In the interest of promoting transparency to affected consumers, the DOI has announced that all insurers shall be required to include specific language as to the determination of the actual cash value of a damaged motor vehicle as set forth in 211 CMR 133.05(1), or substantially similar language, in the motor vehicle insurance policy contract. This new language may also be included in a mandatory endorsement to the standard motor vehicle insurance policy contract offering property damage liability, collision, limited collision, or so-called comprehensive coverage. With this new change Bulletin 2011-14 makes it clear that the DOI believes that consumers should understand the criteria under which their insurer will determine the actual cash value of their damaged vehicle.
211 CMR 133.05(1) addresses the determination of actual cash value of a damaged motor vehicle and requires that an insurer determine the actual cash value of a vehicle whenever the appraised cost of a repair plus the probable salvage value of the vehicle may be reasonably expected to exceed the actual cash value of the vehicle. As such, the DOI advises that an insurer’s determination should be based on a consideration of the following:
- The retail book value for a motor vehicle of like kind and quality, but for the damage incurred;
- The price paid for the vehicle plus the value of prior improvements to the motor vehicle at the time of the accident, less appropriate depreciation;
- The decrease in value of the motor vehicle resulting from prior unrelated damage which is detected by the appraiser; and
- The actual cost of purchase of an available motor vehicle of like kind and quality but for the damage sustained.
The DOI has given insurance companies until April 1, 2012 to make the appropriate changes and revisions. After that date, insurers will not be permitted to offer, issue or renew motor vehicle insurance policies in the Commonwealth unless the appropriate forms have been placed on file with the DOI. To learn more about what insurers need to do, review the General Filing Instructions in SERFF for the latest filing instructions and information regarding filing materials with the DOI. Lastly, be forewarned, the DOI has made it clear that it plans to use its full array of enforcement tools upon determination that prohibited practices are continuing in the motor vehicle insurance marketplace after April 1st, 2012.