‘IF AN OWNER SUFFERS DIMINUTION IN THE VALUE OF HIS CAR, THE OTHER PARTY IS LIABLE TO COMPENSATE THE OWNER FOR THAT LOSS’

The case was quite new in Italian terms, and we carried out extensive research as to the precedents, so as to provide a preliminary opinion for the owner. The main legal point was whether the party who caused the accident, and more importantly his/her insurer, was liable to pay compensation for the loss of value, in addition to bearing the very high cost of the repairs.

We found very few precedents relating to motor vehicles, though those we found were promising, as the conclusion in similar circumstances had been always in favour of the claimant. There are similar precedents with reference to works of art damaged as a consequence of loans from one museum to another. Based on general principles of Italian law of torts and based on these precedents, we could say that there is consensus as to the fact that the party liable for the event, and therefore its insurer, has to pay compensation for the loss of value, in addition to the compensation due to repair the vehicle/work of art.

We therefore advised the owner that there were reasonable chances of a successful claim against the insurer for diminution in value. Obviously our situation was very different from any previous case, given the extraordinary value of the vehicle. At the time of the accident, according to two expert reports we obtained from top auctioneers, the car had a value in excess of €30million. However, we concluded that the unusual size of the claim should not allow the court to depart from the precedents we had found, or from the general principles of the Italian law of torts.

At the time we started the case, the insurer had already paid out more than €130,000 for the repair of the Ferrari, without raising any objection. In due course they paid 100% of the repair invoices that were submitted by the owner, totalling more than €200,000.

The insurer could not easily inspect the car, as it had been shipped back to the USA immediately after the event. In other words, the insurer acted in such a way as to accept, without any limitation, its liability for the accident. This was, throughout, a very strong argument in favour of the claimant.

Early in the case the judge chose a court-appointed expert to answer four main questions:

Whether the car was being legally driven on the open road Whether or not the accident was caused by the other driver What the market value had been at the time of the accident What percentage of that value was lost as a consequence of it. These were quite promising questions for the claimant. Unfortunately, the expert appointed by the court was not an expert in collector cars; he was more used to dealing with everyday accident repair disputes. This made the technical aspects of the case and the judgment more complex than expected. We (with the expert hired by our client) had to deal with unexpected questions from the court’s expert, including his doubts about the authenticity of the car; about its presence in Italy at the time of the accident; even about its very existence.

Notwithstanding the above, we ended up with a report from the court’s expert, which concluded that there was a loss of value equal to 15% (which is correct in our opinion); but which provided a wrong (much too low) valuation of the car. This was mainly due to the fact that the court’s expert knew effectively nothing about the collector-car market, and was not able to come up with a valuation for this one-off collectable Ferrari that was anywhere near accurate.

Based on the report of court’s expert’s, the judge handed down a decision stating that:

The car was being legitimately driven by the owner, as it was properly registered in its country. The existence and validity of registration must be assessed in accordance with the law of the country where the vehicle is, actually or allegedly, registered It was properly covered by an international insurance policy. The existence of insurance coverage is mandatory in Italy and a vehicle cannot be driven on open roads if it is not insured The other driver was only partially liable (addressed below) The car had a certain value before the accident, and had lost 15% of its value as a result of the accident

The other driver and his insurer were jointly liable to the owner of the damaged vehicle for payment of the loss of value.

As to the point of the decision that the accident was caused by the joint negligence of both drivers, we believe the decision is simply wrong. The judge failed to consider the local police report, which clearly confirmed that the other driver crossed the centre line of the road and hit the Ferrari, which was being driven in its correct lane. The other driver was fined for this in a criminal prosecution, and did not challenge the fine (that is, he did not file an appeal). That criminal judgment, in our opinion, represented final evidence as to the other driver’s culpability for the accident, which the judge should have taken into account. The Ferrari owner has lodged an appeal on this joint negligence point.

OUTCOME

The Court decided that the Ferrari had a value at the time of the accident of €6,500,000. 15% of that sum is €975,000, and the 50% joint negligence factor reduced the judgment award to €487,500, plus a costs award to the claimant of €30,000.

One may argue that the judgment figure should have been much higher, (a) had there been a more realistic valuation of the Ferrari, and (b) deleting the 50% discount, which we believe was wrong. Nevertheless it is still a significant sum, more than twice the cost of the €200,000 repair bill.

However, the key point here is not quantum, but liability. The Italian Court has found without question that when a valuable collector car suffers material damage caused by the negligent act of another party, and as a result the owner suffers diminution in the value of his car, that other party is liable to compensate the owner for that loss. While this ‘first instance’ judgment will not be binding on other courts in Italy, nor indeed in England, I am told that in a similar case an Italian court would adjudge the culprit liable for diminution in underlying value.

So, what gives from all of this?

If you are the owner of a valuable car, it would be sensible to check that you have it insured on an agreed value basis at the current open market value. You may also wish to check that your policy includes cover for diminution in value in the event of an accident – whoever is responsible for that accident, including disaster events that are no-one’s fault.

And – obviously – steer well clear of White Van Man.