Consider one of the first recorded cases where repairs couldn’t restore property to its preloss condition, and a DV cash payment made up the difference. Massachusetts’ Supreme Court heard the case known as “Samuel Giles & Another v. The Eagle Insurance Company” in 1840. One interesting point: The repairs were shorted at the property owner’s request (to prevent a total loss) and DV was still awarded by the court!
The fishing schooner Good Hope, a “first rate vessel of her class,” was anchored off shore in Chitecamp Harbor after fear of a raging storm forced her from the open sea along with five other schooners. A heavy gale on September 14, 1837, which had begun a day earlier, turned inward, blowing directly into the harbor, pushing the Good Hope ashore, and imbedding her among the rocks, even allowing the sea to “breech over her.” Four other vessels also suffered damage.
The next night brought more of the same, and the vessels were badly beaten. The Good Hope’s crew and captain, with some of the shore’s inhabitants, emptied the boat and even sold some of its contents to raise cash for repairs. Eight days and many long hours later, with seas subsided and temporary repairs made with caulking, the Good Hope was able to return to her home port in the Massachusetts town of Gloucester.
“On her voyage to Gloucester she leaked badly…and two pumps were kept going half the time. The master carpenter, who repaired the vessel, stated that the whole body of the vessel was injured; that some of her timbers were lifted; that some of her treenails were started in the bilge, so as to come half through; that the seams and butts were opened in several places, and that some bolts were broken and others started; and he stated that the injury from the strain or hogging could not be perfectly repaired except by rebuilding her.”
Safely at Gloucester, “skillful persons were employed…to make necessary repairs.” But the plaintiffs didn’t want the vessel totaled out. Instead, they;
“…directed the carpenters to repair the vessel and make her sea worthy, but to do it economically…not (wanting) anything out of reason to be done upon her. Craftsmen bored out some treenails and put in more bolts; taking out, and afterwards putting in again, so much of the ceiling as was necessary for that purpose, and re-caulked her and spiked her decks. After these repairs she was sea worthy…constantly employed, and…performed her voyages well.”
But a hogg* remained in the vessel after repair, a condition that would affect not only the beauty of the vessel but it’s strength. According to witnesses at the trial, the vessel originally insured at $2,500 had diminished in value $800 to $1,000 due to the hogg.
Not surprising, the insurer contended that the hogg and strain were “imaginary damage, for which it was not responsible.” Ironically, this is almost identical language that many insurers use today to deny claims for Inherent Diminished Value, a claim very similar in that it is often difficult to see with one’s eyes.
A court battle began and the jury recognized that the schooner could not be “perfectly repaired, except by rebuilding her” and awarded $835 for damage of hogging and strain.
The court wrote:
“The case is not without its difficulties….there is no room for mistake about the main fact. She is obviously so much hogged as not to be perfectly repaired, unless by rebuilding her. She has been made sea worthy; but it is in evidence that she is not so strong as she would be if she were as straight as she was built. Now the insured is entitled to an indemnity. If an insurance policy should be obtained as she now is, and a damage should happen to her, all that could be required of the underwriter would be to put her in as good a state and condition as she was when the policy was made. It could not, on any principle of indemnity, be required that she should be put in a better shape and condition. Here, at the time of insurance, this schooner was of the first class. By the perils of the sea, she has received an injury obvious to the eye, essentially effecting and diminishing her value. How can it be said the plaintiffs are indemnified, if compensation should not be made for this damage?”
Obvious parallels link this case to auto insurance settlements 170 years later. The insurance industry uses the same arguments and tactics today, only combined with new tactics and techniques to avoid liability. Nothing changed but time.