Carson v. Mercury Insurance
210 Cal. App. 4th 409
| Cal. Ct. App. | 2012Background
- Carson bought a 2008 Honda Accord for about $31k; Mercury insured collision coverage allowing repair, replacement, or payment, excluding diminution in value.
- After a collision Mercury repaired the car instead of declaring total loss; final repair costs totaled $18,773.62, plus towing.
- Carson sued Mercury for breach of contract and bad faith for not totaling the car, not restoring it to preaccident value, and pursuing subrogation against the at-fault driver.
- Permanent General paid Carson $15,000 (BI) and $9,?0?0 (PD) with Carson signing a PD release; Mercury then pursued subrogation against Permanent General.
- Trial court limited issues to whether the car could be repaired to its preaccident safe condition; Carson failed to prove nonrepairability; Mercury’s choice to repair was upheld; the court denied the public policy/implicit covenant arguments.
- Appellate court affirmed; Mercury’s policy language was clear; diminution in value was excluded; the made-whole rule did not bar subrogation; public policy concerns not violated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Mercury’s option to repair and not declare total loss breached the contract | Carson argues Mercury should havetotaled the car due to value loss | Mercury’s policy permits repair; no obligation to pay diminution in value | No breach; policy allowed repair and excluded diminution in value |
| Whether the car could be repaired to its preaccident safe condition | Carson's experts show nonrepairable to preaccident safe condition | Manufacturer repair specs show repair possible to preaccident safe condition | Mercury could repair to preaccident safe condition; trial court correct |
| Whether Mercury violated the made-whole rule by pursuing subrogation | Recovery from at-fault insurer should be limited until fully compensated | Carson recovered fully via PD release; Mercury’s subrogation proper | Made-whole rule not violated; PD release and lack of pursued DPI claim support |
| Whether the policy's unilateral repair option is against public policy | Option to repair is unconscionable and unenforceable | Policy language is clear and not against public policy | Not against public policy; policy terms enforceable |
Key Cases Cited
- Ray v. Farmers Ins. Exchange, 200 Cal.App.3d 1411 (Cal. App. Dep’t 1988) (insurer may repair if able to return car to preaccident condition; diminution in value not paid)
- Owens v. Pyeatt, 248 Cal.App.2d 840 (Cal. App. 1967) (insurer’s election to repair conclusive if repair restores preaccident condition)
- Careau & Co. v. Security Pacific Business Credit, Inc., 222 Cal.App.3d 1371 (Cal. App. 1990) (implied covenant applies to performance; not necessary to prove breach of specific contract provision)
- Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins. Co., 5 Cal.4th 854 (Cal. 1993) (policy ambiguity not presumed absent definition; interpretation favored if plain)
- 21st Century Ins. Co. v. Superior Court, 47 Cal.4th 511 (Cal. 2009) (made-whole rule context in California law)