Opinion ID: 852754
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Heading: UIM Coverage for Diminished Value

Text: Dunn contends that Part C of his policy, entitled Uninsured Motorists Coverage applies to his claim. Part C provides: A. We will pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of: 1. Bodily injury sustained by an insured and caused by an accident; and 2. Property damage caused by an accident if the Schedule of Declarations indicates that both bodily injury and property damage Uninsured Motorists Coverage applies. Meridian responds that it paid Dunn's claim under its collision (Part D-Coverage for Damage to Your Auto) coverage. Meridian argues that under Part D Meridian's liability is limited to: [T]he lesser of the: 1. Actual cash value of the stolen or damage property; or 2. Amount necessary to repair or replace the property with other property of like kind and quality. This Limit of Liability provision applies by its terms only to Part D i.e., to the collision coverage. It does not, therefore, come into play as to UIM (Part C) coverage. The Court of Appeals assumed that the Limit of Liability in Part D applied to Dunn's claim but concluded, consistent with the Court of Appeals' holding in Allgood, that the obligation to repair or replace the property with other property of like kind and quality included coverage for diminished value. Dunn, 810 N.E.2d at 740. Accordingly, the Court of Appeals held that Dunn was entitled to recover the amount of any diminished value of his car resulting from the accident and repair. In Allgood, we reversed the Court of Appeals' ruling on which the Court of Appeals relied here. Specifically, we held that the collision coverage of a policy similar to Dunn's did not include payment for diminution in value. Allgood, 836 N.E.2d at 245, 2005 WL 2789043. Here, however, Dunn contends that his claim is not for damage to his automobile, which is subject to Part D's Limit of Liability provision that excludes diminution of value in collision coverage. Rather he asserts a right to indemnity under his UIM coverage, which essentially gives him the right to recover from his own insurer the amount for which an uninsured motorist is liable. We agree that Dunn is entitled to recover any diminution in the value of his vehicle resulting from the damage inflicted by an uninsured motorist, subject to the policy limits on Dunn's UIM coverage. The tortfeasor has no Limit of Liability comparable to the limitation on Dunn's collision coverage and therefore Dunn is entitled to recover the full amount of his damages from the accident, including any diminution of value of his car after its repair. Tennessee courts have not addressed whether diminished value is recoverable under language which requires an insurer to pay compensatory damages which an `insured' is legally entitled to recover from an uninsured driver. In Wiese-GMC, Inc. v. Wells, 626 N.E.2d 595, 598 (Ind.Ct.App.1993), trans. denied, our Court of Appeals followed the Restatement (Second) of Torts in holding that damages recoverable from a tortfeasor who damages property include diminution of value of a repaired chattel. According to Restatement (Second) of Torts § 928 (1977): When one is entitled to a judgment for harm to chattels not amounting to a total destruction in value, the damages include compensation for: (a) the difference between the value of the chattel before the harm and the value after the harm or, at his election in an appropriate case, the reasonable cost of repair or restoration, with due allowance for any difference between the original value and the value after repairs, and (b) the loss of use. Wiese concluded: In summary, the fundamental measure of damages in a situation where an item of personal property is damaged, but not destroyed, is the reduction in fair market value caused by the negligence of the tortfeasor. 626 N.E.2d at 599; see also Dado v. Jeeninga, 743 N.E.2d 291, 295 (Ind.Ct.App.2001) (citing Wiese ). Meridian argues that Wiese is inapplicable because it dealt with damages in common law tort and Dunn's measure of damages is provided by Dunn's insurance policy. We think, however, that because the terms of that policy promise to pay whatever an insured is legally entitled to recover, the policy itself establishes the tort measure of damages as the amount compensable under UIM coverage. We agree with Wiese and the Restatement that in Indiana a tortfeasor is liable for diminution of value of a repaired item. Accordingly, Dunn's UIM coverage for compensatory damages which an `insured' is legally entitled to recover from the owner or operator of an `uninsured motor vehicle' includes indemnity for diminution in value after repairs are completed. We see no basis to distinguish Tennessee law in this respect, and do not find any Tennessee authority to the contrary.