Loss of Value ≠ “Loss of Use” in Insurance
In Tennessee Farmers Mut. Ins. Co. v. Reed, No. E2012-01392-COA-R3-CV, 2013 Tenn. App. LEXIS 382 (Tenn. Ct. App. June 10, 2013), the Tennessee Court of Appeals recently held that the plain meaning of “loss of use” does not include loss of value or economic loss.
In Reed, several defendants filed suit against Reed, the personal representative of the Estate of Carol LaRue, a financial and investment consultant. The defendants claimed that LaRue was negligent and had breached her fiduciary duty by advising defendants to invest in promissory notes which ultimately became worthless. As a result, defendants claimed that they had suffered financial damages.
Before her death, LaRue had purchased from Tennessee Farmers a commercial general liability insurance policy (the “policy”). The policy covered loss to personal property which it defined as follows:
Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that cause it.
Tennessee Farmers filed a declaratory judgment seeking a determination that defendants’ claims were not covered by the policy. The trial court granted Tennessee Farmers summary judgment, finding that as a matter of law, the losses sustained by defendants were not “property damage” as defined by the policy, but instead were investments which lost value. The court further found that defendants’ loss was the type that would typically be covered by an errors and omissions policy rather than a commercial general liability policy.
The court of appeals agreed that coverage did not exist for defendants’ claims. While the policy did not define “loss of use,” using the “usual, natural and ordinary meaning” of the words, the appellate court held that defendants were not alleging loss of use of the promissory notes. Rather, defendants were alleging that they had lost their investment. As a result, defendants were claiming a loss of value, not a loss of use. While the defendants attempted to equate the loss of use with loss of investment or value, the court of appeals held they are simply not the same.