Thursday, 21 October 2021 16:54

MA High Court Rules Auto Insurers Must Pay for Inherent Diminished Value

Written by Jim Sams, Claims Journal


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Anybody who’s seen a Carfax commercial may suspect a vehicle that’s been involved in a crash is worth less even after it is repaired.

Massachusetts auto insurers are now required to compensate third-party claimants for those losses. The state’s highest court ruled Oct. 19 that standard auto policies issued in Massachusetts require compensation for “inherent diminished value.”


“Because the plain language of part 4 of the standard policy does not limit recovery to merely repair or replacement costs, such recovery must compensate a claimant for any loss of value the claimant incurred as a result of a collision, offset by the increase in value that may occur from repairs to the vehicle,” the Massachusetts Supreme Judicial Court said in a unanimous decision written by Justice Serge Georges Jr.


The Supreme Court considered two consolidated lawsuits filed in 2017 against Commerce and Safety Insurance Co. on behalf of three policyholders and all others “similarly situated.” The trial court rejected the class action and granted summary judgment in favor of the insurers.


The high court reversed those rulings and remanded the case to the trial court to determine the amount of lost value, if any.


Commerce Insurance Co. warned during oral arguments that such a decision would “cause a seismic shift” and “economically destabilize” the insurance marketplace. The American Property and Casualty Insurance Association and the New England Legal Foundation, which advocates for free market principles, had filed amicus briefs supporting the defense.


But Mansfield attorney Kevin J. Powers, who wrote an amicus brief in favor of the plaintiff for the Massachusetts Academy of Trial Attorneys, said the decision simply keeps up with the times. He said his brief specifically mentioned Carfax and the ability of consumers nowadays to quickly look up a vehicle’s history.


Access has been growing over time. Powers’ brief cites a New York Times article that reported as late as 2003 Carfax had vehicle accident data in only half of the states.


“This is a serious change in the technology of the marketplace,” Powers said in a telephone interview. “As a practical matter, this is...

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