At trial, Parker's offered a series of documents relating to each claim brought by each insured that were admitted into evidence primarily by stipulation: the final invoice, a supplemental report itemizing all the work done by Parker's and identifying charges made by Parker's that Nationwide's claims adjuster did not believe were covered by Nationwide's insurance policies, a separate itemized bill for painting costs incurred, the accounting ledger Parker's created for each claim, the contracts between Parker's and Nationwide's insureds authorizing Parker's to repair each insured's vehicle, and the assignment of insurance claims by the insureds to Parker's.

Mr. Parker, the owner of the repair shop, testified on direct examination to his experience repairing vehicles and to the billing and repair processes employed in his shop. He compared, in some respects, the practices employed in his shop to those used by Nationwide's claims adjuster.

The jury returned a verdict finding Nationwide liable for breach of contract and awarding Parker's $41,737.89.

The trial court granted judgment as a matter of law in favor of Nationwide. It construed the Nationwide insurance policies as requiring Nationwide to pay “an amount [Nationwide] determined was sufficient to do the repairs.” It reasoned that the insureds could not have sued Nationwide for sums that were entirely within its discretion to award. Therefore, the trial court explained, Parker's could not sue Nationwide as the insureds' assignee.

Parker's appealed to the Supreme Court of Vermont.

The Vermont Supreme Court's Decision

The Supreme Court of Vermont reversed, vacated the judgment in favor of Nationwide, and remanded with direction to the trial court to reinstate the jury's verdict and its award of damages.

In its decision, the court first rejected the trial court's conclusion that Nationwide only was required under its policies to pay an amount that it determined was sufficient to do the repairs. Rather, the court ruled, the amount owed to insureds was “not entirely within [Nationwide's] discretion and [Parker's] may sue [Nationwide] as the insureds' assignee to challenge [Nationwide's] valuation of the claims.”

The court then explained that Nationwide promised to pay “direct and accidental loss or damage to” a covered vehicle. It pointed out that “damage” under the Nationwide policies meant “cost of repair to preaccident condition,” which had to be paid unless repairs were “uneconomical” and the vehicle was considered a “total loss,” for which Nationwide would pay the insured the vehicle's fair market value before it was damaged.

The court then rejected Nationwide's argument that its policies did not explicitly require payment of the bills submitted by Parker's, finding that the argument ignored the actual issue: whether bills submitted by Parker's were covered. The jury, the court observed, “determined that they were.”

Next, the court determined that there was “legally sufficient evidence” presented at trial showing that the insureds had suffered a “financial loss,” rejecting Nationwide's argument that because Parker's never sought to collect on its bills from the insureds the bills were not a “financial loss.” In the court's view, this argument ignored the “real issue in this case: whether [Nationwide] satisfied its obligation to its insureds under the policy.”

Finally, the court found that Nationwide had to pay “repair and labor costs” given that Nationwide had committed to cover the cost of repair to preaccident condition or the payment of preaccident fair market value, whichever was less, and labor was “an indispensable component of the cost to make a repair.”

The court concluded that, from the perspective of a reasonably prudent applicant for insurance, a collision insurance policy covering the “direct and accidental loss of or damage” not to exceed “cash value” did not exclude from coverage a mechanic's labor even if a separate towing clause in the Nationwide policies explicitly mentioned the word “labor” and the insuring clause did not contain that word.

The case is Parker's Classic Auto Works, Ltd. v. Nationwide Mutual Ins. Co., No. 17-433 (Vt. June 28, 2019). Attorneys involved include: Robert P. McClallen, Rutland, for Plaintiff-Appellant. Eric T. Boron and Roy A. Mura of Mura & Storm, PLLC, Buffalo, New York, for Defendant-Appellee.