Opinion ID: 2276887
Heading Depth: 1
Heading Rank: 7

Heading: damages owed by insurers

Text: [¶ 37] The court found that the insurers breached the insurance contract with County Forest by not paying County Forest for its fire loss. Because the court found a breach and also found that the insurers acted in bad faith, thereby breaching the covenant to deal fairly and in good faith, the court was faced with the task of determining damages. The damages that flowed directly from the breach of the insurance contract were readily determined by the appraisal award and the policy limits. This amount was $743,542.05, which is the sum of the appraisal award on the building ($266,553.57), the replacement cost of the plant electrical system ($185,814), and the policy limits on the contents ($720,000), less the amount already paid by the insurers ($428,825.52). [¶ 38] County Forest requested consequential damages. The court found that County Forest was forced to sell its undamaged sawmill and planer equipment. The evidence discloses that when County Forest received the $428,825.52 payment from the insurers in December 1995, it paid several creditors. It still owed approximately $550,000 to Katahdin Trust on a mortgage and $70,000 to a judgment creditor. The court impliedly found that if County Forest had received the amount owing under the appraisal award, in a timely fashion, it would have been able to pay its creditors. Because of the delay, it was forced to hold an auction of the undamaged equipment. The court concluded that the forced sale resulted in a loss to County Forest of $250,000. [5] The court also awarded County Forest consequential damages representing the interest payments owed to Katahdin Trust by County Forest and interest payments and attorney fees which were the result of a lawsuit by a creditor against County Forest. [¶ 39] The insurers argue that County Forest had financial difficulties before the fire and these damages were a result of those difficulties and not the result of the fire or the delay in payment of the insurance proceeds. Although the court heard testimony and received documents regarding County Forest's financial situation before the fire and the debts that it owed at that time, the court was not compelled to find from that evidence that County Forest would have been forced to liquidate its equipment or would have been unable to pay its creditors even without the fire and delay in payment of the insurance proceeds. The record amply supports the court's findings of consequential damages resulting from the forced sale as well as the interest payments and other costs owing to the creditors. [6]