Every day we see evidence of the continuing evolution of subrogation law across our country. In many respects, we are still pioneers in this industry, as subrogation wasn’t pursued, respected, or sought after for many years, leaving many areas in our industry undecided by the courts and simply unknown. A good example of this is the state of the law in Alabama with regard to recovery of loss of use damages when a vehicle is damaged. The new Alabama Court of Appeals decision in Myers v. Alfa Insurance Company is only the latest subrogation decision determine subrogation rights in a particular area for the first time.
The basic rule for measuring physical damages to a motor vehicle under Alabama law is the difference in a vehicle’s value before and after the accident. This difference may be shown by proof of reasonable cost of restoring the machine to its original condition. The difference in market value is not the absolute, only measure of damages, but is only a principal element. The difference may be shown by proof of the reasonable cost of repairs necessary to restore the vehicle to its original condition. If repairs alone cannot return the vehicle to its pre-accident condition, there does not appear to be any authority for recovery of inherent diminution in value.
In Alabama, a total loss is damage to the car which is 75% or greater than the value of the car. A vehicle is “salvage” when (1) the frame or engine is removed and not immediately replaced, or (2) when the insurer has paid a total loss on vehicle. Usually, the insurer buys the vehicle from the insured for the fair market value (i.e., salvage) and then applies to the state for a salvage title. If a vehicle can be restored by repair to its original condition, the measure of damages is the difference between the reasonable market value of the vehicle before and after the accident. Any element affecting the determination of the real loss may be considered in determining the difference in market value. The reasonable cost of such repairs may be admitted and considered.
The insured is entitled, after repairs to his vehicle, to a car equal to but not better than he had immediately prior to the collision. In addition, the cost of repairs must not exceed the difference in the market value of the car before and after the injury. No hard and fast rules are imposed upon the trial court in the admission of evidence with regard to the elements upon which a fair judgment of the loss in market value may be ascertained. The reasonable cost of repairs may be admitted and considered.
Loss of Use
In addition to the other damages recoverable, loss of use (reasonable value of use or rental of a car while the owner is deprived of use of damaged vehicle during repairs), wrecker costs, etc., may also be recoverable. Loss of use is recoverable for a reasonable amount of time until the vehicle is replaced or repaired. With regard to loss of use, the reasonable value of the hire or use of the car while deprived thereof, the expenses of removing it to and from the place of repair, and maybe other elements may enter into the real loss.
Until 2012, the measure of damages for property loss when a vehicle was totaled was limited to the value of that vehicle immediately before the collision, less its salvage value, if any. Under that rule, one could not recover damages for both the total loss of the vehicle and the loss of use of that vehicle.
In 2012, the Supreme Court in Ex parte S&M, LLC—a case involving a collision between a taxicab (commercial vehicle) and another vehicle—ruled for the first time that with regard to a damaged commercial vehicle that is a total loss, the recovery of reasonable loss of use damages is allowed during the time reasonably required to procure a replacement vehicle. The court surveyed a number of jurisdictions that had adopted the so-called “modern approach” to loss-of-use damages recoverable when a commercial vehicle is destroyed. However, Ex parte S&M seemingly, and somewhat arbitrarily, limited loss of use damages for total loss vehicles only to commercial vehicles. The ruling did allow for loss of use damages with respect to privately owned vehicles.
In 2024, the Court of Appeals in Myers v. Alfa Mutual Insurance Company, was asked to extend the loss of use rule involving totaled vehicles to privately-owned vehicles also. The court refused to extend the loss of use rule to privately-owned vehicles, stating:
We…remain bound by the preexisting rule prohibiting loss-of-use damages when the irreparable vehicle at issue is privately owned. It is up to the supreme court to expand its holding in Ex parte S & M to cover situations involving those kinds of automobiles, if it so chooses.
It is clear that with regard to a damaged commercial vehicle that is not repairable, the recovery of reasonable loss of use damages is allowed during the time reasonably required to procure a suitable replacement vehicle. The Ex parte S & M, LLC decision overruled three older decisions which held to the contrary. However, with regard to recovery of loss of use damages to a totaled non-commercial passenger vehicle, the answer appears to be “no”—until the Alabama Supreme Court changes the law. While the S&M LLC decision appears to limit itself to commercial vehicles, the cases it overruled (Hunt and Lary), both dealt with non-commercial passenger vehicles, not commercial vehicles. In the S & M decision, Justice Woodall stated:
The decisions in Hunt, Fuller, and Lary are overruled to the extent that they conflict with the modified vehicle-damage rule set forth in this opinion. The Court of Civil Appeals’ judgment was entered in reliance on Hunt, and the circuit court’s judgment was entered in reliance on Fuller and Lary. Therefore, we reverse the Court of Civil Appeals’ judgment and remand the case for that court to reverse the circuit court’s judgment in favor of the estate and then to remand the case to the circuit court for further proceedings consistent with this opinion.
Unless and until the Supreme Court specifically includes non-commercial passenger vehicles in a later opinion, owners of non-commercial passenger vehicles are still prohibited from recovering loss of use damages for totaled non-commercial vehicles. The S&M opinion itself cites to cases from California and Oklahoma addressing commercial vehicles. It is now clear that Alabama has carved out a commercial vehicle exception to the general rule that there is no loss of use for a totaled vehicle.
For questions about subrogating automobile physical damage, loss of use, or diminution in value losses, contact Lee Wickert at leewickert@mwl-law.com.
[1] Fuller v. Martin, 125 So.2d 4 (Ala. App. 1960).
[2] Alford v. Jones, 531 So.2d 659 (Ala. 1988).
[3] Ala. Stat. § 32-8-87(d).
[4] Hannah v. Brown, 400 So.2d 410 (Ala. App. 1981).
[5] Fischer v. Hawkeye Stages, 37 N.W.2d 284 (Ala. 1949).
[6] Fuller, supra.
[7] Id.
[8] Hunt v. Ward, 79 So.2d 20 (Ala. 1955).
[9[ Fuller, supra.
[10] Fuller, supra.; Hunt, supra.
[11] Ex parte S & M, LLC v. Burchel, 120 So.3d 509 (Ala. 2012), overruling Hunt v. Ward, 79 So.2d 20 (Ala. 1955), Fuller, supra., and Lary v. Valiant Ins. Co., 864 So.2d 1105 (Ala. App. 2003).
[12] Myers v. Alfa Mut. Ins. Co., 2024 WL 4522424 (Ala. App. 2024).
[13] The decision overruled Hunt v. Ward, 79 So.2d 20 (Ala. 1955), Fuller, supra., and Lary v. Valiant Ins. Co., 864 So.2d 1105 (Ala. App. 2003).