The Honorable Charlie Cole Chaffin State Senator Route 3, Box 1057 Benton, Arkansas 72015
Dear Senator Chaffin:
This is in response to your request for an opinion on the following question concerning A.C.A. 27-53-401:
Does the responsibility for difference in market value before and after a collision apply to ALL insurance companies or does it apply only to a third party insurance company? Is there any basis for an insurance company to claim they are only liable for the reduction in market value when it does not involve their own customer's reduction in market value?
It is my opinion, in response to your question, that although27-53-401 does not mention insurance companies, and thereby does not expressly govern their activities, it operates as a practical matter in most instances to require liability of an insurance company only to an individual who is not its insured.
The relevant provision, A.C.A. 27-53-401 provides:
In all cases involving damage to motor vehicles, the measure of damages shall be the difference between the value of the vehicle immediately before the damage occurred and the value after the damage occurred, plus a reasonable amount of damages for loss of use of the vehicle.
This provision applies to all cases involving damage to motor vehicles. Cases, in this instance, means lawsuits. When a lawsuit is filed seeking recovery for damage to a motor vehicle, the statute directs the judge as to the calculation of the amount of damages. The statute makes no reference to insurance companies or their liability.
When a judge applies the measure of damages provided for in the statute, he or she will enter an order or judgment against the defendant for that amount. Often, if the defendant is insured, (as he is now by law required to be) his insurance company will pay this amount to the plaintiff, who is not its insured. This scenario is consistent with the basis of your question which inquires whether insurance companies are only liable to pay the claims of non-insureds under the statute. Under the scenario just discussed, the insurance company is liable only to the third party non-insured.
As noted earlier, 27-53-401 applies only in lawsuits where the judge orders the payment of damages. The statute, as a practical matter will not operate so as to require an insurance company to pay this measure of damages to its own insured, unless the insured's insurer is the defendant (i.e. caused the damage to the insured's vehicle).
Of course this is not to say that an insurance company is not, in certain instances, contractually obligated to pay claims of its insured for damage occurring to that insured's motor vehicle. This contractual liability, however, is simply not governed by A.C.A. 27-53-401.
The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Elana L. Cunningham.