Marchman v. Grange Mutual Insurance Company
Court of Appeals of Georgia, Docket No. A98A1049, decided May 6, 1998 (Eldridge, Judge, for the Court; McMurray, Presiding Judge, and Blackburn, Judge, concurring). The complete opinion appears below. Our text comes from the Caselaw Access Project (case.law), Harvard Law School’s open archive of published U.S. case law, which supplies the opinion as printed in the official reporter at 232 Ga. App. 481. The reporter’s head matter — the docket number, the caption, the parallel-cite line “(500 SE2d 659)”, the decision date, and the counsel listing (Robert E. Richardson for the appellant; Mozley, Finlayson & Loggins, William D. Harrison, and Lawrence B. Domenico for the appellee) — is summarized in this paragraph rather than printed as opinion text; a caption and a court-and-date line are reprinted above the opinion. Here is the complete list of repairs to the opinion text: the judge’s name line was set in bold; the reporter’s decided-date and counsel block, which the archive prints in the middle of Division 2 as an artifact of how the printed page was columned, was removed and summarized above; “March-man” was rejoined to “Marchman” in the two places the line break split it; and the missing period in the concurrence line “McMurray, P. J, and Blackburn, J., concur.” was restored. Two things were deliberately left as printed. First, the Louisiana citation reads “201 S2d 689 (La. App. 1967)” in the archive, where the reporter almost certainly set the Southern Reporter abbreviation; because that may be the reporter’s own compression rather than a scanning error, it stands untouched. Second, the opinion’s single footnote, which the archive prints after the concurrence line with no inline reference marker, appears at the end below an editorial note of ours. Nothing else was changed. No word of the Court’s has been condensed, reordered, or paraphrased.
The full opinion
MARCHMAN v. GRANGE MUTUAL INSURANCE COMPANY.
Court of Appeals of Georgia. No. A98A1049. Decided May 6, 1998.
Eldridge, Judge.
Jimmy Marchman, individually and as executor of the estate of his late wife, Barbara Marchman, filed suit against the defendant, Grange Mutual Insurance Company (“Grange Mutual”), in an effort to recover $70,000 in property insurance following a May 1995 fire that destroyed Marchman’s home. The trial court granted summary judgment to Grange Mutual after finding that Marchman had not rebuilt his home, thereby failing to satisfy the condition precedent to recovery under a rider to the insurance policy at issue. Marchman appeals, and we affirm.
In his sole enumeration of error, Marchman asserts that the trial court misconstrued OCGA § 33-32-5 (a), Georgia’s Valued Policy Statute, and failed to apply its provisions to supersede the express terms of the insurance rider. OCGA § 33-32-5 (a) reads in pertinent part as follows: “Whenever any policy of insurance is issued to a natural person or persons insuring a specifically described one or two family residential building or structure located in this state against loss by fire and the building or structure is wholly destroyed by fire without fraudulent or criminal fault on the part of the insured or one acting in his behalf, the amount of insurance set forth in the policy relative to the building or structure shall be taken conclusively to be the value of the property” (Emphasis supplied.)
The Grange Mutual insurance policy on Marchman’s home showed basic coverage in the amount of $125,500. Marchman and Trust Company Bank, as mortgagee, jointly received this amount in December 1995. The bank retained approximately $109,000 in satisfaction of the mortgage and issued a check for the remaining proceeds to Marchman.
In addition to the basic coverage, Marchman also had purchased a “Homeowners Vantage Plus Endorsement”; this insurance rider provided for “dwelling replacement cost coverage.” Under this rider, Grange Mutual agreed to pay the full replacement cost of the destroyed property, regardless of the limits in the basic policy. However, the express language of the rider reads as follows: “We will pay only an amount equal to the actual cash value of your damaged property until the actual repair or replacement is complete.” (Emphasis supplied.) The requirement to repair or replace is restated in the homeowner’s policy manual, which states that “[i]f the full cost to repair or replace the damaged property is more than $2,500 or 5% of the insurance for the dwelling or other structure in this policy, we will not be liable for full replacement cost until actual repair or replacement is completed.” (Emphasis supplied.)
Further, as an additional condition precedent to receiving the benefits of the rider, Marchman was required to pay a higher “adjusted premium.” Although the rider contained a provision that the replacement had to occur within 180 days of the loss, Grange Mutual gave Marchman over a year to secure a building loan and replace his home.
However, Trust Company Bank refused to finance the rebuilding of Marchman’s home. Marchman admitted during the summary judgment motion hearing that he had not contacted other lending institutions about securing a loan.
Marchman subsequently filed a claim against Grange Mutual, asserting that the replacement cost rider increased the “face value” of his insurance policy. Therefore, under OCGA § 33-32-5 (a), he was entitled to the proceeds of the basic coverage of $125,500 plus an additional $70,000, regardless of whether or not he rebuilt his home. For the following reasons, we disagree.
- Marchman asserts that the insurance contract is ambiguous and, therefore, should be construed in his favor. See Isdoll v. Scottsdale Ins. Co., 219 Ga. App. 516, 518 (466 SE2d 48) (1995). However, the insurance contract is internally consistent, and the plain, unambiguous language requires no judicial construction. See OCGA §§ 13-2-1; 13-2-2 (2), (4); 33-24-16. The contract clearly requires, as conditions precedent to receiving benefits under the replacement cost rider, that Marchman (a) rebuild his home and (b) pay additional premiums. In fact, in responding to Grange Mutual’s motion for summary judgment, Marchman admitted that the $70,000 was due and payable “subject to the insured’s compliance with the conditions of the policy.”
“When a plaintiff’s right to recover on a contract depends upon a condition precedent to be performed by him, he must allege and prove the performance of such condition precedent, or allege a sufficient legal excuse for its nonperformance. [Cits.]” (Punctuation omitted.) Wolverine Ins. Co. v. Sorrough, 122 Ga. App. 556, 560 (177 SE2d 819) (1970). It is undisputed that Marchman has not rebuilt the home or paid the additional premiums. Further, his assertion that he was unable to get financing to rebuild because of his pending bankruptcy proceedings was lost when he admitted that he abandoned his pursuit of such financing once Trust Company Bank, his former mortgagee, rejected his rebuilding loan request. Accordingly, Marchman failed to present any evidence to create a material issue of fact regarding his performance of the conditions precedent and his entitlement to benefits under the replacement cost rider, and the trial court was authorized to grant summary judgment to Grange Mutual. See OCGA § 9-11-56 (c); Lau’s Corp. v. Haskins, 261 Ga. 491 (405 SE2d 474) (1991).
- However, Marchman claims that OCGA § 33-32-5 (a) should supersede the express, unambiguous provisions of this rider, although he cites to no authority for this assertion. Instead, Marchman argues that public policy requires that the statute be applied to insurance riders outside the basic coverage. This argument is without merit.
OCGA § 33-32-5 protects property owners from the overwhelming burden of proving the value of property after it has been totally destroyed by fire by “conclusively” establishing that the value of the property equals the face value of the policy. In this way, a property owner is entitled to the benefits of the insurance coverage without the difficult and perhaps impossible task of proving actual damages. See Harvey v. Gen. Guaranty Ins. Co., 201 S2d 689 (La. App. 1967). “Such a valuation is in the nature of a contract for liquidated damages.” 6A Appleman, Ins. Law & Practice, § 3827, pp. 245-246. In this case, Marchman has accepted the benefits of this statutory protection, receiving $125,500 in insurance proceeds without having to prove the value of his home prior to the fire. The proceeds were then deposited in the bank or used to satisfy his mortgage.
However, when a property owner attempts to recover under a replacement cost rider, the actual cost of repair or replacement already has been incurred, so that it is definite and ascertainable. As such, there is no need to statutorily mandate conclusions as to the value of a structure once it has been rebuilt. Accordingly, OCGA § 33-32-5 (a) does not apply to insurance riders that require replacement or repair as a condition precedent to recovery of insurance proceeds. See generally BSF, Inc. v. Cason, 175 Ga. App. 271, 274 (333 SE2d 154) (1985). There was no error in the trial court’s grant of summary judgment to Grange Mutual.
Judgment affirmed.
McMurray, P. J., and Blackburn, J., concur.
[Editorial note, ours: the archive prints the opinion’s single footnote after the concurrence line, with no inline reference marker. It follows, verbatim.]
The $70,000 figure represents the difference between the face value of the insurance policy, $125,500, and the alleged cost of $195,500 to rebuild the house to its pre-loss condition.
What it decided
This one goes against the policyholder, and it is worth reading precisely because of that.
A May 1995 fire destroyed Jimmy Marchman’s home. Grange paid the basic coverage of $125,500 in December 1995, jointly to Marchman and Trust Company Bank as mortgagee. The bank kept roughly $109,000 to satisfy the mortgage and cut Marchman a check for what was left.
Marchman had also bought a “Homeowners Vantage Plus Endorsement” — dwelling replacement cost coverage. Under it, Grange agreed to pay full replacement cost “regardless of the limits in the basic policy.” He wanted another $70,000 under that endorsement, which the opinion’s footnote explains is the gap between the $125,500 face amount and the alleged $195,500 cost to rebuild.
He did not get it, for one reason: he never rebuilt.
The endorsement said, in the words the court italicized: “We will pay only an amount equal to the actual cash value of your damaged property until the actual repair or replacement is complete.” The policy manual said the same thing a second way. And the endorsement carried a second condition too — a higher “adjusted premium” Marchman also had not paid.
The court held the contract “internally consistent, and the plain, unambiguous language requires no judicial construction.” Those two requirements were conditions precedent, and under settled Georgia contract law a plaintiff “must allege and prove the performance of such condition precedent, or allege a sufficient legal excuse for its nonperformance.” Marchman offered an excuse — his bank refused a rebuild loan while his bankruptcy was pending — and it failed, on his own admission: “he abandoned his pursuit of such financing once Trust Company Bank, his former mortgagee, rejected his rebuilding loan request.” He conceded he “had not contacted other lending institutions.” Summary judgment for the insurer.
The second half of the case is about Georgia’s Valued Policy Statute, O.C.G.A. § 33-32-5 (a), which the opinion quotes. On a total fire loss to a one- or two-family home, the face amount of the policy “shall be taken conclusively to be the value of the property.” Marchman argued that the replacement cost endorsement raised his policy’s face value, so the statute entitled him to the extra $70,000 whether he rebuilt or not.
The court said no, and explained why. The statute exists to spare an owner “the overwhelming burden of proving the value of property after it has been totally destroyed by fire” — a valuation “in the nature of a contract for liquidated damages.” Marchman had already taken that benefit: he collected $125,500 without proving what his house was worth. But replacement cost is different in kind, because “when a property owner attempts to recover under a replacement cost rider, the actual cost of repair or replacement already has been incurred, so that it is definite and ascertainable.” No proof problem, so no need for the statute. Holding: “OCGA § 33-32-5 (a) does not apply to insurance riders that require replacement or repair as a condition precedent to recovery of insurance proceeds.”
One detail cuts the other way and should not be lost: the endorsement required replacement “within 180 days of the loss,” and Grange did not enforce that. It “gave Marchman over a year to secure a building loan and replace his home.”
What it did NOT decide
- It did not hold that hardship can never excuse performance. The court applied the rule that a plaintiff must prove performance or “allege a sufficient legal excuse for its nonperformance.” It rejected Marchman’s excuse on this record, because he admitted he stopped looking after a single rejection from his former mortgagee. An insured who documents a genuine, exhausted, unsuccessful effort is not the insured this court reviewed.
- It did not decide what happens after a denial. Grange never denied. It paid the basic limits within about seven months and extended the replacement period. The Georgia rule for an insured who could not replace because the carrier refused to pay is in BSF, Inc. v. Cason — the case this opinion itself cites — where the court affirmed actual cash value now plus 180 days from the remittitur to replace and claim the difference.
- It did not rule on the 180-day replacement provision. The carrier waived it. The holding rests entirely on non-performance, not on lateness, and the opinion never says whether that deadline would have been enforced.
- It did not decide anything about the mortgagee’s $109,000. The court recites that the bank retained it and moves on. There is no holding here about mortgagee clauses, loss-payee checks, or whether proceeds absorbed by a lender affect a rebuild condition.
- It did not decide whether the unpaid “adjusted premium,” standing alone, would have been fatal. Both conditions were unmet and the court treated them together.
- It did not address bad faith. No penalty count under O.C.G.A. § 33-4-6 appears in the opinion, and nothing here suggests the carrier’s conduct was at issue.
- It did not limit the Valued Policy Statute’s core function. Marchman received the statute’s benefit. What the court refused was extending it to an endorsement that conditions payment on rebuilding.
- It is a 1998 decision quoting a 1998 statute. We do not carry a Reading Room page for O.C.G.A. § 33-32-5. Read the current text of that statute directly before relying on the version quoted here.
Why it matters to policyholders
This is the rule that can cost you your claim if you ignore it. When your carrier pays “actual cash value” and holds back “recoverable depreciation,” it is relying on words like the ones in Marchman’s endorsement. Georgia enforces those words literally. The withheld money is real and it is yours — but the endorsement conditions it on the repair or replacement actually happening, and a Georgia court will not read that condition out of the policy because rebuilding turned out to be hard.
The excuse has to be built, not felt. Marchman’s situation was genuinely bad: a destroyed house, a bankruptcy, a mortgagee that took most of the proceeds and then declined to lend for the rebuild. He still lost, and the sentence that beat him was his own admission that he stopped after one “no.” If financing, permitting, contractor availability, or a lienholder is blocking your rebuild, that has to become a paper record while it is happening — every lender contacted, every date, every refusal in writing — not a story told later.
Ask for an extension in writing, before the window closes. Grange voluntarily gave more than a year past a 180-day provision. Carriers do extend replacement periods, and a written request with a written answer costs nothing. An extension you were told about on the phone is worth very little.
Read your endorsement for the second condition. Marchman’s replacement cost coverage required both rebuilding and paying a higher premium. Most people never look at the endorsement until the loss. Look now, and note the replacement deadline, any premium condition, and the dollar threshold that triggers the holdback.
Know which number you are arguing about. The Valued Policy Statute settles the value of the building on a total fire loss so you do not have to prove it. It does not deliver replacement cost money for a house that was never rebuilt. For how Georgia thinks about actual cash value itself, see American Casualty v. Parks-Chambers.
And do not let the holdback fight distract you from the timing rules. The carrier’s own deadlines for acknowledging, deciding, and paying a claim are in Georgia’s claim-handling regulation, Ga. Comp. R. & Regs. 120-2-52-.03. Those obligations run whether or not you have rebuilt.
Where our work sits. A public adjuster prices the rebuild properly at both numbers, keeps the depreciation schedule honest and itemized, documents the replacement as it happens, and negotiates the release of the holdback when the conditions are met — or negotiates an extension when they cannot be met yet. Suing over a denied holdback, or bringing a bad-faith count, is attorney work, and we refer it out. More Georgia claim law, in full text, is on the Georgia claim-law page.
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