Ways of Evaluating Property Damage Claims in Various Contexts

Bremer Whyte Brown and O’Meara

Potential damages in a lawsuit may come in many forms depending on the facts of the case. Common damages include medical expenses, loss of earnings, property loss, physical pain, and mental suffering. Of the many damages Plaintiffs may claim, one of the most prevalent and recognizable is property damage. This article briefly discusses these types of damages which fall under two major categories – Real Property and Personal Property.

Broadly speaking, “real property” means land, and “personal property” refers to all other objects or rights that may be owned. Ballentine’s Law Dictionary defines “real property” as: “Such things as are permanent, fixed, and immovable; lands, tenements, and hereditaments of all kinds, which are not annexed to the person or cannot be moved from the place in which they subsist. . . .” (Ballentine’s Law Dict. (3d ed. 2010).) “Personal property” is defined as: “Money, goods, and movable chattels . . . . All objects and rights which are capable of ownership except freehold estates in land, and incorporeal hereditaments issuing thereout, or exercisable within the same.” (Id. (emphasis added).)

Real Property

Real property may be damaged or “harmed” through trespass, permanent nuisance, or other tortious conduct. The general rule is that Plaintiffs may recover the lesser of the two following losses: (1) the decrease in the real property’s fair market value; or (2) the cost to repair the damage and restore the real property to its pre-trespass condition plus the value of any lost use. (Kelly v. CB&I Constructors, Inc.) However, an exception to this general rule may be made if a Plaintiff has a personal reason to restore the real property to its former condition, sometimes called the “personal reason” exception. In such cases, a Plaintiff may recover the restoration costs even if the costs are greater than the decrease in the real property’s value, though the restoration cost must still be “reasonable” in light of the value of the real property before the injury and the actual damage sustained.

Personal Property

Several forms of recovery are available for damage to personal property, depending on the severity of the harm, the type of personal property at issue, and the recovery sought.

Fair market value frequently plays a role in determining the amount of recovery. Fair market value is “the highest price that a willing buyer would have paid to a willing seller, assuming: 1. That there is no pressure on either one to buy or sell; and 2. That the buyer and seller are fully informed of the condition and quality of the [item of personal property].” 

If the personal property had value before the harm occurred and still retained a part of its value following the harm, a Plaintiff may recover the lesser of either: (1) the reduction in the item’s value because of the harm; or (2) the reasonable cost of repairing it. The formula for recovery changes if the personal property will still lose value even if the repairs are performed: recovery becomes the difference between the item’s value before the harm and its lesser value after the repairs have been made plus the reasonable cost of making the repairs, but this award may not exceed the value of the item before the harm occurred. If repairs cannot be made, the formula for damages changes yet again; recovery is the fair market value of the item before the harm occurred minus the item’s fair market value immediately following the harm. 

If the personal property is lost or destroyed because of the harm, recovery is more straightforward. Simply put, the Plaintiff is entitled to the fair market value of the item of personal property just before the harm occurred. 

In some instances, personal property has “special value” to its owner, over and above its market value. Put differently, the law recognizes additional recovery for “property which has a market value and also a peculiar value to the owner . . . .” (Zvolanek v. Bodger Seeds, Ltd.) To recover damages for property having special value, a Plaintiff must prove: (1) that the item had some market value; (2) that the item had a unique value to the Plaintiff; and (3) that the Defendant had notice of this unique value before the harm or that the Defendant’s conduct was intentional and wrongful. Note that “peculiar value” does not include sentimental or emotional value; it “refers to a property’s unique economic value” or “special characteristics” that increase its monetary value. (McMahon v. Craig) It is also worth noting that there is no set formula for determining the amount of special value, making this form of recovery more difficult to evaluate. 

A Plaintiff may receive an additional award for the loss of use of the personal property (i.e. the amount of time he or she is unable to use the item). To determine recovery for a Plaintiff’s loss of use, a Plaintiff must prove the reasonable cost to rent a similar item for the amount of time reasonably necessary to repair or replace the item. 

Evaluating property damage depends on a number of factors, including the type of property, the extent of the damage, and the recovery sought. While many damages can be estimated based on market value and the cost of repairs, wildcard damages such as the personal reason exception for real property and special value recovery for personal property can have an unpredictable impact on damage calculations. As with all damages, case-specific facts matter when making property damage determinations. For Plaintiffs, it is wise not to count on recovery that is more difficult to prove. For Defendants, it is prudent to allow for a healthy margin of error. 

Montana Supreme Court: Insurer Not Bound by Insured’s Settlement

K. Alexandra Byrd | SDV Insights | October 24, 2019

In Draggin’ Y Cattle Co., Inc. v. Junkermier, et al.1 the Montana Supreme Court held that where an insurer defends its insured and the insured subsequently settles the claims without an insurer’s participation, a court may approve the settlement as between the underlying plaintiff and underlying defendant, but the settlement will not be presumed reasonable as to the insurer. Therefore, an insurer who defends its insured cannot be bound by a stipulated settlement that the insurer did not expressly consent to.

The case involved Draggin’ Y Cattle Company (the “Cattle Company”), a ranching and cattle business that utilized the services of an accounting firm, Junkermier, Clark, Campanella, Stevens, P.C. (“Junkermier”), to structure the sale of real property to take advantage of favorable tax treatment. It was discovered that Junkermier’s employee misinformed the Cattle Company’s owners of the tax consequences of the sale. The Cattle Company’s owners subsequently filed suit against Junkermier and its employee and alleged nearly $12,000,000 in damages due to the error. Junkermier’s insurer, New York Marine, provided a defense for Junkermier and its employee.

The Cattle Company’s owners offered to settle the claims against Junkermier and its employee for $2,000,000, the policy limit of the New York Marine policy. New York Marine refused to give its consent or tender the policy’s limit. Subsequently, Junkermier, its employee, and the Cattle Company entered into their own settlement agreement for $10,000,000. The settlement was contingent upon a reasonableness hearing to approve the stipulated agreement.

New York Marine moved to intervene and challenged the stipulated settlement. The trial court, relying on Tidyman’s Mgmt. Svs. Inc. v. Davis, 330 P.3d 1139 (Mont. 2014), held that New York Marine had effectively abandoned its insured when it had refused to settle the claim in good faith and therefore it was “as if it had breached the duty to defend.” The trial court concluded that the settlement was reasonable and entered judgment against Junkermier.

On appeal to the Montana Supreme Court, New York Marine argued that a stipulated judgment, entered into without the insurer’s consent or participation, is only reasonable when the insurer has refused to provide a defense, effectively abandoning the insured. New York Marine noted that it provided its insureds with a defense throughout the relevant proceedings.

The Montana Supreme Court agreed with New York Marine and held that if parties decide to settle without the insurer’s participation, a court may approve the stipulated judgment as between the underlying plaintiff and the underlying defendant, but it will not be presumed reasonable as to the insurer. The judgment against Junkermier and the proceedings were reversed and remanded to the lower court for further proceedings.

This case underscores the importance of involving coverage counsel in settlement negotiations when a defending insurer refuses to agree to a reasonable settlement. Montana policyholders should also consider whether a declaratory judgment action is necessary if their insurer has reserved its rights as to any indemnity owed.

Insurer Must Pay for Matching Siding of Insured’s Buildings

Tred R. Eyerly | Insurance Law Hawaii | September 11, 2019

    The Seventh Circuit found that the insurer was obligated to pay for siding of a building that was not damaged by hail so that it matched the replaced damaged portions of the siding. Windridge of Naperville Condominium Association v. Philadelphia Indem. Ins. Co., 2019 U.S. App. 23607 (7th Cir. Aug. 7, 2019). 

    A hail and wind storm damaged buildings owned by Windridge. The storm physically damaged the aluminum siding on the buildings’ sought and west sides. Philadelphia Indemnity, Windridge’s insurer, contended that it was only required to replace the siding on those sides. Windridge argued that replacement siding that matched the undamaged north and east elevations was no longer available, so Philadelphia had to replace the siding on all four sides of the buildings to that all of the siding matched. 

    Windridge sued and moved for summary judgment. The district court ruled that matching was required. The only sensible result was to treat the damage as having occurred to the building’s siding as a whole. 

    The policy was a replacement-cost policy. Philadelphia promised to “pay for direct physical ‘loss’ to ‘Covered Property’ caused by or resulting from” the storm, with the amount of loss being “the cost to replace the lost or damaged property with other property . . . of comparable material and quality . . . and . . . used for the same purpose.” The loss payment provision offered four different measures for loss, leaving Philadelphia free to choose the least expensive: (1) pay the value of the lost or damaged property; (2) pay the cost of repairing or replacing the lost or damaged property; (3) take all or any part of the property at an agreed or appraised value; or (4) repair, rebuild or replace the property with other property of like kind and quality. 

    The Seventh Circuit noted that the district court’s conclusion that the buildings as a whole were damaged – and that all of the siding must be replaced to ensure matching – was a sensible construction of the policy language as applied to the facts. Philadelphia’s interpretation – pay to replace only the specific panels of siding that were directly hit by hail, leading to two-tone buildings – was less reasonable. Regardless, the unit of covered property consider under the policy (each panel of siding vs. each side vs. the buildings as a whole) was ambiguous as applied to the facts, so the interpretation that led to coverage was favored. 

    Here, each building as a whole suffered direct physical loss as a result of the storm. The storm altered the appearance of the buildings such that they were damaged. Due to the extent of the damage and the lack of matching siding available on the market, the better construction of the ambiguous policy was to require Philadelphia to replace the siding on all four elevations of the buildings. The district court’s judgment in favor of Windridge was affirmed. 

Foundations, Basement Walls And Collapse — Connecticut Supreme Court Rules Against Coverage

Larry P. Schiffer | Squire Patton Boggs | November 21, 2019

Homeowners in Connecticut (and other states) have had issues with crumbling foundations and basement walls of their homes due to defective concrete manufactured by a specific supplier. They have turned to their homeowners insurance policies for coverage and coverage has been denied. Multiple lawsuits have been brought. In a series of recent cases, the Connecticut Supreme Court was asked on a certified question in two of the cases to resolve questions of Connecticut law concerning the term “collapse” in the insurance policies, whether the “substantial impairment of structural integrity” standard applied to the “collapse” provision of the insurance policies, whether that standard requires a showing of imminent danger of falling down or actually collapsing), and whether the term “foundation” in the policies unambiguously includes the basement walls of the homes.

The main opinion is contained in Karas v. Liberty Insurance Corp., No. SC 20149 (Ct. Sup. Ct. Nov. 12, 2019). Shorter opinions are contained in Vera v. Liberty Mutual Fire Insurance Co., No. SC 20178 (Ct. Sup. Ct. Nov. 12, 2019) and in a factually distinct opinion, Jemiola v. Hartford Casualty Insurance Co., No. SC 19978 (Ct. Sup. Ct. Nov. 12, 2019). The first two cases came to the Connecticut Supreme Court by way of certified questions from the Connecticut federal court. The third case was a direct appeal of a Connecticut case. The outcome on the coverage question is the same, but the facts and discussions have differences. All three cases held for the insurance companies and against the policyholders on coverage for the crumbling walls.

There’s a lot to unpack in the main opinion and the state court case opinion and quite a bit of deep legal analysis. In the main opinion, the court concluded that the term “collapse” in the policy was otherwise undefined and therefore ambiguous so as to include coverage for any substantial impairment of structural integrity. But the court also held that the substantial impairment of the structural integrity standard required proof that the home was “in imminent danger of falling down,” and that the term “foundation” unambiguously encompassed the home’s basement walls.

In finding ambiguity, the court stated that “although the collapse provision purports to exclude settling, cracking, shrinking, bulging and expansion from its purview, it does not express a clear intent to exclude coverage for a collapse that ensues from what initially began as unexceptional, run-of-the-mill settling, cracking, shrinking, bulging or expansion but what later developed into a far more serious structural infirmity culminating in an actual or imminent collapse.” The court noted that the controversy over the term “collapse” has been around since before 1960 and that with this much warning, the insurer was capable of unambiguously limiting collapse coverage to a building reduced to rubble and actual collapse.

On the standard of substantial impairment, the court clarified that substantial impairment meant imminent danger of falling down as the most reasonable standard. This imminence requirement, said the court, does not render collapse coverage illusory; “it merely gives effect to the reasonable expectations of the parties as evidenced by the language of the policy.”

Finally, the court addressed the coverage exclusion for collapse of the home’s foundation and whether it unambiguously included the basement walls of the home. The court held that it did based in part on the court’s view that even laypersons with no special knowledge understand that the concrete basement walls of a home are part of the home’s foundation.

Since there was no imminent danger of collapse and because the basement walls were part of the foundation, there was no coverage.

I urge anyone addressing coverage for crumbling walls, especially in Connecticut, to read these opinions carefully to determine if the facts are applicable to the findings here.

He Who Represents Himself has a Fool for a Client

Barry Zalma | Zalma on Insurance | November 8, 2019

Release of all Claims Defeats Bad Faith Suit

First party property insurers seldom use a release of all claims to resolve a fire claim. The only time a release is used is when there is a serious dispute between the insurer and the insured and threats of extra-contractual litigation. For example if an insurer believes the insured committed fraud or attempted an arson for profit but has insufficient evidence to prove the fraud without years of serious litigation, a settlement paying more than indemnity, but less than the cost of the litigation, will be reached with a release. Similarly, if the insured is litigious, threatens a bad faith suit on first contact, a release might be required to protect the insurer from unnecessary litigation.

In Perfection, LLC D/B/A Carl Krueger Construction, Inc., Liberty Mutual Group Inc., v. Edward Cole, A/k/a Carl Cole D/b/a North Shore Station, NNS, LLC D/B/A North Shore Station, Cecole Properties, LLC, Debtor, Appeal No. 2017AP242, State of Wisconsin in Court of Appeals District II (October 23, 2019) Edward Cole appealed, acting pro se (as his own lawyer), from a judgment which held him liable to Perfection, LLC and eliminated his case against his insurer.


This case arises out of a fire loss that occurred at Cole’s laundromat business on January 12, 2013. Cole’s business had insurance coverage with Liberty Mutual. In furtherance of his insurance claim, Cole submitted expenses relating to his retention of a restoration contractor (Perfection).

After exchanging multiple emails, Cole and Liberty Mutual reached an agreement as to the final amount of the insurance claim. Liberty Mutual agreed to pay Cole a total of $298,232.99. In return, Cole signed a policy release in which he agreed to release all claims against Liberty Mutual, including any extra contractual claims.

On February 28, 2014, Perfection filed suit against Cole for breach of contract, alleging that he had withheld payment for some of its work. Cole filed counterclaims against Perfection, asserting breach of contract and breach of warranty. He also filed a cross-complaint against Liberty Mutual, alleging that it had acted in bad faith. In order to pursue this latter claim, Cole sought to rescind the policy release executed eight months earlier, claiming that he had signed it under duress.

Liberty Mutual sucessfuly moved for summary judgment, seeking dismissal of Cole’s cross-complaint.  The court refused to allow Cole to rescind the policy release because he did not, as a matter of law, show the elements necessary to establish duress.

As the new trial date approached, Cole’s new attorney also moved to withdraw, citing disagreement with Cole over strategy. Cole asked the court to reject the motion; however, he also began acting pro se, submitting numerous filings. Ultimately, the court denied counsel’s motion, noting that it had “gone through this before” and wanted to keep the case on track. Accordingly, it refused to consider Cole’s pro se filings.

The matter proceeded to trial where a jury found Cole liable to Perfection for breach of contract and punitive damages. The jury rejected Cole’s counterclaims against Perfection.


Perfection’s action was fully litigated in state court with the jury. Cole claimed that the circuit court erred when it dismissed his cross-complaint against Liberty Mutual. He accuses the court of failing to consider facts in support of his bad-faith claim.

Summary judgment is appropriate if there are no genuine issues of material fact and one party is entitled to judgment as a matter of law. The Court of Appeals was satisfied that the circuit court properly granted Liberty Mutual’s motion for summary judgment because, regardless of the merits of Cole’s bad-faith claim, the policy release barred him from bringing it.


Mr. Cole was not a very reasonable insured. He caused Liberty to enter into a negotiated settlement raising enough concern that it required – to effect the settlement for more than it believed it owed – required that Cole sign a release of all claims including extra contractual (bad faith) claims. Liberty was right about Cole. Cole’s lawyers begged to be relieved of the obligation to represent him. Even with the release Liberty was sued for bad faith and needed to make a summary judgment motion and defend that motion on appeal. The release protected Liberty but Cole still cost them a great deal of money defending against his frivolous suit and appeal.