Appellate court upholds decision of St. Clair County jury in favor of Allstate

Steve Gonzalez Jun. 1, 2006, 12:32pm

A 2004 jury verdict in favor of Allstate Insurance was affirmed by the Illinois Appellate Court's Fifth District in Mt. Vernon on a 2-1 vote.

Michael and Tiffany Sims of East St. Louis filed suit on behalf of 387,000 policyholders who claimed the Northbrook-based auto insurer owed its customers more than just the repair or replacement of vehicles after accidents.

They claimed Allstate failed to pay them the amount that their vehicle decreased in value after the car accident.

The Sims' class action complaint filed in St. Clair County sought approximately $300 million in damages, but the jury said Allstate is only responsible only for repair costs to the vehicle.

The lawfirm of Korein Tillery and Cates & Glass represented the class.

Circuit Judge Lloyd Cueto certified the class, determined that Allstate's insurance policy was ambiguous, and submitted the case to a jury.

The jury returned a verdict in favor of Allstate.

Arguments centered on the interpretation of Allstate's policy language. Jurors had to interpret the meaning of terms such as loss, for example, and Allstate's promise to pay policyholders for direct and accidental loss to their vehicles.

Cueto instructed the jury that they were to find against Allstate and in favor of the policyholders where such terms and policy language were not clear or ambiguous.

Lawyers for the class contend that loss was an unclear term and could be interpreted to include diminished value. They based their argument on the contention that a vehicle could never be returned to pre-loss or pre-accident condition as the Allstate policy promised.

Allstate responded that the Sims' interpretation of loss was unreasonable and that policyholders accept the insurer's definition of terms like loss when they sign a policy.

Allstate used as an example consumers' expectation when other products, such as televisions or lawnmowers, are repaired. In those cases, Allstate argued, consumers don't expect to get either back in factory condition.

Instead, they expect to have their products returned in functional condition. Those same expectations can be applied to automobile repair, Allstate argued.

Allstate also claimed that it took two years after the Sims ended their relationship with Allstate before filing a suit -and only after Tiffany Sims answered a newspaper ad placed by attorney Judy Cates, asking Allstate customers to be part of a class action diminished value case against the insurer.

Attorney H. Sinclair Kerr, representing Allstate, called the suit a creation of the plaintiffs' lawyers, who were "looking for a huge payoff."

On appeal, the Sims argued that Cueto erred in allowing the jury to construe the insurance policy and abused its discretion in allowing Allstate to present evidence regarding its unilateral subjective intent.

They also argued that Allstate improperly attacked the ethics and integrity of the plaintiffs' counsel.

Writing the opinion for the court, Justice Terrence Hopkins wrote:

"The plaintiffs argue that the diminished value of an adequately repaired vehicle is a "direct and accidental loss" that Allstate is required to compensate under the policy's insuring provision. Allstate does not dispute that the term "loss" could encompass a vehicle's diminished value, but it contends that the insuring language must be construed in light of the "Limits of Liability" and "Payment of Loss" sections. Allstate argues that these provisions are clear and unambiguous and preclude an insured's recovery for a vehicle's diminished value.

"The plaintiffs counter that the phrase "repair or replace *** with other of like kind and quality" in the 'Limits of Liability' section encompasses an inherent concept of value, is at the least ambiguous, and therefore requires Allstate to compensate the plaintiffs for their vehicles' diminution in value. The plaintiffs argue that because the policy requires that a repair or replacement be of 'like kind and quality,' the vehicle must be repaired so that there is no remaining physical damage and no loss in value and that, otherwise, Allstate must pay to compensate its insured for the vehicle's diminished value.

"While a vehicle's diminished value may be a 'loss' under the policy's insuring provision, we agree with Allstate that its obligation to compensate the insured for that loss is circumscribed by the plain language of the policy's 'Limits of Liability' and 'Payment of Loss' sections.

"The limit-of- liability provision includes no reference to diminished value or the restoration of value, and the plain and ordinary meaning of the provision's language precludes an insured's recovery for the diminished market value of a damaged but repaired vehicle.

"Additionally, the language of the 'Limits of Liability' provision demonstrates that Allstate knew how to say 'value' when it meant 'value.'

"We find no ambiguity in the contractual terms of Allstate's automobile insurance policy. The policy clearly does not allow an insured to recover for a diminution in value.

Presiding Justice Stephen Spomer concurred with Hopkins while Justice Tom Welch wrote a brief dissent.

Welch wrote:

"I respectfully dissent. As set forth in the majority opinion, the insurance policy provides that Allstate will 'pay for direct and accidental loss to YOUR insured AUTO' (collision coverage) and that Allstate will 'pay for direct and accidental loss to YOUR insured AUTO *** not caused by collision' (comprehensive coverage). Allstate does not dispute that the term 'loss' could include a vehicle's diminished value. In addition, there is no dispute that the policy fails to explicitly exclude from coverage, after the vehicle's repair, the loss sustained because of the vehicle's diminished value.

"Because the provisions in the policy do not exclude the loss sustained by a repaired vehicle's diminished value, I believe there is an ambiguity in the policy that must be construed against Allstate as the drafter. If Allstate, the drafter of the insurance policy, did not want its insureds to reasonably believe that they would be compensated for the entire loss, including the diminished value of the vehicle, Allstate should have specifically so stated in the policy.

"The policy could have stated, 'The term 'loss' in this policy does not include the diminished value of an insured vehicle,' to avoid any ambiguity regarding this coverage. Because I believe that a reasonable person, after reviewing the policy, would believe that the coverage would return him or her to the same financial position he or she was in immediately prior to the accident, I must respectfully dissent."

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