California FAIR Plan Association v. Garnes

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Garnes’s Richmond home was damaged by a kitchen fire. She had a fire insurance policy, with a limit of $425,000 from FAIR Plan Association, California’s insurer of last resort. Gaines claimed she should receive the amount it will cost her to repair the house, less an amount for depreciation, the net amount of which was agreed to be $320,549. FAIR argued the Policy and the Insurance Code allowed it to pay the lesser of that amount or the fair market value of the house, which at the time of the fire was $75,000. After examining Insurance Code, the court of appeals agreed with Garnes. Section 2051 provides that under an open fire insurance policy that pays “actual cash value,” as does the Gaines Policy, the actual cash value recovery is determined in one of two ways. For a “partial loss to the structure,” the measure is “the amount it would cost the insured to repair, rebuild, or replace the thing lost or injured less a fair and reasonable deduction for physical depreciation” or “the policy limit, whichever is less.” Construed in accord with its plain meaning, this provision, coupled with sections 2070 and 2071, sets a minimum standard of coverage that requires FAIR to indemnify Garnes for the actual cost of the repair to her home, minus depreciation, even if that amount exceeds the home's fair market value. View "California FAIR Plan Association v. Garnes" on Justia Law