this provision as a whole and the last sentence in particular apply to both stolen and damaged cars.