CALIFORNIA FAIR PLAN ASSOCIATION, Plaintiff and Respondent,
v.
MARLENE GARNES, Defendant and Appellant.
A143190
California Court of Appeals, First District, Second Division
May 26, 2017
In a recent decision brought by the FAIR plain, the Appellate court ruled that where repair costs did not exceed policy limits in a Actual Cash Value fire policy, the recoverable damages would be the repairs even if they exceed the fair market value of the home.
The court in that regard summarized as follows:
In 2011, Marlene Garnes’s family home in Richmond, California was seriously damaged by a kitchen fire. She had purchased a fire insurance policy for the property, with a policy limit of $425, 000 (the Policy), from California FAIR Plan Association (FAIR), California’s insurer of last resort. The dispute in this case and the issue on appeal is how much coverage Garnes is entitled to under the Policy. She claims she should receive the amount it will cost her to repair the house, less an amount for depreciation, the net amount of which the parties agree would be $320, 549. FAIR contends the Policy, and the Insurance Code, allow it to pay her the lesser of that amount or the fair market value of the house, which at the time of the fire was $75, 000. The answer to this question depends on interpretation of sections 2051, 2070 and 2071 of the Insurance Code, [1] including the phrases “total loss to the structure, ” “partial loss to the structure” and “actual cash value” in section 2051, and whether sections 2070 and 2071 permit insurers to provide less favorable coverage than that prescribed by section 2051. Applying our independent judgment to these questions of statutory interpretation, we conclude that Garnes is correct. Section 2051 of the Insurance Code provides that under an open fire insurance policy that pays “actual cash value, ” as does the Policy here, the “measure of the actual cash value recovery… shall be determined” in one of two ways, depending on whether there has been a “total loss to the structure” or a “partial loss to the structure.” For a “partial loss to the structure, ” the measure prescribed is “the amount it would cost the insured to repair, rebuild, or replace the thing lost or injured less a fair and reasonable deduction for physical depreciation” or “the policy limit, whichever is less.” (§ 2051, subd. (b)(2).) Construed in accord with its plain meaning, this provision, coupled with sections 2070 and 2071, sets a minimum standard of coverage that requires FAIR to indemnify Garnes for the actual cost of the repair to her home, minus depreciation, even if this amount exceeds the fair market value of her home. Further, the legislative history and the Insurance Commissioner’s interpretation of this statute also support this interpretation. FAIR’s arguments are based on interpretations of these sections that cannot be squared with their plain language, and the contention that requiring recovery of repair costs less depreciation where they exceed fair market value is bad policy. The latter argument is for the Legislature, not this court. The law supports Garnes’s interpretation. Therefore, we reverse the trial court’s judgment and remand this matter for further proceedings consistent with this opinion.
The Court came to this conclusion through analysis of statutory language and found the meaning of such to refer to damage in a physical sense as opposed to an economic measure.