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Ways of Evaluating Property Damage Claims in Various Contexts

Potential damages in a lawsuit may come in many forms depending on the facts of the case. Common damages include medical expenses, loss of earnings, property loss, physical pain, and mental suffering. Of the many damages Plaintiffs may claim, one of the most prevalent and recognizable is property damage. This article briefly discusses these types of damages which fall under two major categories – Real Property and Personal Property.

Broadly speaking, “real property” means land, and “personal property” refers to all other objects or rights that may be owned. Ballentine’s Law Dictionary defines “real property” as: “Such things as are permanent, fixed, and immovable; lands, tenements, and hereditaments of all kinds, which are not annexed to the person or cannot be moved from the place in which they subsist. . . .” (Ballentine’s Law Dict. (3d ed. 2010).) “Personal property” is defined as: “Money, goods, and movable chattels . . . . All objects and rights which are capable of ownership except freehold estates in land, and incorporeal hereditaments issuing thereout, or exercisable within the same.” (Id. (emphasis added).)

Real Property

Real property may be damaged or “harmed” through trespass, permanent nuisance, or other tortious conduct. The general rule is that Plaintiffs may recover the lesser of the two following losses: (1) the decrease in the real property’s fair market value; or (2) the cost to repair the damage and restore the real property to its pre-trespass condition plus the value of any lost use. (Kelly v. CB&I Constructors, Inc.) However, an exception to this general rule may be made if a Plaintiff has a personal reason to restore the real property to its former condition, sometimes called the “personal reason” exception. In such cases, a Plaintiff may recover the restoration costs even if the costs are greater than the decrease in the real property’s value, though the restoration cost must still be “reasonable” in light of the value of the real property before the injury and the actual damage sustained.

Personal Property

Several forms of recovery are available for damage to personal property, depending on the severity of the harm, the type of personal property at issue, and the recovery sought.

Fair market value frequently plays a role in determining the amount of recovery. Fair market value is “the highest price that a willing buyer would have paid to a willing seller, assuming: 1. That there is no pressure on either one to buy or sell; and 2. That the buyer and seller are fully informed of the condition and quality of the [item of personal property].” 

If the personal property had value before the harm occurred and still retained a part of its value following the harm, a Plaintiff may recover the lesser of either: (1) the reduction in the item’s value because of the harm; or (2) the reasonable cost of repairing it. The formula for recovery changes if the personal property will still lose value even if the repairs are performed: recovery becomes the difference between the item’s value before the harm and its lesser value after the repairs have been made plus the reasonable cost of making the repairs, but this award may not exceed the value of the item before the harm occurred. If repairs cannot be made, the formula for damages changes yet again; recovery is the fair market value of the item before the harm occurred minus the item’s fair market value immediately following the harm. 

If the personal property is lost or destroyed because of the harm, recovery is more straightforward. Simply put, the Plaintiff is entitled to the fair market value of the item of personal property just before the harm occurred. 

In some instances, personal property has “special value” to its owner, over and above its market value. Put differently, the law recognizes additional recovery for “property which has a market value and also a peculiar value to the owner . . . .” (Zvolanek v. Bodger Seeds, Ltd.) To recover damages for property having special value, a Plaintiff must prove: (1) that the item had some market value; (2) that the item had a unique value to the Plaintiff; and (3) that the Defendant had notice of this unique value before the harm or that the Defendant’s conduct was intentional and wrongful. Note that “peculiar value” does not include sentimental or emotional value; it “refers to a property’s unique economic value” or “special characteristics” that increase its monetary value. (McMahon v. Craig) It is also worth noting that there is no set formula for determining the amount of special value, making this form of recovery more difficult to evaluate. 

A Plaintiff may receive an additional award for the loss of use of the personal property (i.e. the amount of time he or she is unable to use the item). To determine recovery for a Plaintiff’s loss of use, a Plaintiff must prove the reasonable cost to rent a similar item for the amount of time reasonably necessary to repair or replace the item. 

Evaluating property damage depends on a number of factors, including the type of property, the extent of the damage, and the recovery sought. While many damages can be estimated based on market value and the cost of repairs, wildcard damages such as the personal reason exception for real property and special value recovery for personal property can have an unpredictable impact on damage calculations. As with all damages, case-specific facts matter when making property damage determinations. For Plaintiffs, it is wise not to count on recovery that is more difficult to prove. For Defendants, it is prudent to allow for a healthy margin of error. 

Because these issues can be complex, it’s best practice to consult with experienced and knowledgeable counsel when property damage has occurred. Contact Bremer Whyte Brown & O’Meara LLP to speak with an attorney who can help.