This is my last post on Judge Sharp’s recent decision in New Hampshire Ins. Co. v. Blackjack Cove, LLC (the opinion can be viewed here) – – unless Parks decides to pick a fight with me about the case.  In this installment, I’m going to focus on a small section of the opinion involving replacement cost insurance.  To briefly remind you of the facts, the insured property was a marina that was damaged during a tornado.  As part of the claim, the insurance company sought summary judgment as to the marina owner’s claim “for the value [the marina] lost due to [the insurer’s] ‘failure to total docks’ at the marina.”  Specifically, the marina owner made a claim for “the difference between the value of the property it should have had under the policy and the value of the property that it ended up with,” arguing that the policy provided that damaged property would be valued at replacement cost but it “was left with patched-up 40 year old docks rather than new docks.”  This is where the train left the rails for the insured, with Judge Sharp agreeing that summary judgment was appropriate on the claim for replacement cost.  Specifically, the court ruled:

The policy provides that [the insurer] will “determine the value of Covered Property in the event of loss or damage at replacement cost (without deduction for depreciation) as of the time of loss or damage.”  The Court is hard-pressed to understand why [the insurer] was required to “total” the docks, and [the insured] points to no provision of the policy that supports its argument. Nor does [the insured] explain why the policy terms entitle it to “new docks” rather than “patched-up 40 year old docks” if those patches restore the docks’ total value to what it was when the docks were insured in 2009, i.e., “without deduction for depreciation.” As [the insured] has failed to point to evidence that demonstrates a triable material fact on this damages claim, the Court grants [the insurer] summary judgment on it.

Before I express my opinions about this conclusion, let me first say that the ruling on this issue was fairly sparse, I’ve not read the parties’ briefs, and I have no knowledge of the policy at issue except for that portion quoted by the court in the opinion.  That being said, I believe that the policyholder was absolutely correct in its argument that it should not have been left with “patched-up 40 year old docks” when it had replacement cost insurance.  Here’s why – – the whole concept of replacement cost insurance is different that traditional principles of indemnity, which would require that an insured be put back in pre-loss condition.   Replacement cost insurance costs more because it gives more – – if you have a 40 year old dock that is destroyed by a covered peril, replacement cost insurance requires that the insurance company replace it with a new dock.  Now that doesn’t mean that you always get a new dock for just any damage, but you certainly would in the case of a total loss.  In the Blackjack Cove case, the court seemed to confuse the principles of replacement cost coverage with market value when it held that the insured failed “to explain why the policy terms entitle it to ‘new docks’ rather than ‘patched-up 40 year old docks’ if those patches restore the docks’ total value to what it was when the docks were insured in 2009, i.e.,’without deduction for depreciation.'”  The problem with this phraseology is that the market value of the docks in 2009 is totally irrelevant to a determination of replacement cost value.   Tennessee case law makes clear that replacement cost includes all costs associated with replacement of the damage. If damage can be repaired, then the proper query is what it costs to repair the damage – – market value is irrelevant to replacement cost coverage.

In conclusion, I suspect that the court was simply holding that it was not necessary to replace the damaged dock in its entirety and that the insured failed to demonstrate why the dock should be totaled.  If that’s the case, then the issue before the court was really one of scope and not of the proper measure of valuation, causing the language concerning “the docks’ total value” to be mere dicta and not necessary to the ultimate holding.

 

 

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Brandon McWherter Brandon McWherter

J. Brandon McWherter is a Nashville-based lawyer and member of McWherter Scott & Bobbitt PLC, which has offices across the State of Tennessee and elsewhere across the Southeast.  Licensed in Tennessee, Arkansas, and Mississippi, he has dedicated his practice to assisting insurance…

J. Brandon McWherter is a Nashville-based lawyer and member of McWherter Scott & Bobbitt PLC, which has offices across the State of Tennessee and elsewhere across the Southeast.  Licensed in Tennessee, Arkansas, and Mississippi, he has dedicated his practice to assisting insurance policyholders with their claims against insurance companies, including claims for bad faith.

For well over a decade, McWherter’s practice has been focused almost exclusively on the prosecution of first party property insurance claims for policyholders.  His interest in this area of the law first started around 2003 when a tornado struck Jackson, Tennessee, where he lived and worked at the time.  Since then, McWherter has represented hundreds or thousands of policyholders whose claims have been underpaid or denied.  He advises and advocates for owners of commercial properties, industrial facilities, residential properties, churches, business owners, and other insurance policyholders.

Since he started counting in 2013, McWherter has assisted his clients in obtaining well in excess of One Hundred Million Dollars ($100,000,000) in settlements, awards, and jury verdicts against insurance companies.

In 2018, McWherter was inducted as a fellow in the American College of Coverage Counsel, which is an invitation-only organization designed to facilitate and encourage the association of lawyers who are distinguished for their skill, experience, and high standards of professional and ethical conduct in the practice or teaching of insurance coverage and extra-contractual law and who are dedicated to excellence in this area of practice.

McWherter has been featured as a “Super Lawyer” or “Rising Star” by SuperLawyers every year since 2010.  Since 2013, he has been selected each year  for inclusion in U.S News and World Reports’ The Best Lawyers in America in the field of Insurance Law.  He also enjoys an AV Preeminent ranking by Martindale-Hubbell for legal ability and ethical standards.

Mr. McWherter is a lifelong Tennesseean and received his law degree from the University of Memphis. While in law school, he was a member of the University of Memphis Law Review, and served on the Editorial Board as Notes Editor.

In advocating for clients, McWherter has trudged through fire scenes and crawled storm-damaged roofs, quizzed consulting construction experts and experts for hours on end, and deposed and cross-examined hundreds of adjusters, experts, consultants, and other professionals within the insurance industry.  He reads insurance policies nearly every day and has a working knowledge of the customs and practices of insurance companies in investigation, estimating, and payment of claims.  McWherter counsels clients on presentation of claims, assists in compiling the evidence necessary to validate the amounts owed, and then enforces his clients’ rights, if necessary, via the judicial system and other alternative dispute resolution options, such as appraisal.

Several of McWherter’s cases have developed the law governing insurance disputes in the State of Tennessee, most recently including the Tennessee Supreme Court’s 2019 decision in Lammert et al. v. Auto-Owners Ins. Co., which held that insurers may not depreciate the costs of labor in determining their actual cash value payment obligations when the policy does not clearly allow it.

When not working, you will usually find Mr. McWherter with his wife, Angela, and his two daughters. He is an avid golfer and a lifelong bass fisherman, neither of which he does as often as he would like.

Practice Areas

  • Representation of policyholders in claims and litigation against insurance companies
  • Bad faith insurance litigation
  • Insurance-based consumer class actions

Professional Associations

  • Tennessee Bar Association
  • Arkansas Bar Association
  • Mississippi Bar Association
  • Tennessee Trial Lawyers Association
  • American Trial Lawyers Association (past member)
  • American Bar Association (past member)

Education

  • B.S.B.A. – Union University (1998)
  • J.D. – University of Memphis (2001)

Bar Admissions

  • Tennessee
  • Mississippi
  • Arkansas
  • Fifth Circuit Court of Appeals
  • Sixth Circuit Court of Appeals
  • United States District Court for the Western District of Tennessee
  • United States District Court for the Middle District of Tennessee
  • United States District Court for the Eastern District of Tennessee
  • United States District Court for the Northern District of Mississippi
  • United States District Court for the Southern District of Mississippi
  • United States District Court for the Eastern District of Arkansas