Diminution in Value- The Property versus Cargo Claims Comparative

I saw an interesting article in an FC&S bulletin on a property insurance claims precedent and I could not help but feel there is the need to relate it to cargo insurance-specifically for auto haulers.

Truckers are signing contracts with shippers that expose them and their insurers to claims that are covered and not covered. One of those big issues is "diminution in value". Especially in cases where retail goods or cars are being hauled, any loss where an insurer repairs or replaces the property being claimed, will result in a diminution of value. That means, you can not sell it for what you could have prior to the loss.

Many insured's and their shippers assume property and cargo are furnishing replacement cost insurance. While it could be endorsed by a naive underwriter, it does not happen.

So what is the property legal precedent on diminution of value? Read below:
Diminution in Value Damages Not Covered in Loss Payment Options
The United States District Court handled a dispute between the insured and the insurer over whether the property policy provided coverage for a diminished value claim. This case is Royal Capital Development, LLC v. Maryland Casualty Company, 2010 WL 5105157 (N.D.Ga.).
Maryland Casualty Company issued an insurance policy to Royal Capital that covered the insured's real property. During the policy period, the floor tiles developed cracks (allegedly the result of construction work performed on adjacent property). The insured submitted a claim and the insurer paid for the damages. However, a dispute arose over the amount of the payment.
Royal Capital submitted a claim that included diminution in value. The insurer paid an amount it contended constituted the full amount claimed for the cost of repairing the property, including investigation costs and legal costs incurred to minimize the loss. The insurer said that diminution in value damages are not covered under the payment option selected by the insured and such damages were not supported by factual evidence. The insured said that the building sustained foundational and structural damages and this resulted in a diminution of value to the property that should be covered as direct physical loss to the building.
The U.S. District Court found that the matter boiled down to simple policy interpretation, using the insurer's choice of payment as a guide. The plain language of the policy does not cover diminution of value damages because the insurer selected a loss payment method that provides only for the cost of repairing or replacing the lost or damaged property. The court went on to state that the policy granted the insurer the right to choose one of four separate calculation methods to determine the amount of direct physical loss or damage; these options are distinct and mutually exclusive. Because the insurer elected to pay the insured the cost of repairing or replacing the los or damaged property, the insured cannot now argue that it is also entitled to diminution of value damages in addition to the monies it has already received. The policy's coverage grant is specific.
The court granted the insurer's motion for summary judgment.
FC & S additional sidebar note: Because the insurer had the option as to how to pay for the loss, and because a plain reading of the policy shows that diminution of value damages are not meant to be included in the option selected by the insurer, the insurer was entitled to summary judgment. Moreover, absent policy language that includes economic damages or diminution of value in the scope of direct physical loss or damage, this court (like most courts) did not choose to gratuitously expand the coverage granted under the terms of the policy.

Do you think you can see a comparison with cargo insurance. You bet.

So help your truckers not agree to diminution of value contracturally with any shipper. They won't find coverage for it.