WDKLAW

IDV - Inherent Diminished Value

MCGILLOWAY V. SAFETY INSURANCE COMPANY (SJC 13043) (OCTOBER 19, 2021) (INHERENT DIMINISHED VALUE IN PROPERTY DAMAGE CLAIMS)

Officially released on October 19, 2021

Key Points: Class action lawsuit to determine if inherent diminished value (IDV) was compensable under part 4 of the Standard Massachusetts automobile insurance policy. The SJC determined that IDV damages are recoverable under part 4, however, a Plaintiff will still need to prove (1) that his or her vehicle has suffered IDV damages and (2) the amount of IDV damages at issue.

The Plaintiff’s asserted that they each purchased a vehicle between 2012 and 2016. Those vehicles were then involved in a collision which caused damage to their vehicles. The at-fault party in each of those collisions was insured by either Safety Insurance or Commerce Company.

Each Plaintiff then sought compensation from the insurance carrier for the damage to their individual automobiles. In each case, the insurer paid the plaintiff the full cost to repair their automobile to its pre-collision status. However, the insurer refused to compensate the Plaintiff for the alleged diminished value of the vehicle. The Plaintiffs then filed suit.

At issue in the case was whether part 4 of the Standard Massachusetts Automobile Policy, covering property damage, required an insurance company to pay for the inherent diminished valued (IDV) caused to their vehicle by the fact that it was involved in an accident. Inherent diminished value is “the concept that a vehicle’s fair market value may be less following a collision and repairs, and that it equals the difference between the resale market value of a motor vehicle immediately before a collision and the vehicle’s market value after a collision and subsequent repairs.”

After receiving cross motions for summary judgment, the trial court judge sided with the Defendant’s, concluding that “the defendants were not required to pay any IDV damages beyond the cost to fully repair the collision damages to the plaintiffs’ vehicle.”

The Supreme Judicial Court (SJC) then granted an application for direct appellate review.

The SJC differentiated part 4 from part 7 (a first party claim for collision coverage) of the standard Massachusetts auto policy, and held that IDV damages are recoverable under a third party claim for damages under part 4 of the standard policy. The SJC noted that not every automobile that is involved in a collision and is subsequently repaired has suffered IDV. “Rather,…, individualized proof is required to demonstrate that a given automobile has sustained some form of diminution in value due to a collision or vehicular accident, even after repairs are made.” A Plaintiff would still need to prove (1) that his or her vehicle has suffered IDV damages and (2) the amount of IDV damages at issue.

The SJC declined to find that the insurance companies had acted in bad faith regarding this issue since a “plausible, although ultimately incorrect” interpretation of its policy did not mean it acted in bad faith.

Full decision can be found here.

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