On March 8, 2018, the Appeals Court ruled the standard Massachusetts automobile insurance policy, providing coverage for a property damage claim including loss of use of a claimant’s damaged property, required the claimant to have incurred actual costs before an insurance company was obligated to pay.
Plaintiff sought loss-of-use payment for property damage without having incurred costs
In this decision, Skeffington v. Liberty Mutual Insurance Company, Ann Skiffington (“Ms. Skiffington”) of East Longmeadow, claimed Liberty Mutual (“Liberty”) had an absolute legal obligation to pay loss-of-use damages for her parked vehicle totaled by a Liberty insured. She also claimed Liberty had a legal obligation to pay her for her title and registration costs and the remaining value of her inspection sticker.
Ms. Skiffington based her claim for loss of use without having incurred costs for substitute transportation on the language of the property damage statute, M.G.L. c. 90, § 34O. This statute provided insurance companies had to pay “loss of use” as part of the damages owed for their insureds’ property damage claims.
Liberty denied Ms. Skiffington’s claim for any loss-of-use damages based on her having incurred no costs for a rental vehicle or other transportations costs arising out of the property damage to her vehicle. Liberty also denied her claim for title and registration cost payments or the remaining value of her vehicle’s inspection stickers
Liberty based its rejection of Ms. Skiffington loss-of-use claim on the wording of the property damage part of the Massachusetts automobile insurance policy that states insurers will pay, “the costs resulting from loss of use.”
Total loss leads to dispute over the interpretation of policy term “loss of use”
Ms. Skiffington owned a 2005 Nissan Altima. On October 31, 2015, she parked her vehicle on the eastbound side of the street outside her home in East Longmeadow. While her vehicle was parked on the street, a Liberty insured traveling westbound over the center line into the eastbound lane and struck Ms. Skiffington’s parked vehicle causing extensive damage.
Ms. Skiffington submitted an insurance claim to her carrier, Plymouth Rock, which declared the car a “total loss” and paid her the actual cash value of the car. Liberty did not contest its insured’s liability and paid Plymouth Rock its subrogation claim for its payment to Ms. Skeffington.
However, Ms. Skiffington made her a claim against Liberty for consequential damages the loss of her vehicle consisting of:
- The “loss of use;” of her vehicle;
- The “title fee for the vehicle;”
- The “registration fee of the vehicle;” and
- The “residual value of the inspection sticker.”
After Ms. Skiffington, through counsel, served a 93A demand letter on Liberty, Liberty responded to Ms. Skiffington demand by denying any relief unless she submitted evidence of the amounts that she paid for a rental car or any other out-of-pocket costs.
Class action for additional damages allegedly owed on total loss property damage claims
When no payments were forthcoming from Liberty, Ms. Skiffington filed a class action against Liberty seeking payment of the claimed damages. In her class action, Ms. Skiffington sought to sue on behalf of herself and behalf of a class consisting of:
- All Massachusetts residents involved in an accident in which Liberty determined that its insured was liable and failed to pay ‘loss-of-use’ amounts (even if such costs were not incurred);
- All individuals who suffered a ‘total loss’ of their vehicle and to whom Liberty never paid Title, registration, or motor vehicle inspection fees; and,
- Treble damages as well as attorney fees for Liberty’s alleged unfair claim practices, and an injunction requiring Liberty to pay these amounts in the future.
Before the Superior Court, Liberty moved for summary judgment and the judge hearing the suit found for Liberty. Ms. Skiffington filed an appeal to the Appeals Court.
Supposed conflict between statute and insurance policy
In the Appeals Court, Ms. Skiffington argued the language of the standard auto policy’s property damage coverage allowed her to recover for loss of use of her vehicle whether she had actual costs for substitute transportation or not. She based this argument on the coverage statement in Liberty’s policy stating:
. . . We [Liberty] will pay damages to someone else whose auto or other property is damaged in an accident. The damages we will pay are the amounts that person is legally entitled to collect for property damage through a court judgment or settlement.”
Ms. Skiffington’s position before both the Superior Court and Appeals Court was that the amounts she was legally “entitled to collect for property damage through a court judgment” included loss of use as a separate element of damages irrespective of her actual incurred costs.
In support of her argument, she cited Massachusetts caselaw purportedly allowing a property damage claimant to obtain loss-of-use damages simply as a result of being deprived of the use of the damaged property. Ms. Skiffington argued that measure of her loss-of-use damages should be the fair cost of what a rental vehicle would have cost her if she had had to rent one.
Liberty argued to both the Superior Court and the Appeals Court Ms. Skiffington ignored the second part of the standard policy’s property damage coverage section stating covered damages include:
…the costs resulting from the loss of use of the damaged property.”
In Liberty’s view, the policy language: “The costs resulting from the loss of use;” followed the dictionary definition of “costs;” as “[t]he amounts paid or charged for something” or a “price or expenditure.” And, therefore, a “cost” could not apply to Ms. Skiffington’s claimed loss of her enjoyment of the full economic value of her property absent any expenditure on her part.
The court finds commissioner of insurance’s approved policy required “actual costs” for Ms. Skiffington to recover
In the Appeals Court, the legal question revolved around one question: Whether the undefined statutory language requiring loss-of-use payments controlled Liberty’s legal obligation or whether the standard policy property damage language with the added word’s for “costs resulting from the loss of use” applied.
The Appeals Court noted Ms. Skiffington alleges that she and the putative class were entitled to loss of use compensation because M.G.L. c. 90, § 34O and Massachusetts common-law clearly recognizes that “[t]he loss of use of [an] automobile during the period of repair [or time until replacement] is as much the natural and necessary consequence of the tortious act of the defendant … as is the cost of the repair.” And she is still entitled to some unspecified amount of damages because the standard policy must provide coverage to comply with the statutory provision for “loss of use” as policy damages, whether or not she incurred costs for substitute transportation.
After stating Ms. Skiffington legal position, the court stated, “We disagree.”
The court, to determine what damages were compensable under the standard policy, had to interpret the policy’s words “in light of their plain meaning, giving full effect to the document as a whole.” Also, the court had to consider “what an objectively reasonable insured, reading the relevant policy language, would expect to be covered.”
The court construed the word “costs” according to its usual and accepted meaning as “the amount or equivalent paid or charged for something,” or, in other words, as an expense Ms. Skiffington incurred rather than might have incurred.
The court did not find, as Ms. Skiffington’s argued, the standard policy language conflicted with the property damage statute, G. L. c. 90, § 34O, because the statement: “including loss of use thereof” did not refer to ‘costs’ as written. amount or equivalent paid or charged for something,” or, in other words, an expense Ms. Skiffington incurred rather than might have incurred.
The court noted that omission did not create any conflict with the policy because the statute also did not define what constitutes “loss of use thereof” and because the commissioner of insurance prescribed the policy language in question, the court would not construe any policy ambiguities against Liberty.
Finally, the court ruled it was within the authority of the Commissioner of Insurance to fill in that gap in meaning when deciding, “what the terms of a standard policy will be.”
The court concluded based on its rulings, Ms. Skiffington, to recover for loss of use, had to present evidence to Liberty she incurred actual costs for substitute transportation to recover for loss of use under the property damage coverage of the standard policy.
Based upon Ms. Skiffington not disputing she did not incur any actual costs, the court ruled she was not entitled to the loss-of-use damages she had claimed.
The court rules standard policy has no coverage for title, registration or inspection sticker costs
On Ms. Skiffington’s added claim, the court declined to consider Ms. Skiffington’s allegations Liberty was liable for her title and registration fees and the residual value of her inspection sticker. The court held since she did not contend that the title, registration, and inspection fees constituted “property damage” under Liberty’s policy or that they were covered damages under any other provision of the policy, she was not entitled to any relief.
Twenty days to apply for further appellate review to the Supreme Judicial Court
The Massachusetts Appeals Court is an intermediate appellate court. The ultimate judicial authority resides with the Supreme Judicial Court. Parties dissatisfied with an Appeal Court’s decision may apply for further appellate review. The allowance of the appeal is discretionary with the Supreme Judicial Court.
Under the Massachusetts Rules of Appellate Procedure, Ms. Skiffington may apply for further appellate review with the Supreme Judicial Court up until March 28, 2018.
Agency Checklists will monitor this matter and update its readers on the filing of an application for further appellate review and the action of the Supreme Judicial Court on any such application.