CA FAIR Plan Assn. v. Garnes
A143190M
| Cal. Ct. App. | Jun 14, 2017Background
- Marlene Garnes owned a Richmond home insured by California FAIR Plan (FAIR) under an open "actual cash value" (ACV) fire policy with $425,000 dwelling limit; a 2011 kitchen fire caused extensive (but not total) damage.
- Repair estimate (including abatement) was $362,670; after depreciation Garnes claimed $320,549. FAIR paid $75,000 as the pre-loss fair market value and filed for declaratory relief seeking a ruling that this was the available recovery.
- The central dispute turned on statutory interpretation of Insurance Code §§2051, 2070, 2071: whether "total loss to the structure" and "actual cash value" mean (A) physical destruction vs. economic threshold, and (B) whether partial-loss recovery can exceed fair market value.
- The trial court granted summary judgment for FAIR. Garnes appealed; the Insurance Commissioner and United Policyholders filed amici briefs supporting Garnes.
- The Court of Appeal reversed, holding that §2051(b) requires payment of repair cost minus physical depreciation for a partial loss even if that exceeds fair market value, and that statutory measures govern over conflicting policy terms.
Issues
| Issue | Plaintiff's Argument (Garnes) | Defendant's Argument (FAIR) | Held |
|---|---|---|---|
| Meaning of "total loss to the structure" in §2051 | Means physical total destruction of the structure; Garnes's house was a partial loss | Means economic/test: any loss where repair cost exceeds fair market value is a "total loss" | Court: "to the structure" denotes physical destruction; Garnes's loss was partial |
| Meaning of "actual cash value" for partial losses under §2051 | For partial loss, ACV = lesser of repair cost minus physical depreciation or policy limit (no fair-market cap) | ACV (per §2071/Jefferson) is fair market value, so partial-loss recovery capped at fair market value | Court: §2051(b)(2) prescribes ACV for partial losses as repair cost minus depreciation (or policy limit); fair market cap applies only to total loss |
| Interaction of §§2051 and 2071 (standard form) | §2051 supplies the specific statutory measure of ACV and must be read into §2071; insurers cannot provide less favorable coverage than statutory minimums | §2071 (and Jefferson) sets ACV = fair market value; §2051 should not override §2071 to create a new cap | Court: Harmonize §§2051 and 2071 by treating §2051 as the specific statutory definition informing "actual cash value" in §2071; §2051 is mandatory and incorporated into policies |
| Effect of conflicting policy terms | Policy terms that limit recovery below statutory minimums are unenforceable; Insurance Code governs | Policy terms control the parties' contract; statute doesn't mandate §2051 over the policy | Court: Statutory provisions (e.g., §2051, §2070/2071) impose mandatory minimums that preempt contrary policy terms; policy must conform to statute |
Key Cases Cited
- Jefferson Ins. Co. v. Superior Court, 3 Cal.3d 398 (interpretation that "actual cash value" historically equated to fair market value)
- Wildman v. Government Employees Ins. Co., 48 Cal.2d 31 (statutory protections are to be read into policies)
- Century-National Ins. Co. v. Garcia, 51 Cal.4th 564 (policy provisions less favorable than statutory standard form are unenforceable)
- Howell v. State Farm Fire & Casualty Co., 218 Cal.App.3d 1446 (policy exclusions unenforceable where they conflict with statutory law on causes of loss)
- Doan v. State Farm Gen. Ins. Co., 195 Cal.App.4th 1082 (discussed appraisal and ACV language; did not decide §2051/§2071 reconciliation)
- Kirkwood v. California State Automobile Assn. Inter-Ins. Bureau, 193 Cal.App.4th 49 (recognizing 2004 §2051 amendments as prescribing ACV measure)