Friday, February 25, 2011

Hibbs v. Allstate Ins. Co. (Cal. Ct. App. - Feb. 24, 2011)

An insured's car gets damaged, and the damage is covered by insurance.  The insurer says it'll cost $6,200 to repair the vehicle.  The insurance policy says that the insurer can either pay the $6,200 or repair the vehicle.  The insured says she'd rather have the money than the banged-up (albeit repaired) vehicle.  The insurance company doesn't car.  It repairs the car and gives it back to the insured, rather than giving them the money like they wanted.

The Court of Appeal explains that there's an 1867 case from New York that says this is just fine:  that the insurer can do whatever it wants.  However, it also notes that "modern cases,"including cases in the twentieth century from Missouri and Colorado, hold that the insured has a right to get the money if she prefers, notwithstanding the policy language.  The insured should be able to get the money rather than have that money spent on a repair she doesn't want.

I very much liked one part of the Court of Appeal's opinion.  Where Justice Gilbert says:  "The parties cite no California case on point, and we have found none.  There will be one now."

Awesome.  Love it.  Caused a visible grin to appear on my face.

But I don't like the Court of Appeal's holding.  Which agrees with the New York case from 1867.  Letting the insurer do whatever it wants even if it is against the interest of the insured.

Justice Gilbert doesn't give a persuasive reason, in my view, for allowing such a result.  Sure, the policy says so.  But that didn't stop Colorado and Missouri.  And we find tons of things against public policy.  Particularly when insurance policies are at issue and when what the insurer wants frustrates the legitimate desires of the insured.  The only thing beyond the mere policy that Justice Gilbert comes up with is an unelaborated thought that an insurer might want to repair a vehicle rather than giving an "unsafe" (unrepaired) vehicle to the insured.  But come on.  They're not going to drive this thing, which couldn't be driven anyway.  And even if they did, no way the insurance company would be liable.  That's not an actual reason.

By contrast, I could think of tons of reasons why the insured might prefer the money.  And why, for public policy reasons, we should prefer to allow such recovery (instead of repair) as socially beneficial.  Perhaps the insured fears that the repairs won't be safe, and so won't drive the vehicle even if repaired.  Perhaps the insured thinks that the insurer has erroneously valued the vehicle, and rather than file a lawsuit (with resulting transaction costs), thinks he can recover more for the car if she takes the repair money and sells the unrepaired car for scrap than accepting a repaired car and selling it to someone else.  Perhaps the insured can repair the vehicle himself for less than the $6200, or has a friend that can do it for less, and wants to pocket the difference.  None of these things hurt the insurer.  All help the insured.  They should be allowed.  So this is one of those rare instances where California law, rather than leading the pack, radically lags behind it.  Following an outdated, anti-consumer opinion from 1867 in New York rather than the weight of modern -- pro-consumer -- authority.

And that makes me sad.

So I liked the thought.  Just didn't like the result.

P.S. -  Wanted to also mention that, two paragraphs after the paragraph I liked, the court begins a sentence with:  "Th court stated . . ."  Oops.  Even spell-check should have caught that one.