First Case On Diminished Value, 1840

Consider one of the first recorded cases where repairs couldn't restore property to its preloss condition, and a DV cash payment made up the difference. The Supreme Judicial Court of Massachusetts decided Samuel Giles & Another v. The Eagle Insurance Company, 2 Met. 140 (43 Mass. 140), in 1840. One interesting point: the owners asked for economical repairs because they meant to keep the vessel, and the hogging could not be fully repaired except by rebuilding her. The damages for the lost value were still allowed.

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The fishing schooner Good Hope, a “first rate vessel of her class,” was anchored off shore in Chitecamp Harbor after fear of a raging storm forced her from the open sea along with five other schooners. A heavy gale on September 14, 1837, which had begun a day earlier, turned inward, blowing directly into the harbor, pushing the Good Hope ashore, and imbedding her among the rocks, even allowing the sea to “breech over her.” Four other vessels also suffered damage.

The next night brought more of the same, and the vessels were badly beaten. The Good Hope’s crew and captain, with some of the shore’s inhabitants, emptied the boat and even sold some of its contents to raise cash for repairs. Eight days and many long hours later, with seas subsided and temporary repairs made with caulking, the Good Hope was able to return to her home port in the Massachusetts town of Gloucester.

Safely at Gloucester, “skillful persons were employed…to make necessary repairs.”The owners said they meant to keep her. They

But a hogg* remained in the vessel after repair, a condition that would affect not only the beauty of the vessel but its strength. According to witnesses at the trial, the vessel originally insured at $2,500 had diminished in value $800 to $1,000 due to the hogg.

Imaginary Damage

Not surprising, the insurer contended that the hogg and strain were “imaginary damage, for which it was not responsible.”The court agreed that unseen or theoretical damage could not be claimed. It allowed this claim because the lasting damage was “actual, visible and tangible” and reduced the vessel’s value even after repairs.

A court battle began and the jury recognized that the schooner could not be “perfectly repaired, except by rebuilding her” and awarded $835 for damage of hogging and strain.

The court wrote:

Conclusion

More than 180 years later, the same principle still appears in many diminished-value disputes. When repairs cannot restore property to its pre-loss condition, the lasting loss in value may be a separate item of damage, depending on the policy and state law.

* Hogg: When a hogg condition exists, the sides of the vessel buldge, much like the sides of a shoe when the wearer bends his/her foot.