Points to consider after the recent SJC Decision
The Supreme Judicial Court (SJC) decision last month (See Agency Checklists’ article of October 26, 2021, “Supreme Court Rules Auto Policies Cover Vehicles’ Post-Repair Losses of Value”), holding that automobile property damage claimants can recover from the insureds who caused the damage to their vehicle and resulting inherent diminished value (IDV) will create a need for independent agents, as trusted advisors to their insureds, to answer questions about IDV claims.
The decision of the Court did not answer many questions beyond stating that the recovery of inherent diminished value is a component of automobile property damage claims under Massachusetts Law.
The following are seven points that every agent might wish to know to answer some of the questions that an insured may have if their vehicle is damaged, and they have the belief that the vehicle will have IDV even after being repaired.
How are IDV claims quantified?
1Just as in a total loss payment, where the measure of the loss is the actual cash value of the vehicle, IDV is the measure of the actual cash value of a vehicle after the body shop has repaired the vehicle. The question of whether a vehicle has IDV is dependent upon a number of factors, including age, mileage, pre-accident condition, post-accident repairs.
The National Automobile Dealer Association, which publishes the NADA guide of vehicle values, states on its website, “It is very difficult, if not impossible, to determine diminished value from an accident and as a result, NADA guides make no attempt to take a stand on diminished value. Any aspect of the vehicle’s history can have an effect on the value of a vehicle…”
In its decision, the SJC stated that not every damaged vehicle will have IDV damages. Claimants seeking IDV damages based on the SJC’s decision have to be able to show that their vehicle’s post-repair actual cash value is less than its pre-accident cash value, notwithstanding it being repaired. While the internet has numerous sites purporting to calculate IDV for claimants, how useful these resources will be for IDV claimants in negotiating with property damage insurers or presenting as evidence in court is an open question.
What is the statute of limitations for filing an IDV claim?
2The statute of limitations for any inherent diminished value claim would seemingly fall under the general tort statute of limitations found in M.G.L. c. 260, § 2A, “actions of tort…shall be commenced only within three years next after the cause of action accrues.” In the case of inherent diminished value claims, the date of the accident would still be the date the cause of action accrues, even though the amount of the inherent diminished value may not be known until after the vehicle has been repaired.
Do inherent diminished value claims only apply if the driver causing the accident was 100% liable?
3No. Massachusetts is a comparative negligence state. When a person makes a claim against another driver for causing property and inherent diminished value damages, they can still recover even if both drivers have some degree of fault. By law, a person who is partially at fault can collect the property damage their vehicle adjusted by their degree of fault.
For example, if two cars had a front-end collision in an intersection with no traffic controls, a good supposition is that they were each fifty percent at fault. Under the Massachusetts version of the comparative negligence statute, each could collect fifty percent of their property damage and fifty percent of their respective inherent diminished value, if any. Once a party’s degree of fault reaches fifty-one percent, however, that party loses their right to recover any damages
A party’s comparative negligence is a negotiating point in settlement discussions with an insurer over inherent diminished value, but in a legal proceeding, it is an actual percentage that the court will find and use in awarding damages for any negligence claim, including a claim for inherent diminished value.
Are the claims for IDV as a result of the SJC decision retroactive?
4Although the SJC was asked to make any ruling allowing IDV claims prospectively, the Court did not do so. The general rule espoused by the SJC is that its holdings “apply to past as well as to subsequent transactions or occurrences.” Based on the lack of a ruling that the IDV decision applies only prospectively, it appears that property damage claimants who have provable claims for IDV damages within the last three years could make a claim for compensation.
Is there a difference in coverage between the 2008 standard policy and the 2016 version?
5The decision of the SJC was made under the 2008 version of the standard automobile policy used by carriers. The 2016 version of the standard policy does have a change in the property damage language from the 2008 version. The 2008 version states for property damage coverage that: “. The damages we will pay are the amounts that person is legally entitled to collect for property damage through a court judgment or settlement.”
The 2016 version has a clause in its property damage coverage part that provides, “the amount we will pay does not include…Any decreased value or intangible loss claims to result from the property damage unless otherwise required by law.”
Whether the language in the 2016 policy “required by law” can operate to exclude IDV coverage is a matter that a court may have to decide. However, the SJC decision made IDV damages recoverable, and therefore, claimants under the 2016 policy form may have a strong argument that the payment of IDV damages is now “required by law.”
Do insureds who collect under their collision coverage have any claim for IDV damages.
6They may, but not from their own insurer. In 2007, the SJC found that persons with collision claims had no right to IDV damages under parts 7, 8, and 9 of the standard automobile policy. Ordinarily, an insurance company, in paying a collision claim, acquires the insured’s rights to recover from third parties or their insurers who caused the loss. However, since collision claims do not have any coverage for IDV damages, all rights to IDV damages remain with the insured. Therefore, there is an argument that insureds would have the right to claim IDV damages against the person who caused their injury under their property damage coverage.
Essentially, the property damage coverage of the person who caused the damage is broader than the collision coverage of the person who suffered the damage. As a result, that additional area of coverage may benefit the first party insured who legally could not collect their IDV loss against their own insurer.
Where can a claimant bring an IDV claim if they cannot settle it with a property damage insurer?
7One option is small claims court. While ordinarily small claims cannot exceed $7,000, there is no limit for an automobile property damage claim. The judge or Clerk-magistrate can hear cases involving property damage to a $2,000.00 junker or a $300,000.00 Ferrari. The only requirement is that the small claim allege property damage to an automobile.
Agency Checklists will keep its readers updated
As stated in its article on the McGilloway decision, the SJC remanded the case to the Superior Court for hearings on what IDV damages, if any, the plaintiffs’ vehicles suffered and on class-action status. Likewise, the SJC decision will probably engender more class action and individual lawsuits that will generate decisional law clarifying the proof and damages involved in IDV claims.
Agency Checklists will endeavor to keep abreast of developments in this area and update its readers.
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
An experienced insurance litigator as well as a certified mediator and arbitrator who specializes in insurance industry disputes, Owen’s interest and affinity for insurance began at a young age working the counter at his father’s assigned risk agency in Roxbury.
Over the course of his career, Owen has argued a number of cases in the Massachusetts Supreme Judicial Court and has helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
Connect with him directly at 617-598-3801.
