Royal Capital owns an eight story commercial building in the Buckhead area of Atlanta and purchased an insurance policy from Maryland Casualty to insure the building. After construction activity on an adjacent property caused physical damage to the building, Royal Capital submitted a claim under the policy to Maryland Casualty seeking both the cost of repair and the post repair diminution in value resulting from the damage. Maryland Casualty acknowledged that the damage to the building was a covered loss under the policy and paid over $1M to compensate Royal Capital for the estimated cost of repair. However, Maryland Casualty refused to acknowledge any responsibility to compensate Royal Capital for the alleged diminution in value of the property.
In 2001, the Georgia Supreme Court found in State Farm v. Mabry, a case involving an automobile insurance policy, that insurers were required to pay for damage to insureds’ cars as well as diminution in value of the repaired vehicles. The Mabry rule had never, however, been applied to real property. In Mabry, the Georgia Supreme Court wrote that “recognition of diminution in value as an element of loss to be recovered on the same basis of other elements of loss merely reflects economic reality.”
The Georgia Supreme Court has now found that an insured suffering property damage is entitled to “full recovery” including in some circumstances both diminution in value and costs of repair and the Mabry rule is not limited to automobile insurance contract cases.
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