American Casualty Company of Reading, Pa. v. Parks-Chambers, Inc.

Court of Appeals of Georgia, Docket No. 41187, submitted March 1, 1965, decided April 15, 1965 (Jordan, J., writing; the concurrence line as transcribed reads “Bussell and Pannell, JJ., concur”). The complete opinion appears below, transcribed from the official reporter via the Caselaw Access Project, Harvard Law School’s open archive of published U.S. case law; only print artifacts have been removed. The reporter’s head matter here is not a syllabus. It is the docket line, the submission and decision dates, and counsel of record, and we have reproduced it above the opinion. Three honest limits on the transcription: the archive’s text carries no star-page markers, so this page cites no pinpoint pages; the reporter’s numbered division headings did not survive it (the opinion’s own reference to “Division 3” is the ruling on the inventory-shortage item); and one stray transcription mark, “fair market value is. not necessarily limited to original cost,” is set here as “is not.” Nothing else in the court’s words has been touched.

The full opinion

AMERICAN CASUALTY COMPANY OF READING, PA. v. PARKS-CHAMBERS, INC. Court of Appeals of Georgia (April 15, 1965). Docket No. 41187. 111 Ga. App. 568. Submitted March 1, 1965. Decided April 15, 1965.

Smith, Bingel, Martin & Lowe, Sam F. Lowe, Jr., for plaintiff in error. Hamell, Post, Brandon & Dorsey, Charles E. Watkins, Jr., contra.

Jordan, Judge.

This was a suit by Parks-Chambers, Incorporated against the American Casualty Company of Reading, Pennsylvania on a policy of multi-peril insurance issued by the defendant company to the plaintiff.

The petition alleged that the plaintiff had suffered a loss at 1258 Paces Ferry Road, N.W., Atlanta, Georgia, on or about April 27 to April 29, 1963, at an unknown hour, caused by vandalism, malicious mischief, robbery, burglary, and other events insured against and water damage to property in the amount of $20,036.27, as a result of such cause. The plaintiff sought to recover this sum and an additional sum of $9,009.06 as penalty and attorney’s fees for bad faith. Copies of the policy sued upon and of the proof of loss filed with the defendant company were attached to the petition as exhibits.

The defendant insurance company filed general and special demurrers to the petition which were overruled by the trial court, and the exception is to that judgment.

The allegations of the petition are sufficient to show that the plaintiff has suffered an insured loss under Section 1, Subsection II, Paragraph H, entitled “Vandalism and Malicious Mischief,” of the policy sued upon, General Accident &c. Corp. v. Azar, 103 Ga. App. 215 (119 SE2d 82), for which a recovery in some amount would be authorized against the defendant insurance company. Accordingly, the trial court did not err in overruling the general demurrer to the petition. Burke v. Life Ins. Co. of Ga., 104 Ga. App. 865, 867 (1) (123 SE2d 426).

The plaintiff insured in paragraph 10 of the petition alleged that the actual cash value of the property at the time of loss was $32,709.06 and that the actual cash value of the property after the loss was $14,586.11; that damage to other property and additional losses, as enumerated in the attached proof of loss, amounted to $1,913.32; and that the total actual cash value and amount of the loss was $20,036.27.

The defendant insurer in grounds 2, 3, 4, and 5 of its special demurrers attacked this computation of loss on the ground that it was further alleged in paragraph 10 of the petition and in the attached proof of loss that the property of the alleged actual cash value of $32,709.06 had been purchased by the plaintiff at a cost of approximately 56 per cent of that sum; and that under the policy of insurance sued upon, a copy of which was attached to the petition as an exhibit, the original cost to the plaintiff is the basic measure of damages. It is thus contended by the defendant insurer that the pleadings affirmatively show that the plaintiff’s claim is substantially in excess of the coverage afforded by the policy as asserted in these grounds of demurrer.

A suit on a policy of insurance being a suit upon a contract, the measure of the insurer’s liability must be determined according to the terms of the contract. U. S. Fidelity &c. Co. v. Corbett, 35 Ga. App. 606, 610 (134 SE 336). The pertinent provisions in the policy in dispute in this case state that the defendant insurance company: “does insure the Insured named in the declarations, above and legal representatives, to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality within a reasonable time after such loss, without allowance for any increased cost of repair or reconstruction by reason of any ordinance or law regulating construction or repair, and without compensation for loss resulting from interruption of business or manufacture, nor in any event for more than the interest of the Insured.” (Emphasis supplied).

The primary obligation of the defendant insurance company under these provisions was to insure the owner to the extent of the actual cash value of the property at the time of loss, the correct measure of its liability being the difference between the value of the property immediately before the injury and its value immediately afterwards. Dependable Ins. Co. v. Gibbs, 218 Ga. 305, 315 (127 SE2d 454). Under the decision of the Supreme Court in the Gibbs case, the stipulation of the policy that liability shall not exceed the cost of repair or replacement is a subordinate provision to be pleaded defensively if the insurer would limit or diminish the amount of recovery by reason thereof.

It follows therefore that the basic measure of loss under this policy is not original cost or replacement value as contended by the defendant insurer, but is actual value which has been defined as fair market value of the property at the time of loss. National Fire Ins. Co. v. Banister, 104 Ga. App. 13 (121 SE2d 46). While it has been held in a case involving the loss of a stock of goods that the actual cost of such goods to the insured “would be at least their actual cash value” (Emphasis supplied) (General Accident &c. Corp. v. Azar, 103 Ga. App. 215, 221, supra), actual cash value or fair market value is not necessarily limited to original cost. Mobile Fire Dept. Ins. Co. v. Coleman & Collat, 58 Ga. 251 (3).

The plaintiff insured in computing the amount of its claim against the defendant insurer was not therefore limited as a matter of law to the original cost of the property in dispute but was entitled to allege as a matter of ultimate fact the actual cash value placed by it on the subject property and to assert its claim within the language of the policy provisions, the determination of the actual cash value of the property and of the amount of the loss being an issue for the jury under the pleadings. Millers Nat. Ins. Co. v. Waters, 97 Ga. App. 103 (1) (102 SE2d 193).

The trial court did not err in overruling these grounds of special demurrer.

The plaintiff in paragraph 10 alleged that “damage to other property and additional losses, as stated in the said proof of loss, amounted to $1,913.32.” The defendant in ground 6 demurred to and moved to strike from the petition the sum of $1,913.32 on the grounds that the proof of loss referred to in paragraph 10 (Exhibit B to the petition) showed that a portion of such amount, $1,042.10, was claimed as a shortage in inventory, an item of coverage not afforded by the policy sued upon.

While the policy by endorsement covered certain losses of property due to robbery and other perils, there is no provision which per se covered a shortage in inventory, and in the absence of specific allegations of fact showing that the alleged shortage in inventory was caused by one of the perils insured against, this ground of special demurrer was meritorious and should have been sustained.

The remaining grounds of special demurrer attack the allegations and prayer of the petition in which a recovery of the statutory penalty and attorney’s fees for bad faith is sought.

While the petition in this case stated a cause of action for a recovery in some amount against the defendant insurance company and was good as against general demurrer, it did not state a cause of action for the recovery of the specific amount claimed by the plaintiff in view of the ruling in Division 3 of this opinion. Accordingly, since the plaintiff’s claim for damages for bad faith was not predicated upon an absolute denial of liability by the defendant insurer or upon a refusal of the company to make a bona fide effort to effect a settlement of the claim, but was wholly predicated upon the failure of the company to pay the specific sum claimed by the plaintiff, the petition did not state a cause of action for the recovery of the statutory penalty and attorney’s fees for bad faith. “Refusal to pay in bad faith means a frivolous and unfounded denial of liability. If there is any reasonable ground for the insurer to contest the claim, there is no bad faith…” Dependable Ins. Co. v. Gibbs, 218 Ga. 305, 316, supra.

The trial court erred in overruling ground 7 (b) of the special demurrer.

Judgment affirmed in part; reversed in part.

Bussell and Pannell, JJ., concur.

What it decided

Parks-Chambers, Inc. suffered a loss at 1258 Paces Ferry Road in Atlanta over three days in April 1963, pleaded as vandalism, malicious mischief, robbery, burglary and water damage, and sued its multi-peril carrier for $20,036.27 plus $9,009.06 in statutory penalty and attorney’s fees. The carrier attacked the petition by general and special demurrers, the pre-1966 Georgia device for testing a pleading before trial. The trial court overruled them and the appeal came up on those demurrer rulings alone. So every holding below is about what a policyholder is allowed to plead and prove, not about what the property was actually worth.

The court made four rulings.

1. The petition stated a claim. Vandalism and malicious mischief were insured perils, so “a recovery in some amount would be authorized.” The general demurrer was properly overruled.

2. Original cost is not the measure of loss — actual cash value is, and actual cash value means fair market value at the time of loss. The carrier’s argument was arithmetic: the insured pleaded property with an actual cash value of $32,709.06 that it had bought for about 56 percent of that sum, so (said the carrier) the claim was necessarily inflated past the coverage. The court rejected the premise. The policy’s primary obligation was to insure “to the extent of the actual cash value of the property at the time of loss,” and under the Supreme Court’s decision in Dependable Ins. Co. v. Gibbs the correct measure is “the difference between the value of the property immediately before the injury and its value immediately afterwards.” That is exactly how the insured had pleaded it: $32,709.06 before, $14,586.11 after, a difference of $18,122.95, plus $1,913.32 in other damage, for the $20,036.27 claimed.

From there the sentence policyholders cite this case for: “the basic measure of loss under this policy is not original cost or replacement value as contended by the defendant insurer, but is actual value which has been defined as fair market value of the property at the time of loss.” The court acknowledged the stock-of-goods line of cases, in which the insured’s actual cost “would be at least their actual cash value,” and still held that “actual cash value or fair market value is not necessarily limited to original cost.” The insured could plead its own valuation as ultimate fact, and “the determination of the actual cash value of the property and of the amount of the loss” was an issue for the jury.

3. The repair-or-replace cap is a defense the insurer has to raise. The same policy sentence said liability would not exceed what it would cost to repair or replace with material of like kind and quality. The court, again following Gibbs, called that “a subordinate provision to be pleaded defensively if the insurer would limit or diminish the amount of recovery by reason thereof.” It does not displace actual cash value as the measure; it caps the recovery only if the insurer pleads and proves it.

4. The insured lost on two items, and one of them killed the bad-faith count. Of the $1,913.32 in “other” damage, $1,042.10 was pleaded as an inventory shortage, which the policy did not cover as such. That demurrer should have been sustained. And because the bad-faith claim rested entirely on the carrier’s failure to pay “the specific sum claimed,” a sum that included a non-covered item, rather than on an absolute denial of liability or a refusal to negotiate in good faith, the penalty and fee claim fell with it. The court restated the standard from Gibbs: “Refusal to pay in bad faith means a frivolous and unfounded denial of liability. If there is any reasonable ground for the insurer to contest the claim, there is no bad faith.”

Judgment affirmed in part, reversed in part.

What it did NOT decide

Our earlier version of this page called Parks-Chambers the case where “Georgia defines actual cash value as fair market value.” That reads too big. Here is the honest perimeter.

• It did not invent the rule; it applied one. The fair-market-value definition is credited to National Fire Ins. Co. v. Banister, 104 Ga. App. 13, and the before-and-after measure and the “subordinate provision” point both come from the Supreme Court’s decision in Dependable Ins. Co. v. Gibbs, 218 Ga. 305. Parks-Chambers is a clean, quotable application of those authorities against a carrier arguing original cost — which is what makes it useful — not a first-instance definition of ACV in Georgia.
• It is a pleading decision. Every ruling is on demurrer. The court did not find a value, weigh an appraisal, review an award, or approve any method of computing fair market value. It held that the insured was entitled to allege actual cash value as ultimate fact and that the amount was for the jury. A case about what may be pleaded cannot tell you what your loss is worth.
• It is a commercial contents case, not a building or roof case. The loss was vandalism, burglary and water damage to business property. Nothing in the opinion addresses dwellings, roofs, matching of undamaged materials, or how to value a partial loss to a structure. The policy language it construes is the ACV-plus-repair-cap wording of a 1963 multi-peril form, and the court repeatedly ties its holding to “this policy.”
• It says nothing about depreciation, or about replacement cost policies. No holding on whether depreciation may be taken, on what may be depreciated, on labor depreciation, or on how holdback under a replacement-cost endorsement works. Those questions are not in the opinion.
• It did not hold that original cost is irrelevant. The court preserved the stock-of-goods point from General Accident v. Azar — that for a stock of goods the insured’s cost “would be at least their actual cash value” — and held only that value “is not necessarily limited to original cost.” Cost is evidence. It is not the measure.
• It did not create a rule that naming a number defeats a bad-faith claim. What defeated the penalty count was that the claim was “wholly predicated upon the failure of the company to pay the specific sum claimed” and that the sum included an item the policy did not cover, so the carrier had a reasonable ground to contest it. Compare Hanover v. Hallford, where a demand with no magic words still supported the penalty.
• It is not an appraisal case. If your disagreement with the carrier is about the amount of a covered loss, the appraisal cases are the ones to read: McGowan v. Progressive (Ga. 2006) on what an appraisal clause may resolve, Lam v. Allstate (2014) on how carriers recast an amount dispute as a coverage dispute, and Omni Health Solutions v. Zurich (11th Cir. 2021). And where repairs leave a building worth less than it was, see Royal Capital v. Maryland Casualty (Ga. 2012).

Why it matters to policyholders

Georgia has no statute that defines “actual cash value.” Policies use the phrase constantly and rarely define it, and when a carrier’s worksheet drives an ACV number down, the definition is where the argument lives. Parks-Chambers is one of the Georgia decisions that fills that gap, and three things in it are worth keeping in front of you.

What you paid is not an automatic ceiling. The carrier here argued that because the insured had bought the property for roughly 56 cents on the dollar of the value it claimed, the pleading proved its own excess. The court said no: value at the time of loss is the question, and it “is not necessarily limited to original cost.” A depreciation schedule that starts from purchase price and walks it down is a carrier’s position on value, not the legal measure.

Before-and-after is the frame. The measure the court adopted from Gibbs is the difference between the property’s value immediately before the loss and immediately after. That is a valuation question with two numbers in it, and this decision put both of them in front of a jury rather than in the carrier’s file.

The repair-or-replace clause is the insurer’s burden, not your starting point. Under this decision the “not exceeding the cost to repair or replace” language is subordinate — the insurer must plead it defensively to use it. If a carrier limits payment to a repair estimate, the question to ask is whether it has actually invoked and supported that provision, and what the property was worth before and after the loss.

And one warning that has aged perfectly. The insured here lost its penalty claim under OCGA § 33-4-6 not because the carrier behaved well but because the demand was built around one specific figure that contained an item the policy did not cover. A demand for the covered loss survives; a demand for a bundled number invites the answer the carrier gave here, that it had “reasonable ground to contest the claim.” Georgia’s later penalty cases sit alongside this one: Hanover v. Hallford (1972) held that no magic words are needed to make a demand, and Primerica v. Humfleet (1995) held that the 60-day clock only runs when payment is actually due.

A public adjuster documents the loss, values it, negotiates it and invokes appraisal where the policy allows. Bad-faith penalties and lawsuits are attorney work, and we refer that out. But the record that a penalty claim later stands or falls on — what was demanded, when, and for exactly what — is built during the claim, not after it.

A note on the citation

This page previously cited the case as 111 Ga. App. 567. That is off by one page. The Caselaw Access Project’s metadata for volume 111 of the Georgia Appeals Reports places American Casualty Co. of Reading, Pa. v. Parks-Chambers, Inc., Docket No. 41187, decided April 15, 1965, at 111 Ga. App. 568–571. Page 567 is the last page of a different case, Turner v. American Mutual Liability Insurance, 111 Ga. App. 565, decided the same day. The correct official citation is 111 Ga. App. 568 (1965).

Two related notes, so nothing here is overstated. The archive’s record for this case lists only the official Georgia Appeals citation, with no parallel South Eastern Reporter cite, so we do not print one. And because the transcription carries no star-page markers, we have not attached pinpoint page numbers to the passages quoted above — the full opinion is on this page, so you can read any quotation in its place.

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