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Newnan attorney sues insurance company in ‘diminution of value’ dispute

  • By Clay Neely
  • |
  • Oct. 06, 2021 - 2:15 PM

A Newnan attorney has filed a federal lawsuit against a Michigan-based insurance company, alleging the company failed to compensate policyholders after the tornado of March 2021.

The complaint, filed by Taylor Drake, alleges the Auto-Owners Insurance Company of Lansing, Michigan, failed to pay for the diminution of the fair market value of two properties Drake owns on LaGrange Street and Boone Drive.

“Diminution in value” describes a property’s loss of value even after repairs have been made to restore the property to its original condition.

The complaint was filed last Thursday in the U.S. District Court of Northwest Georgia.

While the company compensated Drake for the damages sustained in the March tornado, Drake claims it failed to pay for the diminution of fair market value to both properties.

Georgia state law states that policyholders may recover post-repair diminution in value as part of their property damage claims, as referenced in the case of Royal Capital Development LLC v. Maryland Casualty Co.

Drake alleges that in 2015, Auto-Owners Insurance Company attempted to incorporate a diminution in value exclusion into the two policies covering the properties on LaGrange Street and Boone Drive.

However, Georgia law states if an existing policy is renewed, it cannot reduce coverage at the same time. It can only issue a non-renewal notice and then create a new policy containing the exclusion.

Georgia law also requires a written notice in a reduction in coverage to be issued 30 days before any proposed reduction, which Drake claims was never sent.

Drake also alleges that in 2015, Auto-Owners Insurance Company attempted to reduce coverage while increasing premiums on the policies for both properties.

The company continued raising premiums for each subsequent year, Drake said.

Drake is seeking full payment of the diminution of value for the properties, valued at $43,000, along with punitive damages and attorneys fees.