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A federal appeals court Friday reversed a lower court ruling in favor of a Berkshire Hathaway Co. unit in a dispute over $2.3 million in coverage to fix hundreds of cars damaged by a 2019 hailstorm finding the policy wording was ambiguous.
The 10th U.S. Circuit Court of Appeals in Denver ruled in Brandon Steven Motors LLC v. Landmark American Insurance Co. that it was unclear if a spreadsheet created by Expert Auto Claims, which was retained by Landmark to assess a claim submitted by the Wichita, Kansas-based auto dealership, was intended as a settlement offer.
The dispute centered on whether the insurer was required to pay the dealership for the actual costs it paid USA Dent to repair cars damaged by a May 2019 hailstorm or the estimated value of the loss contained in the spreadsheet.
Landmark provided a “Dealer’s Open Lot Coverage” policy to BSM that allowed the insurer to settle a claim on an “appearance damage basis” or pay the actual repair costs.
According to the ruling, BSM submitted a claim to Landmark days after the storm and retained USA Dent to perform the repairs. BSM agreed to pay the repair company $150,000 upfront and 50% of the insurance recovery because the paintless dent repair technique it used could not fix the cars 100%, court documents say.
Landmark, in turn, hired EAC to assess the damage to the vehicles. EAC created a spreadsheet that listed the affected vehicles and the costs to repair them. The spreadsheet totaled the loss to $2.3 million.
After Landmark said it was still investigating the claim, the dealership sued the insurer in the U.S. District Court for the District of Kansas in October 2019, accusing the insurer of breach of contract and breach of the duty of good faith and fair dealing. BSM said in the lawsuit that Landmark should pay the $2.3 million for the loss as provided by the spreadsheet.
The court awarded summary judgment to Landmark, finding the policy does not provide for the payment of estimated costs after BSM hired USA Dent to make the repairs.
The appeals court found that the phrase “appearance damage basis” in the policy is ambiguous “because its meaning is doubtful and cannot be gleaned from a natural and reasonable interpretation of the language.”
“Rather than providing any guidance on settling a claim on this basis, the section merely explains how a settlement will be calculated when a loss has not been settled on an appearance damage basis,” the appeals court said.
The panel also ruled that the lower court erred when finding that BSM’s recovery was limited to actual costs since Landmark never requested the repairs.
Landmark did not respond to a request for comment.