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Coverage for 'Diminution in Value' in Commercial Property Insurance Policies

By Lewis E. Hassett and Ryan C. Burke

Cases in numerous states mandate coverage for post-repair diminution of value under automobile policies. See, e.g., MFA Ins. Co. v. Citizens Nat. Bank of Hope, 545 S.W.2d 70 (Ark. 1977) (“the proper measure of damages was the difference in the value before it was wrecked and the value after it was wrecked, repaired, and tendered to the insured”); Venable v. Imp. Volkswagen, Inc., 519 P.2d 667 (Kan. 1974); Potomac Ins. Co. v. Wilkinson, 57 So. 2d 158 (Miss. 1952); Dunmire Motor Co. v. Oregon Mut. Fire Ins. Co., 114 P.2d 1005 (Or. 1941); Ciresi v. Globe & Rutgers Fire Ins. Co., 244 N.W. 688 (Minn. 1932); Edwards v. Maryland Motorcar Ins. Co., 197 N.Y.S. 460 (N.Y. App. Div. 1922); Hyden v. Farmers Ins. Exch., 20 P.3d 1222 (Colo. Ct. App. 2000). But few mandate such coverage under commercial property policies not covering automobiles.

In Royal Capital Development, LLC v. Maryland Cas. Co., 728 S.E.2d 234 (Ga. 2012), the Georgia Supreme Court recently announced that commercial property insurance policies governed by Georgia law provide coverage for post-repair diminution in value damages. This case generally stands in contrast to the earlier holdings of courts in other states, which had held that post-repair diminution in value damages are not covered under commercial property policies. Because few courts have addressed this issue at all, the holding of Royal Capital Development may prove significant.

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